So you’re thinking of letting your property to holidaymakers?

The popularity of short-term and holiday lets has continued to grow in recent years, which has given a boost to the tourist industry across England. For many property owners the lettings provide a good source of income whilst also offering more flexibility than long-term lettings. Short-term lettings give property owners the option of living in the property themselves for parts of the year. It can be challenging to recover possession from troublesome tenants who have long term tenancies. As short-term holiday lets are granted under licence rather than a tenancy, it is easier and quicker to recover possession of the property.

Short-term and holiday lets are not without their issues, with local residents complaining about the nuisance caused by the occupiers and of being priced out of the housing market.

As a result of these tensions between landlords and local residents, consultations are underway for new legislation which is likely to regulate short-term and holiday lettings. Consideration is being given to whether local authority licencing should be required for the conversion of properties into short-term and holiday-let accommodation, whether there should be restrictions on the number of days each year that properties can be let, and the possibility of issuing fines and revoking licences when safety, noise and nuisance conditions have not been met.

Whilst we wait to find out the outcome of the consultations, there are already a number of factors that property owners should be considering before letting their properties as short-term and holiday lets.

• Check your property title. There may be restrictive covenants on the property title which prevent or restrict the use of the property for short-term or holiday lets. For example, there may be covenants against use as a business, parting or sharing possession of the property, or using the property otherwise than as a private residence. Care should be given to checking the Register of Title and/or the deeds for the property.

Where it is a leasehold property, it is particularly important to consider the provisions in the lease. We have already seen a number of cases reach the Court and Tribunal where landlords have taken action against leasehold owners for breaches of the lease.

In the case of Nemcova v Fairfield Rents Ltd [2016] UKUT 303 the leasehold owner granted short-term lettings through sites such as Airbnb. The long lease of the flat contained a covenant not to use the property for any purpose whatsoever other than as a “private residence”. The landlord claimed that the short-term letting of the property by the leasehold owner for a few days a week was in breach of covenant. The Upper Tribunal held that the leaseholder was in breach of covenant because for the use to be as a private residence there had to be “a degree of permanence going beyond being there for a weekend or a few nights in the week”.

In the case of Bermondsey Exchange Freeholder Ltd v Nino Koumetto (as Trustee in Bankruptcy of Kevin Geoghan Conway) [2018] 4 WLUK 619 the leasehold owner had been letting the property through Airbnb. The lease contained various covenants which were said to have been breached, such as a covenant against parting with or sharing possession of the whole of the property, a covenant against alienation without consent and the requirement to use the flat as a residential flat for the occupation of one family. Ultimately, the Judge found in favour of the freehold owner and granted an injunction which prevented the tenant from letting the property on a short-term basis to paying guests.

• Check the terms of any mortgage or charge against the property. If the property has a mortgage, then it could be a breach of the mortgage conditions to let the property out without the prior consent of the mortgagee, which they may not be obliged to give. The mortgagee may require a change in the mortgage terms which could incur additional fees and costs.
• Check whether planning permission is required. It may be needed to convert properties into holiday-let accommodation.
• Check your insurance policy. Does it provide sufficient cover, when it is let to third-party occupiers on a short-term basis. You may need to increase your cover or change your policy.
• Check whether you will be paying council tax or business rates. On 1 April 2023 the Non-Domestic Rating (Definition of Domestic Property) (England) Order 2022 comes into force, which allows owners of domestic properties to pay business rates rather than council tax if they are used for self-catered short-term lets (such as holiday lettings). This applies where the property has been made available for short-term lets totalling 140 days or more in the previous year and it has in fact been let out for at least 70 days during that period year.
• Consider the terms of the agreement that you will have with the occupiers. If issues arise with the property, what rights do the occupiers have? If you have issues with the occupiers, what rights do you have?

If you would like any further information on letting your property, please do contact FSP’s Property Litigation Team.