Friday, January 31st, 2020
There have been some big changes in the last few years to the holiday/short-term let market through the rise of global home-sharing websites such as Airbnb. Property owners are attracted by the extra income that can be generated by letting a property and the off-beat, homely and often cheaper residences appeal to guests.
The market is flourishing despite some arguments it creates a transient use and leaves a negative impact on the local community, depleting the housing supply in the local area.
However, there are other considerations to think about before letting a property on a site such as Airbnb. It’s important to take a moment to think about some of requirements needed.
Obviously, you need to ensure the short-term let of your property is safe for guests i.e. the gas appliances have been checked, the property is fire safety compliant and you also need to consider child safety. However, these are not the only requirements you need to think about. Below is a list of the often-overlooked legal requirements for letting a property in this way.
Do you need planning permission from the Local Authority when letting a property?
Planning permission is needed for a development if there is any material “change in the use” to any of the buildings or land.
Residential properties can be categorised into two different classes of use.
A residential property used as a dwelling by a single household (Class C3) will be a classed differently from one which is used for multiple occupancy, say three to six people (Class C4). Short terms lets are a particular kind of residential unit. If you switch to a different use from a dwelling by a single household to a short-term let this may need planning permission (unless there are permitted development rights). It is normally a question of fact and degree as to whether a short term let is a material change of use.
If your property is based in London, the Greater London Council, under the General Powers Act 1973, established that change of use to a short-term let (defined as occupation for less than 90 days) would be a material change of use and therefore would need planning permission. However, the Deregulation Act of 2015 introduced an exception for properties in London allowing residential premises to be used for temporary sleeping accommodation, without being considered a “change of use” if the use of the property for the short-term let is for 90 nights or less in a calendar year (subject to some exceptions). Other cities are likely to follow in the future.
What does the lease say?
If the property to be let is a leasehold flat, you will need to think about the covenants (obligations) in your lease. Letting a property on sites such as Airbnb could put you in breach of your lease. Most residential leases will have a “user” clause often stating that the property must be used as “a private residence”. Consequently, decisions in the Upper Tribunal Lands Chamber and more recently in the Central London County Court have determined that there must be a degree of permanence for a property to be used as an occupier’s private residence. A longer length of letting of a property, on what is commonly known as an assured shorthold tenancy, would not normally fall foul of this ruling where subletting is not prohibited under the lease.
If the flat owner is in breach of the lease covenants (obligations), then ultimately the landlord could seek to terminate the lease. This is known as “forfeiture”. In fact, this may become a useful tool for other leaseholders in a building to prevent such short-term lets by requesting the landlord enforce the terms of the lease against the owner of the leasehold property. This may be a relatively “simple ask” if each of the flat owners have a share of the freehold.
What about your mortgage company?
If the property is mortgaged, then, unless it is specifically provided for in the mortgage i.e. by way of a buy-to-let mortgage, you may need to ensure you do not breach the terms of your mortgage conditions by letting out the property. You should read your mortgage terms carefully or contact your lender before you start letting your property.
What about tax?
Tax is a complex topic. Your own tax liability will vary based on your own individual circumstances. Generally, if you are receiving income from your home for short periods this is technically considered taxable income, and as such may be subject to income tax. Tax on income is payable over a certain threshold and there are also various reliefs available.
We highly recommend that you research your obligations or consult with a tax professional to get more specific information before you letting a property and registering it on such websites.
If you require any property related advice, please do get in touch with Hanne & Co’s Property Team. We have a team of knowledgeable and experienced solicitors who will be more than happy to help. You can contact us at 01306 776010 (Dorking) or 020 7228 0017 (London).
Chris Christofi is a Senior Solicitor at Hanne & Co