Holiday Lettings: Profit or Loss?

If you own a freehold property and short term lettings and their effect on wear and tear doesn’t concern you then holiday lettings may be for you.  However if you own a leasehold property beware. Holiday lettings may well be a temptation too far.

Most leasehold properties contain clauses about subletting. When you read them you might think that they appear fairly innocent, for example, I have to notify my landlord within 30 days of the details and ensure that my occupiers don’t breach my lease. However in the small print of most lengthy leases are separate clauses that also apply. These clauses are usually found in the schedules to leases and refer to the use of the flat. 

If your lease contains a clause that suggests you may only use your flat as a private residence or a private home then letting on a holiday letting basis can breach this clause.

A Court of Appeal authority (Caradon District Council v Paton 2003) has recently been revisited by the Upper Tribunal of the Property Chamber in a case called Nemcova v Fairfield Rents Ltd (September 2016).  The case gives a useful summary of the law and how to apply it to leases.  The tribunal have steered away slightly from Caradon to say that some short term lettings, providing they are for the use of the property as a residence (even for a short period) may not fall foul of this clause but each lease would be looked at carefully to establish the proper intention of the clause. 

The duration of the letting however is a material factor and holiday lettings for weeks or days will rarely be anything other than transient and will therefore breach the lease.

Please therefore take advice before falling into this trap as a breach of your lease can have serious consequences.  If you are a freeholder or agent struggling to contain holiday lettings in your block then this case may come as a welcome reinforcement of the existing law.

For expert advice speak to Claire Whiteman on 01273 249229 or other members of our Chambers accredited property litigation team.