Use of Flats - Business use, Airbnb and the case of Triplerose Ltd v Beattie and another  UKUT 180 (LC)
1st July 2020
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1st July 2020
The decisions of the Court and the Tribunal in relation to short term lettings offered by services such as Airbnb and numerous others now number many. Most practitioners, us included, will refer to favourites such as the unfortunate Mrs Nemcova and the successful Bermondsey Exchange Freeholders (see our Legal Updates from May 2018 (see here) and January 2020 (see here)).
Triplerose Ltd v Beattie and another  UKUT 180 (LC)
Nothing much had looked to change the positions confirmed in those cases until Triplerose Ltd v Beattie and another  UKUT 180 (LC) came before the First Tier Tribunal who, with an apparent desire to avoid following either of the above cases, sought to twist interpretation of the user covenant around and around such as to find that the short term letting of the flat in that case did not amount to a breach.
This was plainly incorrect and the matter was appealed to the Upper Tribunal (UT).
The decision of the UT in respect of the short term letting use falls in line with that of Nemcova, as it should, and therefore the case itself is not outstanding. However the case is of interest because the Landlord pleaded breach on two points, one of which related to “business use” by virtue of the short term lettings for commercial gain. The breaches pleaded were as follows:-
Firstly, that the letting of the flat on short term basis was a breach of the requirement that it should not “be used for any purpose other than as a private dwelling house for occupation by one family at any one time” - along the lines of Nemcova and Bermondsey Exchange (see above); and
Secondly, that the use of the property as a commercial concern breached the requirement in the lease “Not at any time to carry on or permit to be carried on upon the Property any trade or business whatsoever”
The facts of the case are straight forward. The Beatties sought to generate income from the flat and looked to Airbnb and Bookings.com to assist with that. Short terms letting were agreed and overseen by the Beatties, and Mr Beattie also occupied the flat from time to time in between bookings. Nothing unusual here.
The UT’s decision
The UT made clear rulings on both points.
On the first point, and “on the facts found by the FTT the individuals who occupied the flat for weekends or other short periods after responding to internet advertisements were not [my emphasis] using the flat as a private dwellinghouse for occupation by one family at any one time. By permitting that use Mr and Mrs Beattie were in breach” of the user covenant in their lease (which is a common version found in residential leases).
It was accepted that the use as a private dwelling did not mean that only the Beatties could occupy the flat but merely that whoever does occupy from time to time must use the flat as their dwelling. In line with Nemcova, the temporary holiday type use is seen as not commensurate with such requirement.
On the second point, the UT considered whether the taking of paying guests was a breach of the prohibition against carrying on a business upon the premises. The Tribunal found that it was not.
They considered that although the Beatties were using the premises as a business resource, there was no business being carried on “upon” the premises. The UT clarified this point as follows - “No activity was carried on upon the property which in itself amounted to a business. I consider that the provision of laundry services between lettings, leaving breakfast goods for visitors, and handling check-in and check-out (which was not said to happen at the flat) do not alter that assessment and do not amount to carrying on business on the property. I therefore consider the FTT was right to find that letting the flat for short term residential use did not breach the covenant against carrying on business upon the property”. [my emphasis]
As we have set out in the previous Legal Updates (see links show in brackets within this article) relating specifically to short term lettings and our further Legal Update from September 2019 (see here) relating to matters to consider before letting a flat (also attached), a leaseholder must have close regard to their lease before embarking on a course of action. Most leases, particularly well drafted modern leases, will contain both qualified and unqualified prohibitions or restrictions, be that in the form of covenants or regulations. In respect of the latter, regulations can be subject to later addition or amendments and thus may not appear in the text of the original lease, so some research and careful record keeping by the leaseholder is essential.
So, leaseholders should beware as there is many an opportunity to fall foul of the lease in what might, on the face of it, seem to be a fairly innocent and prudent venture.
For Landlords, the position on short term letting is becoming ever clearer. We are certainly finding, now with various decisions in both the Courts and Tribunals, that breaches of short term letting and other user provisions need not reach a trial but are often quickly resolved upon making the defaulting leaseholder aware of the default by clear reference to the lease terms and numerous current decisions.
Whilst there will always be exceptions to the above and quirky differences between leases and those used in the decisions referred to above, an unlawful use of the property is often an easy issue to resolve where it is acted upon promptly.
Before pleading breach of the business use it is important to be clear both as to the precise wording of that clause, and whether the specific claimed default is indeed a breach of the specific provision relied upon.
For more information, please contact Kevin Lever, Principal Solicitor, on 01435 897297 or Kevin.Lever@kdllaw.com.
This legal update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole.
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