Forfeiting a Lease: “Air B’n’B” style

On the 6 September 2016, judgement was handed down by the Upper Tribunal (‘UT’) of the Lands Chamber concerning the matter of Nemcova -v- Fairfield Rents Limited [2016] UKUT 303 (LC). This case should act as a clear warning to leaseholder’s who are engaged in the short-term letting of properties through schemes such as Air B’n’B.

Facts of the case

This case concerned a purpose-built flat that was located in a block. The applicant in this matter, who was the tenant, held a lease with 99 years remaining. Within the lease, there were clauses that prevented the tenant from using the flat for any illegal or immoral purposes or for any purposes “other than as a private residence.”

The tenant did not reside in the flat all of the time and subletted the property on a short-term basis. In order to arrange for this, she advertised her property online as a hotel room.

Upon becoming aware of this, the landlord sought a declaration from the First Tier Tribunal (‘FTT’) that the tenant had breached their lease who found in favour of the landlord. This was then appealed by the tenant to the UT.

Arguments

The tenant argued they were not in breach of the lease as they were still using the property for the purposes as a private residence because:

• The flat was still their main residence (even if the tenant was not there all of the time);
• The tenant stayed in the flat for three to four days per week;
• They had sublet the flat around seven times or so in the previous 12 months for around a total of 90 days; and
• The tenant continued to pay the council tax and all of the other utilities that were associated with the flat.

On the other hand, landlord argued that there was a lack of permanence as this would require the tenant living in the property for more than a few nights of the week and that effectively, the people that the tenant was hosting, were using the property akin to that of a hotel. The Upper Tribunal (Lands Chamber) found in favour of the landlord.

This case shows that sub-letting your leasehold property could get you into trouble with the landlord. This is in addition to the possibility of breaching the terms of your mortgage and a potential breach of your insurance policy.

Whilst for landlords and property developers, this case shows the importance of having clauses in leases which prevent the property from being used for any other purpose than a private residence and anti-subletting clauses. We also believe it would be worthwhile making specific reference to the prohibition of the underletting of the property for short periods of time.

At Foskett Marr Gadsby & Head LLP, we have the expertise and the experience to guide you through the minefield that is property litigation. Should you wish to speak further about this with someone, then please contact Richard Gordon (Epping office) on 020 8502 3991.