When Anthony Dunkley travelled to Margate in Kent earlier this year, he wanted to buy a property to stay in occasionally and rent out on Airbnb the rest of the time. After making offers on three flats, he encountered the same problem each time: the lease would not allow it.
While estate agents had assured him that he would be able to rent out the properties for days, weekends and weeks at a time, the paperwork said something different.
Like the leases on many homes around the country, restrictions applied on what they could, and could not, be used for. And renting out on a short-term basis was not permitted.
He had come across a problem that many people who own their own home, but rent it out for short periods, may not be aware of.
Leases frequently contain restrictive clauses such as that the property can only be used as a residence for a single family, or that prevent them being let out for periods of less than six months.
And renting them out despite these rules raises the risk of legal action.
“About 75% of the time, I was told that it could be rented out, and after nine weeks of searching we made three offers. Before spending money on solicitors, I asked for a copy of the lease, and each time it was clearly stated that sublets were not allowed,” says Dunkley, an English national who lives in Italy and Portugal.
“The reasons that estate agents would give a ‘yes’ were incorrect. There were things like ‘the person before has been doing it’ and ‘it’s a basement flat, so that’s no problem and it’s got a separate entrance’.
“Those were considered sufficient reasons to believe that it could be put on Airbnb.”
While leaseholders may own their own home or flat, the terms of the agreement they have with the landlord or freeholder will typically spell out what it can be used for.
In the case of a block of flats, the freeholder could be represented by a management company. Renting it out for a short term could violate clauses which restrict its use to a private residence only.
Chris Waters, managing partner of Meaby & Co Solicitors, says there are a lot of instances where people believe they have the right to rent their property on websites for short terms, but in reality they do not.
“The key issue is, if you have a leasehold property, the starting point for whether you are allowed to rent that property as a short-term let – anything under six months – is going to be defined by the lease.
“Now it would be wrong for me to say that most leases prohibit, or restrict, short term, but certainly a lot do,” he says.
The issue is particularly pertinent in cities, where many more properties are leaseholds, than in the suburbs.
“I don’t think it is a known feature, and I think that those who do know about it tend to ignore it and hope for the best.”
Leases differ widely in what they allow – some will prohibit short-term lets, while others may only permit those that last more than six months.
Waters says that even if there is no specific restriction preventing short-term lets, this does not mean the property can be let out.
Breaching the terms of the lease can have potentially serious consequences for the person renting out. This can start with notice being given to stop breaching the lease, up to court action to forfeit the lease, which “effectively means the lease is terminated and you will lose that property,” says Waters.
Jeremy Weaver, a solicitor with Nottingham-based Brady Solicitors, says the growth of short-term letting websites has led to an increase in queries about leases being breached.
“In my experience it is rare for these issues to end up in court, although there have been some important court decisions on the issue of short-term letting,” he says.
“Most modern leases will include provisions that will probably make it a breach of the lease, based on those decided cases.”
Weaver recently dealt with a case where a leaseholder was consistently short-term letting their apartment, resulting in disturbance being caused to other residents in a city centre block and, eventually, court action being taken.
“I suspect that, in a lot of cases, though not all, leaseholders are not aware that what they are doing is potentially a breach of their lease,” he says. “The best advice that I can give would be to check the lease and, if necessary, either check with the landlord/management company/managing agent first and/or seek some legal advice.”
“Unfortunately, it is not always easily determinable by a layperson whether a lease does prohibit short-term letting.”
Airbnb, probably the dominant player in the sector, declined to comment. On its “responsible hosting page” it says leases may have restrictions on subletting or hosting, and suggests owners review contracts which dictate the rules. If a dispute arises, it says that it may take “appropriate action”, which could include the listing being deactivated.