Can a freeholder/manager prevent a leaseholder from letting out their property on Airbnb and similar short term letting platforms?

Airbnb and similar short term lettings platforms have made huge inroads both in London and all over the UK. While there are many advantages to these platforms, quiet locations may not want a constant flow and turnover of occupants.  Freeholders and other managers of properties may want to know exactly who is occupying the different flats  and other properties under their control. Can freeholders use the terms of long leases to control and, if necessary, prevent the use of properties for Airbnb and other short term lettings?

In Nemcova v Fairfield Rents Ltd [2016] UKUT 303(LC) the Upper Tribunal determined that short term letting was in breach of the covenant in the lease not to use the property “for any purpose whatsoever other than as a private residence.”   A problem with the Tribunal though is that it cannot grant an injunction preventing the further use of a flat in breach of covenant.  The Tribunal can only make a declaration which a freeholder can use in a later s146 Notice and forfeiture proceedings.  This is, to say the least, a rather cumbersome way of controlling the problem.

The civil courts on the other hand can grant an injunction restraining a lessee from continuing with behaviour which is in breach of lease.  Now we have a decision on appeal in Bermondsey Exchange Freeholders Limited v Koumetto (as Trustee in Bankruptcy of Kevin Geoghegan Conway) (unreported) Central London County Court 1 May 2018, which upheld a decision at first instance that letting on Airbnb and similar platforms was in breach of lease and granting an injunction to restrain further subletting.

Both in Nemcova and in Bermondsey Exchange the freeholder relied on so-called “user” covenants in the leases.  Drafted in the days before the internet, let alone Airbnb and similar platforms were invented, user covenants  now sound rather quaint and old fashioned, using such phrases as “single private residence” and “for the occupation of one family only.”  The Tribunal in Nemcova and the court  in Bermondsey Exchange though were able to interpret the user covenant to decide that using Airbnb and similar platforms was a breach.  The catch however is that slight variations in the wording of user covenants may be all important in deciding  whether the lessee is in breach.  In Bermondsey Exchange the user covenant was different from Nemcova and prohibited use “….otherwise than a residential flat with the occupation of one family only.”   The court found that short term letting was a breach of that covenant.

For a freeholder /manager who is less than enthusiastic about a property being used for short term letting, Bermondsey Exchange will be welcome news that, in many circumstances, something decisive can be done.

[Andrew Brookes acted for the successful claimant in Bermondsey Exchange.]

Andrew.brookes@anthonygold.co.uk

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