Letting out your home on Airbnb?

So what are the legal implications of using Airbnb in England and Wales?

Recent case law - Nemcova v Fairfield Rents Ltd

In Nemcova v Fairfield Rents Ltd, the lease for the flat contained the clause "not to use the flat (or permit to be used) for any purpose whatsoever other than as a private residence". The leaseholder listed the flat on Airbnb and hosted several short term lettings.

The Upper Tribunal decided:

• that temporary occupation by an Airbnb guest was inconsistent with the definition of the property as a 'private residence'.
• that as a consequence, the leaseholder's occupation of the flat was 'transient'

What does this mean?

The ruling is significant as the clause to only use a residential property as a private residence is very common in leases. It also occasionally applies to freehold properties.

If you have this restriction in your lease and your landlord finds out that you are letting your property on a short term basis, you will automatically be in breach of your tenancy agreement or mortgage. This applies to lets of even a few days.

Removing this restriction can be an expensive process to negotiate with your landlord. Ultimately, as you are in breach of the lease, the landlord can terminate the lease.

How far does it apply?

The Nemcova case related to letting out the whole property. Therefore, the ruling does not appear to stop tenants who want to let out a single room while they remain permanently in occupation.

Other risks and considerations for Airbnb hosts?

Mortgage contract

Listing your property on Airbnb can have potential implications on your mortgage if your agreement restricts short term lets without your lender's prior consent. If your mortgage agreement does contain such a clause you should seek permission from your lender. Otherwise you risk your lender citing a breach of the mortgage agreement and demanding the repayment of the loan.

Insurance

You also risk invalidating your buildings and contents insurance if you have not told your insurer that you are letting your property on a short-term basis.

Planning

It is unlikely that your property has any other use than as a residential property. Residential property owners must consider whether local planning law needs to be complied with when renting out a property on a short-term basis.

In Greater London, planning permission is needed for anyone who lets their property short term for more than 90 days a year. Failure to comply can lead to a large fine for breach of planning permission. Airbnb now requires proof of permission from the Council before allowing London hosts to surpass the 90 day limit.

Tax

Any rent paid by guests is generally income which will be subject to tax. Depending on how much you may earn from hosting guests, you may need to declare the income to HM Revenue and Customs. It should be noted that there are numerous tax reliefs and allowances available. The main allowance available is the 'rent a room' allowance. This allows you to rent out a room in your main residence with tax free earnings of £7,500. Before you choose to rent out a room it would be prudent to speak to an accountant.

Guests overstaying their welcome

Although it may be a rare situation, it does happen where guests do not leave at the end of their holiday rentals. Landlords will be aware that under the Protection From Eviction Act 1977, it is a criminal offence to evict a residential occupant without a court order.  However the Act excludes holiday lets, so at the end of the term a landlord can change the locks or even threaten the use of force to remove unauthorised occupants.

Landlords cannot however rely on the police, as although squatting in residential property has now been criminalised, if a person was in lawful occupation under the Airbnb agreement, they are not classed as squatters. If this situation arose, then the landlord would need to commence County Court proceedings for possession, which may be costly in both time and money.

Next steps

The Airbnb website does offer practical support to homeowners including a deposit system and a mediation service once something has gone wrong.  Best practice is always to know the situation from the outset and seek the necessary practical advice before embarking on any short lets through Airbnb or similar sites.