The rise of Airbnb and other short-term letting platforms has made holiday-style letting an attractive option for many property owners and investors. The possibility of higher rental returns, greater flexibility and access to a wider market can be appealing, particularly in popular city, coastal and tourist locations.
However, if you are buying a property with the intention of using it as an Airbnb, serviced accommodation or short-term let, there are important legal and practical issues to consider before you commit. What may appear to be a straightforward investment can quickly become complicated if the title, lease, mortgage or planning position does not allow the property to be used in the way you intended.
Hannah Cullen, from our Commercial Property team, regularly assists clients with property transactions and can help identify potential issues at an early stage. Whether the property is being purchased as an investment, for serviced accommodation or as part of a wider property portfolio, taking advice before exchange of contracts can help avoid unexpected complications later.
Leasehold restrictions
If the property is leasehold, the lease should be checked carefully at the outset. Many leases contain restrictions on subletting, business use, nuisance or occupation other than as a private residence. Some leases may expressly prevent holiday lets or short-term stays, while others may require the freeholder’s or management company’s consent before any form of letting can take place.
Even where the lease does not specifically mention Airbnb, short-term occupation by a regular stream of guests may still cause problems. Phrases such as “private residence only” can be interpreted in a way that makes holiday-style letting difficult, and complaints from neighbours about noise, security or wear and tear can place the owner in breach of their lease.
Hannah can review the lease and title documents to help establish whether short-term letting is likely to be permitted, restricted or subject to further consent.
Consent from the freeholder or management company
Where consent is required, buyers should not assume it will automatically be granted. A freeholder or management company may be more cautious about short-term letting than they would be about a standard residential tenancy. They may refuse permission, charge an administration fee, impose conditions or require evidence that insurance and building regulations will not be affected.
This should be addressed before exchange of contracts. A buyer should not rely on an informal comment from the seller or estate agent that “others in the building do it”. If consent is needed, it should be properly requested and confirmed in writing.
Planning considerations
Planning rules are another important consideration. In some areas, particularly where there is pressure on local housing stock, local authorities are taking a closer interest in short-term lets. In Greater London, there are specific restrictions on whole-property short-term letting beyond 90 nights in a calendar year unless planning permission is obtained.
Outside London, the position will depend on the level and nature of the use, the local authority’s approach and whether any additional controls apply. If a property has already been used as a short-term let, it is sensible to ask for evidence of that use and to check whether there have been any complaints, planning investigations or enforcement action.
Before committing to the purchase, buyers should consider making enquiries with the local planning authority to understand whether planning permission may be required for the intended use, particularly where the property will be let frequently or operated more like serviced accommodation.
Mortgage restrictions
Mortgage conditions can also affect whether short-term letting is permitted. A residential mortgage will usually require the borrower to live in the property and may prevent letting without the lender’s consent. A buy-to-let mortgage may allow a longer-term tenancy but not necessarily nightly or weekly holiday-style occupation.
If projected Airbnb income is central to the buyer’s plans, this needs to be checked with the lender at an early stage. Using a property in breach of mortgage conditions could have serious consequences, including a demand to stop the letting, a requirement to remortgage or difficulties when selling or refinancing later.
Insurance issues
Standard buildings and contents insurance may not cover paying guests staying for short periods. For leasehold flats, the buildings insurance is often arranged by the freeholder or management company, so unauthorised short-term letting could create problems for the wider building as well as the individual owner.
Owners may need specialist insurance covering guest injury, accidental or malicious damage, public liability and loss of income. This should be confirmed before the property is marketed as a short-term let.
Practical issues for buyers and sellers
Short-term letting can also affect how easily a property can be sold in the future. A buyer may be reassured by strong income figures, but those figures will be of limited value if the legal right to use the property in that way has not been properly established.
Sellers should be prepared to provide clear information about historic use, bookings, consents, complaints and any correspondence with the freeholder, lender, insurer or local authority.
Buyers should also consider the day-to-day responsibilities that come with running a short-term let, including safety requirements, guest management, cleaning, repairs and neighbour relations. These are not always conveyancing issues in the strict sense, but they can influence whether the investment is realistic.
How we can help
If you are buying or selling a property that is, or may become, an Airbnb, serviced accommodation or short-term let, taking advice early can help avoid unexpected problems.
Hannah Cullen, from our Commercial Property team, can assist with reviewing the title, lease, transaction documents and any relevant restrictions to help identify whether the property can be used in the way intended. Our team can also help raise appropriate enquiries before exchange of contracts, so that buyers have a clearer understanding of any potential legal or practical issues before they are committed.
For clear, practical advice on your property transaction, please contact Richard Reed Solicitors and speak to Hannah Cullen or a member of our property team.
