In recent times, the Airbnb phenomenon has seen a marked
increased in the popularity of such lettings which create an
opportunity for homeowners to secure an income from their property
which can be very lucrative. However, as a recent decision of
the Upper Tribunal confirms, tenants who utilise these platforms to
sublet their property are at risk of breaching the terms of their
lease, which could ultimately lead to forfeiture action being taken
by their landlord.
The issue has received particular attention in the recent case
of Nemcova v Fairfield Rents Limited  UKUT
303(LC), a decision of the Upper Tribunal which was
handed down last month.
The question posed by the Tribunal was:
"A long lease contains a covenant not to use the
demised premises or permit them to be used for any illegal or
immoral purpose whatsoever other than as a private
residence.If the leaseholder advertises on
the internet the availability of the premises (a flat) for short
term lettings and grants a series of such lettings, do the
leaseholder's actions breach the covenant?"
The fact that the tenant had granted a series of short term
lettings of the flat was not in dispute. According to the
evidence, the flat had been let out on about 7 separate occasions
over a 12 month period and only for about 90 days of the year using
the services of a reservation system website. The tenant
contended that, provided the flat was being used as a private
residence by someone, the circumstances of their occupation were
immaterial and no breach of covenant had occurred.
The Upper Tribunal disagreed.
As far as the construction of the covenant in the lease was
concerned, the Upper Tribunal applied the principles of contractual
interpretation as set out in the decision of the Supreme Court in
Arnold v Britton (2015) UK
SC36 (as reported in our previous article
ordinary and natural meaning of the words used in the lease should
be applied and each clause must be construed in its context.
In assessing what it meant to occupy a flat as a
"private residence", the Tribunal formed the
view that the demand and acceptance of a payment and/or the
question of whether the occupier may have another, more permanent,
residence elsewhere were not determinative factors. The
underlying motive for occupation was also not relevant in
determining whether a breach of covenant had occurred. On the
other hand, the duration of occupation was material, since it was
determined that, in order for a property to be used as the
occupier's private residence, there must be a degree of
permanence going beyond occupation for a weekend or a few nights in
the week. Consequently, the Tribunal came to the view that by
granting very short term lettings (which the Tribunal expressed as
days and weeks rather than months) the leaseholder's actions
were in breach of the user covenant in her lease.
However, the Tribunal was at pains to point out that each case
must turn on its own facts. It is a question, therefore, of
assessing the wording of the lease and determining as a matter of
fact and degree whether a breach of covenant has occurred in any
given case. It is clear nonetheless from the Tribunal's
decision that the duration of the short term let was a primary
factor in this particular case.
While the Tribunal expressed the view that it was days and weeks
rather than months which would tip the balance, it is not clear
(and there is therefore much room for debate) what would be the
tipping point in any given scenario. The shorter the duration
of the letting, the greater the risk will be that the tenant will
be in breach of covenant. However, where you draw the line
between a letting of several weeks or several months is far from
In all cases, the short term benefits of letting out your
property are unlikely to be worth the long term pain should a
breach of covenant occur.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Goodman Derrick's employment team will be hosting a workshop on HR horrors and how to deal with them. This practical session, on Wednesday 10 May 2017, will use case studies to deal with some of the tricky HR situations often faced by employers.
The choice of procurement route is vitally important to the success of any construction project. A number of different procurement routes exist but what are the essential ingredients of each and what are their relative advantages and disadvantages? This article discusses the differences between two of those procurement routes: general contracting and design and build.
Bonds, guarantees, performance security or whatever they are called form an important part of every major international contract. Despite this, there are a regular number of cases, in many different jurisdictions, where the courts are asked to decide what the nature of the particular project security actually is.
For well over a hundred years it has been standard practice for contract administrators to be used on construction contracts. Architects have been engaged to supervise and manage building contracts and engineers engineering contracts. More recently, project managers and construction managers have undertaken similar roles under new forms of contract.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).