However, in many cities in Europe and across the world (including Barcelona, New York, and Tokyo) there are regulations preventing or restricting the letting of particular types of properties on a short term basis. Indeed in Greater London, there is a restriction which prevents hosts from renting out their property for longer than 90 nights. If a host wishes to exceed this limit, they must apply for planning permission for a material change of use.

There are also other considerations to be taken into account before attempting to list a property. Does any mortgage or home insurance prohibits such letting? Will a liability to business rates arise if a property is deemed to be self-catering (by being available for let for 140 days or more per year)?
Properties owned on a leasehold basis will often cause further issues, as was shown in the case of Bermondsey Exchange Freeholders Limited v Koumetto. The tenant owned his flat on a long lease in a building containing 18 apartments. He had repeatedly sub-let his flat on a short term basis to a variety of occupiers. The landlord sought an injunction to restrain the tenant from this conduct.

The tenant’s lease contained the following clauses:

• “Not to use or permit the use of the Demised Premises or any part thereof otherwise than as a residential flat with the occupation of one family only…”; and
• “Not to share or part with possession of the whole of the Demised Premises or permit any company or person to occupy the same save by way of an underlease of assignment of the whole of the Demised Premises…”

The Court at first instance granted the injunction,determining that the temporary lettings amounted to a breach of the lease terms. The tenant’s trustee in bankruptcy then appealed the decision, but it was upheld on appeal. The Judge’s reasoning was as follows:

– the subletting to transient visitors was clearly a breach of the covenant prohibiting the sharing of possession or allowing another to occupy other than by way of an underlease or assignment; and
– by subletting the property to transient guests, the tenant was engaging in a commercial venture and was not using the property as a residential premises (which was the only purpose/use permitted by the lease terms).

The lease terms exhibited in the case are not untypical. Given that one of the purposes of such terms is to endeavour to foster a residential community, it is likely that the subletting of a long lease to transient guests/occupiers will very frequently amount to a breach of the lease terms without the express authority or consent of the landlord. This could see the tenant facing a damages claim, injunction or the even forfeiture of its lease.

Proper investigation is vital before a property is offered to short term rentals. For advice relating to residential leases please feel free contact Ann Grice at agrice@nexussolicitors.co.uk or 0161 819 4900.