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29 June 2020

News for flat owners – service charges, Airbnb lets and alterations

Many flat owners will be interested in the outcome of recent cases affecting the relationship with their landlord and their neighbours.

Airbnb lettings – a breach of lease covenants?

The Upper Tribunal of the Lands Chamber has again stated that Airbnb lettings are not allowed where the lease requires use of the flat as a ‘private dwelling’ or similar words (Triplerose Limited v Beattie and Beattie). It was thought that such use amounted to carrying on a business from the flat, which would also amount to a breach of most leases, though this was rejected in Triplerose on somewhat pedantic grounds. But the use of the flat for a succession of paying guests was described as the antithesis of use as a private dwelling.

This is such a live issue at present that it seems inevitable that a higher court will consider it soon but, for the moment, Airbnb or similar short lets of flats will generally be a breach of the lease covenants.

Service charges – restriction on landlord’s right to determine the amount of the service charge

A clause in a lease that made the landlord’s certification of the amount of a service charge conclusive, absent manifest or mathematical error or fraud, could not be interpreted so as to allow the landlord to include in the service charge items which might not properly form part of the service charge and were therefore not lawfully due under the lease.

This was decided by the High Court in a commercial case involving Blacks, the outdoor wear retailers (Sara & Hossein Asset Holdings v Blacks Outdoor Retail), but there are similar clauses in many residential flat leases and the principle will apply to those too.

In fact, it may go further; the Upper Tribunal has recently determined in the case of Williams v Aviva Investors that any provision in a lease is void which purports to allows the landlord to vary service charge proportions where the initial percentage is expressly stated.

Alterations and enforcement of covenants – landlord needs consents to permit alterations

Last but by no means least, the Supreme Court itself has alarmed many landlords and encouraged assertive leaseholders with its ruling in the case of Duval v 11-13 Randolph Crescent Limited.

Where a covenant against alterations was absolute, simply prohibiting them without qualification, it was thought that a landlord was free in its complete discretion to permit them on whatever terms it chose. But if that covenant is in the lease of the flat wanting to carry out the works, and the leases of other flats contain an obligation on the part of the landlord to enforce leaseholders’ covenants, Duval has decided that this discretion does not exist and the landlord cannot permit the works without the consent of all those leaseholders in the building who have the benefit of the enforcement covenant.

This will be a blow in particular to many of the landlords on the great London estates, whose leases often have such a combination of covenants, and it may be that they will respond by being far more reluctant to permit work to flats for fear of repercussions from other flat owners.

The principle applies to all covenants, but will be most felt in the context of alterations, works to flats being often controversial due to noise and other disturbance.

If you have a queries about any of these topics, please get in touch with your usual BDB Pitmans contact or Hema Anand.

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