Airbnb and how a short-term let can amount to a breach of use covenant in a long residential lease

The final decision in our property litigation case review of 2016, is the Airbnb case, Nemcova v Fairfield Rents Ltd. Given the increasing popularity and use of sites like Airbnb, many lessees are, understandably, looking for an additional revenue stream. However, whilst it may seem like a good idea, lessees should be mindful of the fact that this could amount to a breach of their lease and lead to potentially protracted and costly litigation with their landlord or the management company.

In this case the Upper Tribunal (Lands Chamber) (UT) held that a tenant had breached a covenant in her long lease of a flat in Enfield which prohibited the use of the flat for any purpose whatsoever other than as a ‘private residence’.

The lease imposed an obligation on the tenant “not to use the Demised Premises or permit them to be used for any illegal or immoral purpose or for any purpose whatsoever other than as a private residence”. The clause therefore operated to bar on all uses except as a private residence.

Ms Nemcova let out her flat for a night or two at a time for approximately 90 days a year and almost always to business visitors working in London. She would spend three or four days a week at the flat herself and stayed with her boyfriend for the remainder of the week. Ms Nemcova continued to pay council tax and utility bills for the flat and had set up a website advertising her home as an ‘alternative’ to a hotel.

There was an acknowledgement by the UT that the covenant did not require Ms Nemcova to use the flat as ‘the private residence’ but as ‘a private residence’. Ms Nemcova tried to argue that her flat was being used as a private residence by someone (albeit not her). The tribunal did not accept this point and asserted that occupying somewhere as a private residence meant occupying it as a home, which must carry degree of permanence.

It determined that a person using Ms Nemcova’s flat for a very short period of time (one or two days) would not be occupying it as his or her private residence given the passing nature of their occupation.

The UT therefore upheld the original decision in the First Tier Tribunal in that Ms Nemcova had breached the covenant in her lease by granting the short lettings of a few days or weeks at a time.

What is interesting here is that the Tribunal has confirmed that the granting of short-term lettings will not always mean that there is a breach of a user covenant in every case. Instead, each case will turn on the facts and how the lease has been drafted. One point of curiosity arising from this case is whether a more permanent form of occupation, such as an Assured Shorthold Tenancy, would amount to a breach of covenant. This is an issue that is likely to be considered by the UT in the future.