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Beware Airbnb

Airbnb is a huge success, landlords and indeed, letting agents are climbing aboard but there are legal pitfalls, says specialist lawyer Adam Osieke.

Adam Osieke

Adam Osieke imageAirbnb, a website that was practically unknown just a few years ago, has quickly become one of the most popular methods of letting property on a short-term basis. In fact, it has become so popular, that a number of legal issues are often overlooked. Most residential leases restrict subletting to some degree or other. Usually, the condition is that prior consent is obtained from the landlord, but some leases go further and ban subletting altogether.

Airbnb imageAnother common requirement is that the property in question should be used as a private residence. Given that most Airbnb lettings only last a few days, is that enough for the property to be a private residence? The Upper Tribunal thinks not; in the recent case of Nemcova v Fairfield Rents Limited, it found that the letting of a flat to business travellers for days at a time amounted to ‘transient’ occupation. As such, the flat could not be considered a private residence and the tenant, Ms Nemcova, was found to have breached the terms of her lease by renting it on a short-term basis.

BREACHING LEASE TERMS

The list doesn’t end there. Letting a property in Greater London on a short-term basis for an aggregated total of more than 90 days in any one calendar year will amount to a breach of planning control, which could lead to enforcement action by the local authority. Worse still, that enforcement action could then amount to a breach of any condition of the lease that obligates compliance with planning law.

Airbnb Host Guarantee protects against damage to the host property, the building’s common parts are not covered.

It might easily be assumed, however, that these breaches of the lease are quite trivial. The landlord will not have suffered any actual loss and so is there really any cause for complaint? The short answer to that question is yes. Although rarely attempted, it is still possible for a landlord to terminate (or ‘forfeit’) a residential lease for breach, no matter how inconsequential the tenant believes it to be. The Court will, invariably, order the reinstatement of the lease if asked to do so by the tenant, but usually only on the condition that they pay the landlord’s costs, which could be quite significant.

Alternatively, the landlord could simply ask the Court to order that the tenant should remedy the breach of the lease.

In a nutshell, short-term letting of a property without the landlord’s consent (if required) could trigger a costly legal process which is unlikely to end well for the tenant/Airbnb host.

BLAME CULTURE

If things do go wrong, the temptation will be to look for someone else to blame. However, the Airbnb Terms and Conditions (UK) are completely transparent about the fact that the host is solely responsible for complying with the terms of the lease and local laws (paragraph 7) and indemnifies Airbnb against all claims, liabilities, losses and expenses connected to any letting arranged through its website (paragraph 27). In addition, while the Airbnb Host Guarantee offers protection against damage caused to the host’s property, it does not extend to property that the host does not own or control (i.e. the common parts of a block of flats).

So if there is no claim to be made against Airbnb, might the host’s managing agents find themselves in the firing line? There is certainly an appreciable degree of risk here if the terms of the management agreement are not sufficiently robust and proper background checks on the host are not carried out.

For example, the agent might assume that the host is the long leaseholder of the flat and has all the consents necessary for the letting to take place. But in order to defend any potential claims, the management agreement should contain a warranty (i.e. a promise by the host that a specified state of affairs exists) to that effect and an indemnity (i.e. a promise by the host to reimburse the agent in respect of a particular type of liability) against any related third party claims. That said, the terms of the agreement must be fairly balanced; as most Airbnb hosts will be private individuals, Section 62 of the Consumer Rights Act 2015 will render ineffective any part of the agreement which is found to be unfair.

Lastly, remember that even a well-drafted indemnity will be worthless if given by a bogus individual! The Land Registry database can be checked in a matter of minutes and will provide the vitally important confirmation as to whether the host is indeed the owner of the property in question.

Adam Osieke is a Real Estate Dispute Resolution Solicitor at Pemberton Greenish. 

March 10, 2017

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