There have been a number of instances recently where the freeholders and tenants of blocks of flats have sought to manage short-lettings of flats within their blocks with varying degrees of success. To date freeholders have mainly relied on the user and alienation covenants within their standard forms of lease but the vast majority of these clauses were drafted before the rise of Airbnb and do not expressly address flats being let for very short periods. Whilst it may be possible to argue that a covenant not to use a property for a business purpose prevents a leaseholder who owns several flats from letting those flats 365 days a year on short-leases, does the same covenant really apply to someone who lets their flat for a few weeks a year whilst away on business?
So, how can you effectively manage short-term lettings?
Clearly the first step in relation to existing buildings is to carry out a full review of the terms of your standard lease to see what covenants it contains that might be relevant to dealing with short-lettings. What recent cases have shown is the importance of having a clause within your standard form of lease that provides that the tenant must comply with any regulations issued by the freeholder during the lease term as this gives you the ability to issue regulations setting out the policy for short-lettings rather than having to consider the much harder alternative of formally varying each of the existing leases.
When it comes to new developments the situation is rather simpler as you can ensure that the proposed standard form of lease for the development includes suitable provisions dealing expressly with short-lettings and gives the landlord the ability to issue regulations during the term of the lease to deal with any other new situations that may arise during the lease term. However, whilst the leases on some new developments do now cover short-lettings we continue to see plenty of leases for new developments which do not expressly deal with short-lettings.
So what do you need to consider when drafting regulations to issue to tenants or new short-lettings clauses to be included in your standard lease?
The first thing to consider is whether or not to allow short-lettings and, if you allow them, how you are going to manage them. Whilst a ban may be popular with some residents, it is equally likely to upset other residents and buyers who don’t see letting their flat for a couple of weeks as any different to letting friends stay there while they’re away and the key is to try and balance the desires of all of the leaseholders. There is also the risk that if you ban short-lettings completely some residents will still try to let their flats “under the radar” which can lead to more friction between residents and also having to take legal action to enforce the terms of the lease against the offending leaseholder. Generally we recommend a compromise that allows residents to let their homes while they are away within certain parameters whilst preventing “professional landlords” from letting flats all year round on a short-term basis.
Having decided to allow a compromise, there are then a range of options available to you.
You can simply allow short-lettings subject to certain caveats through to insisting that any short-lettings must be booked through a specific provider such as One Fine Stay or Under the Doormat who have staff on call 24 hours a day to deal with any issues in relation to the properties they manage. At a minimum, any provisions should address the following issues:
- Short-term lettings should be by way of licence rather than a tenancy to ensure that visitors do not obtain any kind of security of tenure.
- The leaseholder or the platform managing the letting must have a suitable insurance policy in place that covers any damage caused to the flat and the common parts of the building.
- If leaseholders are going to be allowed to let their properties on short-lettings for more than 90 days a year they must obtain the necessary planning permission.
- That the leaseholder complies with all relevant regulations such as the provision of smoke detectors and gas safety checks.
- That the leaseholder provides details of someone who can be contacted 24 hours a day in case of any problems.
- That the leaseholder checks the identity of all guests to ensure that the people staying in the property are the people named on the booking.
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