TO AIRBNB OR NOT TO AIRBNB: Nemcova v Fairfield Rents Ltd [2016] UKUT 303 (LC)

This case relates to an application by a landlord for a determination that a tenant had breached a covenant in the lease. The covenant required the tenant not to use the flat (situated in a purpose built residential block) or permit it to be used “for any purpose whatsoever other than as a private residence”.

The facts of the case are that the flat owner had a long lease with the landlord and advertised the flat on the internet using websites (including Airbnb) for short-term lettings. The tenant granted a number of short-term lettings and the tribunal was asked to consider whether that amounted to a breach of the “private user” covenant.

The original application was decided by the First Tier Tribunal (Property Chamber) and was determined in favour of the landlord, the Tribunal confirming the tenant had breached the covenant in the lease by allowing short-term lets.

The tenant appealed the decision to the Upper Tribunal (Lands Chamber) which dismissed the tenant’s appeal and upheld the decision in favour of the landlord that the tenant had breached the user covenant.

The main points raised in the decision worth noting are as follows:-

  • There is no material difference between use as a private residence and use as a private dwelling-house.
  • Short-term lettings do not constitute use as a private residence since the tenant would not be occupying the property as their home for the duration of the lettings.
  • The property in question is not required to be the tenant’s only, main or principal residence for the purpose of using the property as a private residence as opposed to the private residence. It is however necessary for there to be a connection between the occupier and the residence i.e. the occupier must use the property as their private residence.
  • There must be a degree of permanence for a property to be used as the occupier’s private residence.

Although the decision is based on the specific facts of this case, it is an important decision for residential property owners and freeholders alike to take heed of at a time when people are increasingly using their properties to earn additional income.

The Nemcova decision is a reminder to residential leaseholders to review their leases carefully for any covenants prohibiting them from using their properties in this way before offering short-term lettings. It may come as a costly surprise to find that a landlord could forfeit the lease as a result of a few lettings on Airbnb, especially as Airbnb and similar short-term letting companies increase in popularity.

For further information on the decision or leasehold covenants, contact Edward Thompson on 01494 478 676 or email edt@blasermills.co.uk