Britain’s top property court ruled that a leasehold flat owner was breaking the law by renting out her property on Airbnb.
The property’s leasehold contract stipulated that it was a “private residence only,” and so cannot be rented out for short periods, the Upper Tribunal’s Land Chamber ruled.
The ruling will be of concern to the millions of Brits who hold leaseholds and may have similar legal clauses in their ownership contracts.
The ruling cautions that “each lease is different; and so is each clause,” so a precedent may not apply universally.
But property lawyer Giles Peaker, who works for the solicitor Anthony Gold, said the ruling has “huge significance.”
“In terms of practical consequences, this is serious for Airbnb, mainly because the ‘private residence’ clause is a common, but not universal, feature of leases,” he told The Times. “While the tribunal’s ruling does not affect people who rent out rooms while they too are staying in the property, it is likely to affect the thousands who rent out whole properties on services like Airbnb.
He added: “Anyone doing Airbnb lettings in a leasehold flat should immediately check their lease, because if the freeholder decides to take action for a finding of breach of lease on that clause, this is a clear precedent that such a use would certainly be a breach. And the consequence of breaching a leasehold agreement are serious. You can face legal proceedings, be forced to pay legal costs and ultimately may have to forfeit your lease.”
In a statement, a spokesperson for Airbnb said: “We remind all hosts to check and follow local rules before they list their space. This is also made clear on our responsible hosting page, which contains useful information and resources on the rules for home sharing.”
If the ruling does set an unfortunate precedent for Airbnb-using property owners, it’s possible that the UK government could move to change the law. It has been previously looked favourably on home rental services, and in July 2015 announced a £7,500 tax break for homeowners who rent out rooms.
The case that spurred the Upper Tribunal’s Land Chamber’s ruling involved a Slovakian designer, Iveta Nemcova, who owned a leasehold property in Enfield, North London, and rented it out on various rental services for a few days a week. Her neighbours complained to the freeholder of the block, and the subsequent legal case found she was in breach of contract because the property was a “private lease only” — even though there was no specific prohibition in her contract.
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