Short-term landlords beware: the key considerations for Airbnb landlords

Ben Gurluk

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Airbnb is one of the great digital success stories of the sharing economy. Globally, there are now more than 200 million users of more than 6.6 million properties listed in 220+ countries worldwide. 

Whilst US cities have now overtaken European cities to claim the highest numbers of listings, the UK has the sixth-highest number of listings in the world, with approximately 567,000 properties available to rent. 

For many people, Airbnb lettings now form part of their regular income. But landlords or potential landlords must tread carefully if they want to avoid possible repercussions: the law is not always on their side.

Are you in breach of your lease?

As an Airbnb landlord, there are several things that you need to consider. If you are a leaseholder of the property, you may already be in breach of your lease by using Airbnb.

In the 2016 case of Necova v Fairfield Rents Ltd, the Upper Tribunal (Lands Chamber) held that leasehold properties whose leases state that the property must be used as a ‘private residence only’ cannot, as a general rule, be rented out for short-term lets, as doing so prevents the property from being occupied with the degree of permanence (‘going beyond being there for a weekend or a few nights’, as Judge Stuart Bridge stated in his judgment) which is required for the property to be classed as a private residence. 

Roughly 4 million leasehold owners in Britain have similar clauses in their contracts, and as a result of this judgment may be prevented from letting out their properties on a short-term basis. If you are considering doing so, then check your lease carefully, and if applicable, consider taking legal advice before listing your property.

Are you complying with the terms of your mortgage?

A further question is whether you are complying with the terms of your mortgage. Airbnb hosts who offer short-term lets without seeking their lender’s permission are very likely to be breaching their mortgage contract, especially where the mortgage contains a clause prohibiting use of the property for commercial purposes. 

A buy-to-let mortgage may be an option for those purchasing a property with the sole intention of using it as an Airbnb, but will not be suitable if the prospective host has any intention of living in the property, or of only letting out a section of the property. 

Whilst it may be tempting to proceed on the basis that your mortgage company might not find out, the potential repercussions of taking the risk are serious – failing to seek consent may result in a demand for repayment of the entire mortgage balance and possibly foreclosure.

Do you need planning permission?

Another consideration is planning law. Londoners are legally allowed to rent out their properties for up to 90 non-consecutive nights, and local authorities in many boroughs are clamping down on owners who breach this rule. 

If you wish to let out your London property on a short-term basis for periods that add up to more than 90 nights in any calendar year, then consider applying to your local council for planning permission – breach of the rule can result in criminal consequences. 

In addition, earlier this year the Departments for Levelling Up and Culture released separate consultations on the introduction of a separate use class and registration scheme for short-term lets, with the intention of allowing local authorities to have greater awareness and control over the numbers of short-term lets in their areas. The results of both consultations are yet to be released, but once they are, prospective Airbnb landlords should review these carefully to check for any new registration or planning requirements and deadlines which may apply to them as a result.

Check the terms of your insurance policy

Finally, consider the terms of your insurance policy: are you breaching them by letting out the spare bedroom every now and then? 

Landlords need to consider whether their block insurance policy adequately deals with short-term lets as it is very likely that explicit consent will be required from the insurance company. If consent is not obtained, then insurers may refuse to pay out for claims and the insurance policy may be invalidated.

Airbnb may be the success story of the age, but in its wake, the traditional warning of buyer beware has a modern counterpart: short-term landlords beware.