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25 August 2020

Airbnb lettings – are landlords winning the battle against unauthorised Airbnb lettings?

This was written by Simon Painter, Partner, Emma Dunley, Trainee Chartered Legal Executive, and Clara Clint, Solicitor.

A number of government departments and local residents are blaming Airbnb and other short-term rental platforms for the increase in rental costs and for pricing long-term renters out of the market. There is further concern that Airbnb and short-term letting companies are circumventing the regulations and taxes foisted on hotels and other rental properties. Parliament appears to be taking note, in particular of the effect on housing shortages, with calls for rental properties to be registered.

Issues with Airbnb rentals are frequently in the media, but what legal developments have there been since the ‘Airbnb ruling’ of Nemcova v Fairfeld Rents Limited in September 2016?

The courts are still taking proactive steps to prevent tenants from letting property on Airbnb and other short term rental sites as can be seen in the case of Bermondsey Exchange Freeholders Limited v Ninos Koumetta (as trustee in bankruptcy for Kevin Conway) (unreported).

This case concerns a defendant who let his flat for short term lettings using Airbnb and other similar platforms. The court at first instance granted a restraining injunction, with the decision being upheld on appeal.

The defendant held a 999 year lease of a flat in Bermondsey Exchange (the flat). In 2015 the claimant / landlord became concerned that the defendant was using the flat for short term lettings through Airbnb and other platforms for more ‘transient and temporary occupiers’. The landlord requested the defendant to stop, the claimant replying that he was not using the flat in the manner complained of and even if he were, it would not breach the lease.

The lease contained the following terms:

‘Not to part with or share possession of the whole of the Demised Premises or permit any company or person to occupy the same save by way of an assignment or underlease of the whole Demised Premises’.
‘Without prejudice to the absolute prohibitions hereinbefore contained not to assign or underlet the whole of the Demised Premises without the prior written consent of the Landlord’.
‘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 ….’
The defendant’s main defence was that the flat was not being used in the manner alleged by the claimant. This was despite the ‘substantial and even compelling’ evidence which the judge described as ‘short term commercial hire’.

At first instance, the judge found that the defendant was in breach of the terms of his lease.

The judge took the view that hiring the flat through Airbnb was the equivalent of:

‘Letting, akin to holiday lets’.

and that such hirers:

‘Are not using the property as a residential flat’.

The judge stated:

‘There is a qualitative difference between letting a property on an assured shorthold basis to a family who occupies the same property as their home… and letting the property on a short term let including through Airbnb and other websites’.

The judge granted an injunction prohibiting the defendant from using the flat in such a manner.

The defendant was made bankrupt just before judgement was handed down. The trustee in bankruptcy decided to continue with the appeal.

The appeal judge explained the judge’s reasoning for the granting of an injunction being:

  • the breach of the lease;
  • relations between the parties had broken down;
  • it was not possible to resolve with an undertaking; and
  • other residents on the development might be encouraged to let through Airbnb and it was therefore in the interests of clarity and certainty to grant the injunction.

During the appeal, various arguments were advanced by the defendant as to the construction of the lease.

The appeal failed with the appeal judge stating:

‘The answer posed to the question asked at the outset of this Judgement is that – for the reasons, I have given – the terms of the Lease applicable in this case were breached by the use of the flat for occupation by transient short-term paying occupants engaged through Airbnb style platforms. Further, the judge was entitled to grant orders in the terms that she did, prohibiting such use’.

A restraining injunction is usually only granted by the court if the claimant can show that unless the defendant is restrained, they will do something in the future which will interfere with the claimant’s rights. The defendant had ceased short term rentals in spring 2016.

It is possible that a deciding factor as to whether or not to grant a restraining injunction in this case was as a result of the defendant’s conduct. Claimant’s counsel during the appeal stated that this was not a case of a commitment not to repeat, having admitted a wrong doing, as the defendant actually denied that he has used the flat for commercial hire.

Since the above case, whilst not binding in English law, the New Zealand tribunal in Nice Place Property Management Limited v Paterson [2018] NZDC 20936 ordered the tenant to give an account of profits to the landlord for letting its property through Airbnb without the landlord’s consent. This reasoning appears to have been copied in the English courts following the case of Westminster City Council v Harman [2019] where the council successfully pursued a social housing tenant for letting his property on Airbnb as a holiday rental. An unauthorised profits order of over £100,000 was made against the tenant and he was evicted from his social housing property.

It therefore appears that the courts are willing to help landlords to stop unauthorised lettings on Airbnb and other short term rental sites.

In 2020, the court provided further clarity for Landlords on when a short-term let will constitute a breach of a lease (in the case of Triplerose Limited v Beattie and another).

Mr and Mrs Beattie let out their flat via a management company which advertised the flat (mainly for weekend use) on Airbnb and Booking.com. Triplerose Limited (the freeholder of the leasehold) flat applied for a determination that the Beatties had breached their lease because:

  • the property was not being used as a private dwelling house; and
  • the Beatties were carrying out a business.

At first instance, the court held that it did not amount to a breach of the lease. Triplerose appealed on the grounds that:

  • the provision of serviced accommodation on a commercial basis was not use ‘as a private dwelling house’; and
  • the taking in of paying guests was a breach of a covenant not to use premises for a business.

On appeal, the court held that there had in fact been a beach of the covenant prohibiting the use of a property other than as a private dwelling house. However, the court held that short-term lets did not in itself amount to a business, so the prohibition on conducting a business at the flat had not been breached.

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