Property owners in popular destinations may be tempted to let their properties to holiday makers to meet the demand and to take advantage of the extra income. However, there are a few legal restrictions which should be checked before property owners offer up their second homes.
If the property is a long leasehold (which most flats and apartments will be) it may well be subject to a restrictive covenant to use the flat only as a single private dwellinghouse or words to similar effect. In 2016 the courts determined (in the Airbnb ruling case of Nemcova) that short holiday lets breach this restriction. Most recently the Upper Tribunal confirmed on 27 May 2020, in the case of Triplerose Ltd v Beattie and Anor (2020) that this remains the case reversing a first instance decision to the contrary. A breach of covenant, if enforced by a lessor, could result in a claim for damages for the profits obtained from the unlawful letting and possibly an injunction to restrain any further such use.
A separate point, also decided in the Triplerose case is potentially of more help to property owners. This concerns the issue of whether a covenant against the use of a property for the purpose of "any trade or business whatsoever", would be breached by short term letting. On this the tribunal found in the property owner's favour and determined that a short let would not offend this covenant. It will be a matter of fact and degree, and depends on whether the letting 'business' remains ancillary and subordinate to the main residential use.
Property owners should also be aware of the planning implications as consideration needs to be given as to whether an application for a change of use under the Town and Country Planning (Use Classes) Order 1987 (as amended) would first be required for a change of use from a C3 residential dwelling house use to a Sui Generis use, as the property is being used both for residential and business purposes.
The 2012 Court of Appeal case of Moore v Secretary of State for Communities and Local Government ruled that it would be a matter of fact and degree and would depend on the characteristics of the use as holiday accommodation as to whether there had been a change of use and therefore the facts of each case would have to be considered to determine whether there had indeed been a change of use.
As has been frequently reported in the media, the distinct shortage across the country of residential homes means that there are many local authorities who would be reluctant to approve such a change of use on the premise that it technically reduces the housing stock within their area. Such was the concern in London that The Greater London Council (General Powers) Act 1973 actually places restrictions across the 32 London boroughs and the City restricting the number of nights that residential accommodation can be used as “temporary sleeping accommodation”. The aim being to protect London’s housing supply for the benefit of permanent residents by giving the boroughs the ability to have greater planning control to prevent the conversion of family homes into short term holiday lets.
We would suggest that where property owners are in any doubt of the implications of letting their property they first obtain legal advice.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at June 2020.