28 Oct 2016

The Upper Tribunal (Lands Chamber) recently held in Nemcova v Fairfield Rents Ltd [2016] UKUT 303 (LC) that a tenant breached a covenant in their lease restricting the use of the flat for that of a “private residence” as the tenant had granted several “Airbnb” style short-term lettings of the property.

Case Report and Analysis

Residential (long) leases usually contain a covenant prohibiting the use of the flat for any purpose other than as a private residence/dwelling (“Residential User Covenant”). In Nemcova, the tenant held the flat under a lease which contained the Residential User Covenant. The tenant granted several “Airbnb” style short-term lettings, and the landlord claimed that these lettings were in breach of the Residential User Covenant.

The Court found in favour of the landlord and held that the tenant had breached the Residential User Covenant, noting that in order for the Residential User Covenant to be observed the current occupier must use the flat as their “private residence”. In determining what constitutes the use of the flat as a “private residence”, the Court held that there has to be a degree of permanence and this would require occupiers to reside in the flat for more than a few nights a week.

The Court noted that this decision was not a definitive answer to the question of whether an “Airbnb” style short-term letting breaches residential user covenants, and the Court’s decision may still be appealed. Nonetheless, for now, if you are a tenant and considering letting your property through a short-letting service such as Airbnb, you should first consider the terms of your user covenant (as well as the covenant relating to underlettings) before handing over the keys for a few days, as the grant of such an “Airbnb” style letting may be in breach of the terms of your lease.

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