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Space-sharing innovation, Airbnb, under threat

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Anyone, anywhere in the world, can list space for rent on the space-sharing website, Airbnb. ‘Space’ is the keyword – you don’t have to own a palace or a luxury annex to earn some extra cash.

In fact, the founders of Airbnb literally rented out 3 airbeds on their living room floor before realising they had a genius idea centred around mutual benefit. They are now a multimillion pound corporation.

The demand for space is huge in such a transient and over populated world, so Airbnb offers property owners the opportunity to make a little money in return for giving up some space in their abode.

But has Airbnb gone too far?

In a report from the Residential Landlords Association (RLA), it is claimed that 64% of properties listed on the site were available for more than 90 days a year. This, they say, is having a significant impact on the housing market, as landlords are taking their flats off the open market and advertising them online instead. This is key concern at a time when the UK is suffering from a severe housing shortage.

Airbnb dispute the findings of the RLA but there are particular tax advantages for landlords who rent out their properties as short-term holiday lets. Equally, however, a landlord is not entitled to such stringent legal protection as is available to them under longer tenancy agreements.

There are other considerations to take into account, such as planning. Properties advertised as available for more than 90 days a year must seek the appropriate planning permission. Many users are flagrantly flouting these regulations, and it won’t be long before the law steps in to control the situation and protect the housing market.

Airbnb is coming under fire across the world. In Vancouver, they have proposed that homewners will have to apply for a business license to offer short-term rentals, and in Berlin, authorities have passed laws limiting companies such as Airbnb from renting out rooms, rather than whole flats or houses.

Furthermore, there are serious implications for homeowners who occupy their property by way of a lease. In a landmark ruling by the Upper Tribunal's Land Chamber, a leaseholder from Enfield was found to be in breach of her lease because of a term that stated her flat could be used for ‘private residence only’.

The ruling only affects those leaseholders who have the ‘private residence’ clause in their lease, and who do not stay in the property while it is being rented out. However, this clause is incredibly common in leases and could mean that thousands of homeowners using sites such Airbnb are effectively breaking the law.

Judge Bridge said: “In order for a property to be used as the occupier's private residence, there must be a degree of permanence going beyond being there for a weekend or a few nights in the week.

Granting very short term lettings (days and weeks rather than months) [....] necessarily breaches the covenant [not to use the property as anything other than a private residence]”, he said.

Airbnb hosts who own their property outright will not be breaching any contractual obligations, although it is worth mentioning that, like any landlord, they could be breaking the law even if they fail to get a gas safety certificate for the property each year.

Anyone doing Airbnb lettings in a leasehold flat should immediately check their lease, because if the freehold owner 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.

The consequences of breaching a leasehold agreement can be serious. A landlord would be entitled to bring legal proceedings against the leaseholder and the court could order payment of damages, legal costs and/or put right any breach if it is possible to do so. The ultimate sanction open to a landlord would be to seek forfeiture of the lease.

The information contained on this page has been prepared for the purpose of this blog/article only. The content should not be regarded at any time as a substitute for taking legal advice.