Even the briefest of visits to websites such as Airbnb reveal the common problem of residential flats being let out on a short term (and often nightly) basis.  The issues and challenges this kind of “letting” creates are well known and well versed.

But what about the lease? Leases contain rafts of covenants which govern how the flat is to be used, including the purposes for which it’s to be used. Does Airbnb type letting place the leaseholder in breach of their lease? And, if so, are they at risk of finding themselves on the receiving end of an injunction?

This was the question for the Court in Bermondsey Exchange Freeholders Limited v Ninos Koumetto (as Trustee in Bankruptcy of Kevin Geoghegan Conway).

 

Background

Although the lessee denied having used his flat to provide short term accommodation for “transient and temporary occupiers” who booked via online portals such as Airbnb, the County Court at first instance that the flat had been let on a short term basis.

Perhaps the copies of the website listing which advertised the flat for short term letting, combined with booking calendars, e-mail reviews and photographs helped to persuade the Court that the lessee had indeed been letting out his flat on this short term basis.

The Court found that there was “substantial and compelling” evidence that the flat had been widely advertised on Airbnb and similar websites, all of which pointed to “short term commercial hire”.

Notwithstanding that this kind of letting had actually stopped by the time matters came round for trial at the County Court, the Judge was satisfied that an injunction should be granted to prohibit such use in the future.

Therefore, at first instance, the Court found that there had been a breach of the lease, and, notwithstanding that the letting had ceased, that it was still appropriate to grant an injunction.

Unsurprisingly, the lessee appealed this decision.

 

Terms of the lease

It’s worth, as this juncture, reviewing the terms of the lease in this case. The clauses in the lease are fairly standard.

So far as “dealings” are concerned, the lessee had covenanted:

“Not to part with or share possession of the whole of the [flat] or permit any company or person to occupy [the flat] save by way of an assignment or underlease of the whole of the [flat]”.

The District Judge found that the lessee had breached this clause because he’d parted with possession of the flat. Alternatively, the leaseholder had breached the clause by allowing people to occupy the flat other than by way of assignment or underlease of the whole of the flat.

The lease also contained the following clause:

“Without prejudice to the absolute prohibitions hereinbefore contained not to assign or underlet the whole of the [flat] without the prior written consent of the landlord”.

The lessee had not obtained written consent for the letting of the flat through Airbnb. Therefore the County Court found that the lessee had breached this clause by underletting the flat “effectively for holiday lets through Airbnb”.

The final clause considered by the County Court was:

“Not to use or permit the use of the [flat] or any part thereof otherwise than as a residential flat with the occupation of one family only…”.

The County Court found that the Airbnb letting amounted to “letting, akin to holiday lets”, and that such hire of “are not using the [flat] as a residential flat”.

Essentially, the County Court found that there was a qualitative difference between letting a flat on an assured shorthold basis to a family who occupy the flat as their home, compared to letting the flat on a short term let on an Airbnb type basis.

 

Appeal

The two questions for the Court on appeal were

  1. Was the County Court right to hold that the leaseholder had breached his lease?; and
  2. Did the Judge exercise her discretion wrongly when deciding to grant an injunction?

On appeal, the clauses of the lease were examined closely.

“Parting with or sharing possession”

As I’ve set out above, the lease prevented the lessee from parting with or sharing possession, or permitting occupation save by way of an assignment or underlease.

This therefore captures both parting with or sharing possession of the flat, and also permitting someone to occupy the flat.

The decision of the County Court that this clause had been breached by the Airbnb letting was found to be “unimpeachable”.

 

“Use as a residential flat”

The lease required the flat to be used as a residential flat with the occupation of one family only.

It was argued by the lessee that the paying guests (who’d booked through Airbnb or similar) were using the flat as “a residential flat”, albeit for short periods of time.

The Court disagreed. They found that the user covenant was clear, and that it was breached when the flat was not used as a residential flat, but as short term temporary accommodation for transient visitors paying for such use by way of commercial hire.

 

Should an injunction have been granted?

The activity complained of had taken place in 2015, and by the time matters came round to the trial in September 2016, the short term letting had stopped.  It was common ground between the parties that there’d been no recurrence since the spring of 2016.

Injunctions are draconian remedies.  And restraining injunctions ought, as a matter of principle, only to be granted if there is some proven likelihood of future interference with a claimant’s rights.

An injunction does not automatically follow from a breach, and instead is a discretionary remedy.

Notwithstanding this, and for a number of reasons, including:

  • breach of the lease had been established (and had been denied by the leaseholder throughout);
  • relations between the parties had broken down;
  • it had not proved possible to resolve the matter by way of an undertaking; and
  • short term arrangements – through Airbnb style platforms – where a modern phenomenon offering new “opportunities” in changing times that might tempt other residents on the development.

the County Court granted the injunction.

On appeal, the Court was satisfied that the lessee had not “come anywhere near establishing a justification for… interfering with the Judge’s assessment”.  The injunction therefore remained.

 

Commentary

This decision will be welcome news for landlords (and indeed management companies) whose developments are plagued by the modern phenomena of Airbnb and other similar platforms.

It’s often complained of that such casual hotel-style use of ordinary residential accommodation causes nuisance and security issues, and is detrimental to a “sense of community” in a block of flats.

Landlords (and their agents) will be assisted by this decision in combating this kind of behaviour.