Airbnb: a lucrative trend or a legal minefield?

Airbnb: a lucrative trend or a legal minefield?

The popularity of private short-term letting sites, such as Airbnb, have surged in recent years with staycations, family and large group bookings becoming ever more popular. With demand high and listings purportedly quadrupled in London since 2015 from 20,000 to 80,000, many individuals are looking to take advantage of the latest trend and increase their income stream. However, this new movement to short-term letting may have long term consequences.

It was reported this week that an Airbnb host has not only been fined £100,000 for letting his Council owned property but his actions led to his eviction. The tenant, a Westminster City Council tenant, had been advertising his council rented property on Airbnb since 2013 to tourists to the Capital generating illicit profits, resulting in the Council taking action against him.

Westminster City Council state that it is currently investigating at least 1,500 properties in the borough for similar short-term letting breaches, but the capital is not alone, we have also recently seen instances involving Airbnb issues here in Plymouth.

For those individuals tempted by the lure of additional income, they should ensure that they are able to let their properties lawfully. The legal implications are often wider than one may think; short-term letting can lead to a breach of mortgage conditions, insurance provisions, restrictive covenants and leases. A breach of any could lead to action being taken by third parties such as lenders and freeholders or ultimately lead to an invalidation of insurance policies exposing those individuals, and in some instances other lease or freeholders, to huge risk.

More worryingly, increasing reports are surfacing regarding individuals posing as prospective tenants, inducing property owners into letting their properties on assured shorthold tenancy agreements (ASTs) for six or twelve months, or longer; their sole intention in fact being to sub-let the property on these types of sites.

This trickery can have devastating consequences for unsuspecting landlords. Upon issue of an AST, the tenant is afforded security of tenure and the landlord cannot take steps to re-gain possession of the property until expiry of the fixed term, or earlier if a breach has occurred by satisfying one of the grounds set out in Schedule 2 of the Housing Act 1988.

However, whilst any sub-letting is likely to amount to a breach of a well-worded AST, that breach is not one that will currently entitle the landlord to a mandatory right to possession and landlords will only be able to rely on one of the discretionary grounds (Ground 12) which covers other eventualities “any obligations of the tenancy (other than one related to the payment of rent) has been broken or not performed”. The effect of this is that landlords could find themselves in a situation whereby their tenant is in breach with no guaranteed way of terminating the tenancy until the end of the fixed term. Importantly, it could also lead to a breach on the part of the landlord, as identified above.

For tenants, who are putting their homes at risk, the stakes are arguably higher. Whether renting from a private landlord, Local Authority or social housing association, it is clear that any individuals found to be carrying out unauthorised sub-letting, are likely to be in breach of the terms of their tenancy; ultimately leading to a landlord seeking vacant possession, either by mutual consent or by seeking an Order of the Court.

If you are considering letting your property on any basis, whether short or medium-long term, we recommend that you first take steps to ensure that you are entitled to; some mortgage providers and insurance policies strictly prohibit lettings of any kind and often separate polices are required for this type of arrangement.

For landlords and tenants alike, careful consideration should also be given to any obligations to declare income and properly account to HMRC, any failure to do so could lead to a criminal offence.

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