Airbnb has become known as the
world’s largest accommodation provider but it owns no property. It gives
property owners an opportunity to let their properties out on a short-term
basis with relative ease and gives consumers an opportunity to stay in a home
and ‘live like a local’ in their location of choice. As a result of this it has
become well known in recent years and is used frequently by many.
For property owners it has
become an easy and profitable way of generating additional income, particularly
for those with residential properties in desirable city centre locations.
However, if you choose to use Airbnb or any other short-term letting website
for letting your property, it is important that you consider the legal
consequences of doing so alongside the financial benefits.
The key legal factors to consider are:
The key legal factors to consider are:
Are you properly insured?
Airbnb offers the following
insurance as part of its business terms:
- Host Guarantee: Airbnb agrees to pay you to repair or replace certain covered property (i.e. your belongings) which is damaged or destroyed as a result of certain covered losses.
- Host Protection Insurance: Airbnb agrees to provide primary liability coverage up to a certain amount if a guest makes a claim for bodily injury or property damage. It may also cover claims if a guest damages the property itself.
Whilst this does provide
comfort to property owners, as is the case with any insurance policy, the terms
and conditions should be read carefully for exclusions and limitations.
You need to ensure that the insurance provided applies to your property and
your individual situation. This is particularly important where you do
not have anyone managing the property on your behalf and monitoring whether
guests are using the property appropriately.
Remember that the Airbnb
insurance does not replace the need to have your own buildings and contents
insurance. If you have a mortgage, the terms of the mortgage deed will
require you to maintain buildings insurance too (or ensure that your landlord
insures if the property is leasehold). Again, you need to check the terms
of these policies too to ensure they are not invalidated by renting out your
property. Usually a notification to your insurer is required when your property
is being let out for short-term lettings.
Will you breach your mortgage terms?
Your mortgage is likely to
contain restrictions on how you can use your property (in both the facility
letter and mortgage deed). You need to check the terms to ensure that
short-term lettings are permitted. If they are not, entering into a short-term
letting will breach the mortgage terms and may be an event of default under the
mortgage allowing the lender to enforce its security (i.e. take steps to call
back the loan).
Will you breach planning regulations?
Planning controls are also
important to consider, both at local and national level. In some areas a
short-term let may be considered as a material change of use (i.e. a change of
use from residential use without planning consent). This has been a
problem for Airbnb in cities around the world and has resulted in penalties
being issued on some occasions.
In 2015 an exception was
introduced to allow properties in London to be used as temporary sleeping
accommodation without this being considered a change of use, provided the total
number of nights the property is used for short-term lettings does not exceed
90 nights in a calendar year. There are restrictions to this exception,
so if you are considering using it you need to ensure the exception applies to
your property. Airbnb has been trying to assist with making their service more
compliant with local and national laws. As a result the Airbnb system now
automatically limits entire home listings in the Greater London area to 90
nights a year unless the property owner confirms that they have the required
planning permission.
If your property is leasehold (rather than freehold) will you breach your lease terms?
Many leases restrict the
ability of the tenant to sublet their property or only allow sublettings if
landlord’s consent is obtained. Leases usually restrict the use of your
property (i.e. to residential use) and require you to comply with planning laws
affecting the property. A recent case held that a tenant had breached a
covenant which prohibited use of their flat for any purpose other than as a
private residence, as they had advertised the flat on the internet for
short-term lettings and granted a series of such lettings.
Most leases will allow the
landlord to forfeit (i.e. terminate the lease by bringing court proceedings)
for breach of covenant. A landlord would also be able to bring a claim
for a monetary payment if it could prove it had suffered a loss. A tenant
can apply to court for relief from forfeiture but will need to remedy the
breach (i.e. stop entering into short-term lettings) in order to prevent the
lease being terminated.
Many residential leases also
include regulations controlling how all tenants in the building use the
building (for example, restricting noise levels, pets, use of common
parts). Even if landlord consent is not required for short-term lettings,
guests need to observe these regulations during their stay at your
property. Airbnb allows property owners to set “house rules” during the
booking process and you need to ensure these include complying with any building
regulations imposed by your lease.
Should you make arrangements to have the property managed?
Although Airbnb and similar
sites offer an opportunity for individuals to maximise rental value from their
properties they do not provide a management service. Some owners have
code accessed boxes to allow guests to pick up keys but it is prudent to have
someone assist in managing your property (making keys available and dealing
with any issues arising). As a property owner you might expect guests to
be using your property for holiday or business stays but there are instances of
properties being used to host parties. Airbnb allows you to vet your
guests by viewing their profile, which is important (as are reviews from
previous Airbnb stays). However, having someone on hand to deal with
issues is advisable. From a security perspective, this also helps to
ensure that the property is not seen by the public as being left unattended for
long periods of time.
To Airbnb or not to Airbnb?
An increasing number of
property owners regard Airbnb and other short-term letting sites as offering a
unique opportunity for them to maximise rental value from their
properties. However, it is important property owners have assessed the
legal issues involved to ensure that they are making an informed choice, and
that the financial benefits outweigh the legal and practical
considerations. When deciding whether to “Airbnb or not to Airbnb” make
sure you consider the legal issues involved.
Grace Laws, Associate,
Fladgate LLP (glaws@fladgate.com)
