An Englishman’s home is his castle but is there room at the inn….

Rachel FitzGerald is a solicitor in our Property Litigation team and considers the rise of Airbnb and gives consideration to the question of whether you can sublet your property in Essence October issue.

Recently, headlines were made when a council tenant, who sublet his central London flat through Airbnb, was evicted and ordered to pay £100,974.94 to his landlord, Westminster Council. The Court’s decision to not only order that possession of the flat be returned to Westminster Council but to also require the errant tenant to handover the profits of subletting his flat, is sure to act as a deterrent to others considering illegally subletting their property.

There has been significant growth in recent years for Airbnb and similar “peer-to-peer” accommodation platforms, which provide a marketplace to connect individuals renting out their properties or spare rooms to others seeking short-term accommodation. Whilst the facts of the Westminster Council’s case are specific to a social housing tenancy, the eye-watering judgment will have grabbed the attention of the owners of the estimated 168,000 Airbnb property listings in England, which make up part of the over 2 million properties listed worldwide.

It is undeniable that many are trying to make their property “work for them”, but with potentially high stakes for those who sublet when prohibited from doing so, how is an individual to know whether they can or cannot sublet their property?

Can you sublet your property?

Whether you are entitled to sublet a property may depend on how you own the property, the restrictions placed on your use of the property or if renting, the terms of your tenancy agreement. Understanding the restrictions which affect your property can be far from straightforward and seeking the advice of a specialist property lawyer is prudent. At Mundays we have assisted many clients in understanding what they can and cannot do with their property, helping them to avoid any later pitfalls.

It is beyond the scope of this article to provide a detailed commentary on the restrictions encountered by individuals wishing to sublet their properties, but here is a short summary of the main forms of property occupation in England and common restrictions encountered.

Freehold Ownership

Individuals who own the freehold interest in their property (the most substantial form of property ownership in England) are often shocked to learn that they can be restricted from hosting individuals at their property using Airbnb. Such action would not be “subletting” per se but may still be subject to restrictions.

A freeholder may find their ability to host fettered by restrictive covenants which affect their property. Such covenants may restrict the carrying on of a business at the property or for more than one family to occupy the freehold property. In addition, a less often considered stumbling block, are restrictions enforced by a managing company which may govern an estate or group of freehold properties.  Some restrictions may impose an absolute prohibition on the ability of an owner to let their property through Airbnb; if this is the case, then it may be very difficult for the owner to host Airbnb users.  Other restrictions may require consent to be sought before a letting of this type can take place. In those circumstances, failure to obtain consent may result in injunctive proceedings being brought against the freeholder, which would likely trigger a significant liability for legal costs.

Leasehold Ownership

Most flat owners in England and Wales own their properties as leaseholders and on purchasing their property will become a party to a lease with their landlord. Landlords will typically seek to exercise control over their tenants’ use of their property and the terms of the lease will reflect this.

Leases of residential properties may include prohibitions on the short term subletting of part (i.e. a room) or all of the property or the carrying on of a business at the property. These prohibitions may thwart the leaseholder’s ability to sublet their property, even if just for a few nights a year.

If a leaseholder has breached the terms of their lease by subletting their property, a landlord may ultimately be able to take steps to end the lease and remove the leaseholder from the property and claim damages as a result of the leaseholder’s breach of the lease terms. Leaseholders should therefore carefully consider their lease before subletting part or all of their property, whether that is through Airbnb or otherwise.

Residential Tenants

As one might expect, the restrictions on subletting and the way in which a property can be used are often greater for short-term residential tenants, such as Assured Shorthold Tenants. For any tenant who wishes to sublet part or all of their rental property, the starting point to learning whether this is permitted is the terms of their tenancy agreement.

Subletting a rented property without the landlord’s agreement runs the significant risk of the landlord seeking to evict the tenant and in the case of social housing may also see the landlord seek an unlawful profit order for payment of the subletting profits, as was successfully sought by Westminster Council.  The extent to which the courts might award similar levels of damages in private rented cases remains to be seen but the Westminster Council case provides a clear reminder of the dim view the courts take about the unlawful use of rented property.

Whilst subletting your property may prove a great way to bolster the coffers, any earnings may prove costly if you are not first satisfied that your actions are permitted. Mundays’ specialist property lawyers can assist in providing you with this certainty and with any other property ownership legal issues you may encounter.

Other Issues to Consider when Subletting your Property

  • If your property is mortgaged, the terms of your mortgage may prohibit subletting without express consent from the mortgage provider.
  • Your home insurance provider should be notified. By subletting your property there may be a change to your insurance premiums and further conditions to be complied with.
  • Your property may also be subject to a provision which prohibits nuisance use. Such a provision would prohibit use that might cause loss, damage, injury, nuisance or inconvenience to your landlord, your fellow tenants or any other owner or occupier of a neighbouring property.
  • Greater London has a restriction which prevents property owners from renting out their property for more than 90 nights per year. If you wish to exceed this limit, you are required to obtain planning permission for a “material change of use” from your local authority.
  • If your property is available to let for 140 days or more per year, it may be deemed a self-catering property and therefore subject to business rates.

The contents of this article are intended as guidance for readers. It can be no substitute for specific advice. Consequently we cannot accept responsibility for this information, errors or matters affected by subsequent changes in the law, or the content of any website referred to in this newsletter. © Mundays LLP

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