Many of you will have come across tenants sub-letting via AirBnB or similar. For many owners of long leasehold flats this has caused huge problems with managing agents alleging that such lettings are in breach of the lease. Freeholders and their managing agents have then pursued the Flat owner for breach of lease and claimed recovery of all their costs.
So is it a breach of the lease?
The starting point is always to look at the lease and see what provisions it contains in respect of sub-letting and the use of the property. Most leases have some restrictions as to sub-letting or use.
As some of you will be aware the freeholder can apply to the First Tier Tribunal for a determination that the leaseholder is breaching his or her lease under section 168 of the Commonhold and Leasehold Reform Act 2002. Various cases have been to the First Tier tribunal with no consistency of decisions. However the Upper Tribunal in Nemcova v. Fairfield Rents Limited [2016] UKUT 303 (LC) has now offered some guidance.
In this case the lease allowed sub-letting but provided that the premises must be used “as a private residence.” Whilst the Upper Tribunal made very clear each case is fact specific (particularly as to the lease terms) it did provide an analysis of the various authorities to be considered. The Upper Tribunal supported the decision of the First Tier Tribunal that the short terms lettings arranged by the leaseholder was a breach of covenant. In so determining the tribunal at both instances was satisfied that short term lettings via AirBnB were not such that the occupants were occupying as a private residence which the tribunal accepted essentially meant as their home.
The upshot is that if you own a flat and sublet do ensure you are complying strictly with the terms of your lease. If you then become aware that your tenant is sub-letting it is critical that you take action to prevent you being challenged by your freeholder. The real issue here is that the flat owner, if pursued by the freeholder, may end up having to pay all of the freeholder’s costs to ensure they avoid forfeiture.
