Unlawful Short Term Lettings – Forfeiture of the Lease

Short term lettings of residential properties through websites such as Airbnb are becoming increasingly popular and can provide a valuable source of additional income for leaseholders, provided they are let in compliance with the terms of their lease, which many are not.

Such unauthorised lettings can create great difficulties for landlords, freeholders and management companies, as a high turnover of occupiers (some of whom may only stay for a few days and have little regard for the neighbours) can cause a serious nuisance to other residents and generally lead to a loss of control as to precisely who is in occupation of a building.

There are a number of clauses commonly found in residential leases which are likely to be relevant when seeking to prevent a long leaseholder from unlawfully letting out their property as a short term holiday let, these include:
 
1) Alienation - most leases contain a restriction on assigning, subletting or otherwise sharing or parting with possession of part or the whole of the property without the landlord’s prior written consent. 

2) User - a residential lease will usually contain a clause stating that the property is to be used solely as a private dwelling house and prohibiting any trade or business from being carried on at the property.

3) Nuisance – a leaseholder will usually be prohibited from carrying out any act which may become a nuisance, annoyance or disturbance to the landlord and/or the other leaseholders or occupiers of the building within which the property is situated.

4) Insurance – a residential lease will usually prohibit a leaseholder from doing anything that will invalidate the buildings insurance policy.

If a property is being rented out in breach of the terms of a lease, a landlord’s enforcement options include obtaining an injunction to prevent the breach continuing or, more commonly, serving a s.146 notice on the leaseholder with a view to issuing court proceedings to seek forfeiture of the lease.

The s.146 notice must:

1) specify the breach;
2) require the leaseholder to remedy the breach, if possible in the circumstances; and
3) require the leaseholder to compensate the landlord for the breach.

Forfeiture proceedings cannot be commenced unless the tenant fails to remedy the breach within a reasonable time (if remediable) and fails to make reasonable compensation for the breach to the satisfaction of the landlord.

If a landlord discovers that their tenant is unlawfully letting the property, they must also be careful not to act in such a manner that could be construed as accepting the breach or permitting it to continue, as this could potentially waive their right to forfeit the lease, depending on whether the breach is considered in law to be ‘continuing’ or ‘once-and-for-all’.

Although Airbnb’s website advises all leasehold hosts to check the terms of their lease before subletting their property through the website and to seek landlord’s consent where required, this is all too often ignored by leaseholders tempted by the financial rewards of short lets and landlords should, therefore, act firmly and decisively immediately upon discovering a breach if they wish to protect their right to take enforcement action and prevent future breaches recurring.

Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases.

For further information, please contact Kenny Friday on kfriday@glovers.co.uk