Daniel Stern is an Associate Solicitor specialising in property litigation at Manchester law firm Slater Heelis LLP. Here, he explains the risks for both tenants and landlords when it comes to letting out property on Airbnb and how to mitigate against them.
You are a tenant or a landlord and you come across Airbnb. What a great idea you think to yourself. The idea of making more money out of subletting or renting out your property sounds very appealing. As our friends across the pond might say, it’s a no brainer…
However, it isn’t all that easy and it must be approached with caution. By using Airbnb, you could potentially be jeopardising your legal interest in the property, particularly if you are a tenant.
Below are some of the common problems experienced by both landlords and tenants using Airbnb and a few tips on how to avoid those (or minimise your risk):
As a landlord:
- Mortgaged property – most mortgages include a clause preventing any letting without prior consent and, when approached, lenders would either say no or grant consent subject to the payment of a fee.
It is understandably appealing to either not approach your lender for consent or to go ahead anyway, even if they refuse. After all, how can they find out?
Lenders monitor and carry out checks to see if properties are advertised on Airbnb and other sites. If you apply for a re-mortgage these checks are much more likely to be carried out. Lenders may also be able to identify Airbnb income from bank statements. In the event that you don’t request consent and they do find out, they could demand a substantial one off fee or even increase your mortgage repayment rate. They could even call in your loan, seeking immediate repayment of your mortgage. In short, letting your property without your lender’s consent is a significant risk which may not be worth taking.
- Insurance – you could invalidate your insurance policy if you let your property using Airbnb and don’t inform your insurer. Using Airbnb changes your policy risk profile and your insurer could use it as a reason to reject any claim.
- Health and safety – if you let the property as a landlord, you would be obliged to comply with health and safety laws, just as you would if you were letting it on a regular six to 12-month tenancy.
- Damage to the property – this is a very real risk and one that can cause you a headache, especially if the damage isn’t covered by the limited Airbnb host guarantee or you have not told your insurer about your use of Airbnb.
- Your guest refuses to leave – you can change the locks at the end of the term without a court order, as it is classed a holiday let. However, it is a criminal offence to use or threaten to use force to evict the guests and therefore you should think carefully before doing so. The prudent method is to issue a claim for possession and get a possession order, although this will be at a cost to you and will delay the re-letting of your property for at least 3 months.
- Greater London properties – until recently, you had to have planning permission in London if you wanted to rent out your property for more than 90 consecutive nights. The Deregulation Act 2015 changed that and short-term lettings for a maximum period of 90 days are now generally permitted. However local authorities can dis-apply these regulations for particular areas, or even particular properties.
As a Tenant:
- Lease terms – aside from it being dishonest to do so, your lease will probably include terms that bar subletting your rented property or only permitting you to do so with your landlord’s written consent. It might also prevent you using the property for the purpose of a holiday letting. If so, any breach may lead to forfeiture action being taken by your landlord which ultimately could lead to you losing your property and having to pay a hefty costs bill or face your credit rating being irreparably damaged by having a judgment registered against your name.
- Insurance – you must make sure that your insurance is not invalidated by subletting your property on Airbnb. Again check the policy terms or speak to you insurer.
- Health and safety – if you are a leaseholder with a long lease, and decide to let the property as holiday accommodation, the health and safety laws would apply to you as you would be considered to be a landlord under the law. For instance, you would have to comply with the relevant fire regulations and in due course have installed smoke alarms and (where necessary) carbon monoxide alarms.
- Damage to the property – you will be liable to your landlord for any damage caused to the property by your Airbnb guests and this could mean losing some or all of your deposit.
- Change of use – recent case law means that even if your lease does allow you to sub-let your property, the use of Airbnb may be deemed a breach of any permitted use clause in your lease.
- Nuisance – as a leaseholder you could be in breach of your lease if your guests are causing noise in the property, and the freeholder, or any of the other leaseholders can bring a claim against you. It has been held that if you permit Airbnb guests to use your rented property, and those guests hold house parties, you would be responsible as if you were hosting those parties yourself.
I am not simply saying using Airbnb is a bad idea. Merely, like anything, it must be approached with caution and with a full understanding of the legal implications.
Daniel is an Associate Solicitor specialising in property litigation in the dispute resolution team at Slater Heelis LLP and is a recommended lawyer in the Legal 500 for property litigation.
Article Courtesy of: www.slaterheelis.co.uk