The idea that we can save the earth’s resources and create lots of new employment opportunities through sharing is no doubt a laudable one, but it is also a highly disruptive development for many industries and brings other concerns as well.
The concept of a “sharing economy” refers to technology companies enabling people to capitalise on their unused assets by renting them to others. Airbnb is a prime example of this where individuals rent out their homes or spare rooms in their homes, all arranged and paid for online, for travellers around the world. Great idea, but a major threat to the hotel industry and likewise similar schemes will threaten taxi operators and car hire companies, tool hire, you name it, and almost anything can be shared.
Advocates wax philosophical that this emerging sharing economy has come about because society has collectively arrived at a more altruistic place in our evolution: we don’t all need to own drills or ladders, lawnmowers or even motor cars – since many owners only get a few minutes or a few days of use out of them each year.
A report conducted by Airbnb in 2013 estimated that the San Francisco-based company had a total economic impact of £502m in the UK – and supported 11,629 jobs. The figure is likely to be much higher today with 27,000 London properties now listed on Airbnb, an 87pc increase over last year.
UK CEO of Airbnb, James McClure has said that “the UK, and London in particular, is the centre of the sharing economy”, driven by being “such an entrepreneurial nation”.
Consequently it seems the UK government is keen to encourage this brand of altruism, arguing in a recent report it commissioned “Unlocking the Sharing Economy”* that it:
“…is an exciting new area of the economy. Digital innovation is creating entirely new ways to do business. These new services are unlocking a new generation of microentrepreneurs – people who are making money from the assets and skills they already own, from renting out a spare room through Airbnb, through to working as a freelance designer through PeoplePerHour. The route to self-employment has never been easier”
In his March 2015 Budget, Chancellor George Osborne unveiled his “steps to put Britain at the forefront of the online sharing economy”. Government employees will be encouraged to use these services, which are often cheaper and more convenient, to book accommodation and transport while travelling on official business, the Chancellor said.
All well and good, but do Britain’s landlords really want to encourage their tenants to enter into an altruistic sharing economy where they would be allowed to share other people’s (landlords’) assets?
Traditionally, residential letting agreements include clauses which prevent tenants from sub-letting. Of course, depending upon the facilities and the size of the accommodation, landlords accept that relatives and friends my stay on occasion. But the prospect of tenants running a B&B business in their homes, or even worse, sub-letting and moving out of the property themselves, is something that would scare most landlords to death.
But that, it appears, is not what government thinks:
“The UK is embracing new, disruptive business models and challenger businesses that increase competition and offer new products and experiences for consumers. Where other countries and cities are closing down consumer choice, and limiting people’s freedom to make better use of their possessions, we are embracing it.”
As far as the UK private rented sector goes, obviously a prime example of where sharing is working, government think is suggesting the relaxation of some of the stricter rules and regulations of letting to allow more sharing, as the report* also suggests:
“The standard tenancy agreement template should be updated to remove the current explicit ban on subletting – tenants should be able to ask their landlords to sublet parts of their property for a period of time.”
These are radical proposals about which landlords and landlord associations have expressed grave concerns. Housing tenure laws as they stand give considerable protection to anyone occupying a property, even squatters have a considerable amount of protection.
Landlords are understandably concerned that if tenants are allowed to sublet they would have no control over who occupies, and if, God forbid, the tenant should move out, what legal help and protection would a landlord receive in getting her property back in one piece? Given that occupying a property with consent is not a criminal office, would landlords be faced with months of wrangling through the civil courts if a sub-tenant refuses to leave?
There have been countless horror stories recently involving tenants subletting, particularly in London:
- London tenant jailed for sub-letting scam
- Yet another London Rent Scam
- Airbnb landlords are taking big risks
- Irish Students Trash Property
Before landlords are happy with any sort of sharing economy, as far as they are concerned, government is going to have to come up with some better legal protections, but given the complexity of housing tenure laws and the snail pace operation of the courts, I don’t see this happening.
Commercial properties are a slightly different matter, as subletting has always been a feature, but strictly with the landlord’s consent.
Here the government is suggesting relaxing tenancy laws to allow temporary lettings in business premises without conferring on the tenant the usual security of tenure protection:
“It should be possible for landlords to sub-let unused business space on a temporary basis without automatically giving tenants security of tenure. This will help to incentivise landlords to make better use of their property without tying it up indefinitely.”
Many business tenants and some commercial landlords fail to realise the full implications of creating a commercial tenancy, which is governed by the Landlord and Tenant Act 1954. When a tenant enters a property by consent and rent is taken, under existing laws, a tenancy is created whether there is a written agreement in place of not.
A commercial tenant, unless contracted out of the Act, obtains long-term security of tenure in the premises. Contra wise, the tenant is tied in for the length of the term. The tenant cannot just walk away from their lease term obligations, as was the case recently involving Karen Danczuk, the controversial wife of Rochdale MP Simon Danczuk.
Mrs Danczuk took a 5 year lease on a shop in Rochdale town centre which she was running as a Deli, whilst also serving as a Rochdale Councillor. When she decided to quit and sell the business, she assumed she could install a new tenant without the landlord’s consent, or a formal assignment, and simply walk away.
Unfortunately for Mrs Danczuk she found to her cost that the courts enforce lease agreements and she found that she was responsible for paying rent up to the end of the term, regardless of the fact she was no longer occupying the premises.
*Unlocking the Sharing Economy: An independent review by Debbie Wosskow, Department for Business, Innovation and Skills
©LandlordZONE® – legal content applies primarily to England and is not a definitive statement of the law, always seek professional advice.
Is the Sharing Economy a threat to Landlords? – http://t.co/tnTXx2KDeo
— LandlordZONE® (@LandlordZONE) July 3, 2015