firm news

Derek Ching
Derek Ching,
New homes and short-term lettings
19 November 2018

The emergence of a market for web-based lettings for short-term visitors, such as Airbnb, has introduced implications for housebuilders looking to sell new homes.  

Some adverse publicity has been generated as a result of residential properties being used, as a result of the operation of these websites, for anti-social or criminal activities which may cause concern to neighbouring owners or generate adverse publicity which could affect ongoing sales on a new development. Apart from the unwanted direct effect of such activities, noise, unwanted visitors, disregard of security and lack of concern for the appearance of common parts by people who have no long-term interest in the area may detract from the attractiveness of the development both for the developer who may have flats or houses to sell and for the existing residents of other properties. 

Frequent arrivals and departures of strangers into a development might give rise to annoyance and nuisance for the residents generally as well as threaten the security of those properties immediately adjacent, particularly where individual dwellings share common accessways, lobbies, lifts and stairwells.

What approach should housebuilders adopt?

Developers should consider the impact upon their developments of homes being used for such short-term letting activities.  

Do nothing 

Some developers may take the view that it is a matter for the owners of new homes to use their properties as they think fit and therefore do not think it relevant to impose upon buyers of new homes covenants prohibiting short-term letting arrangements.

The imposition of restrictions may even be seen as unattractive in specific local markets.

Impose controls

Others may take the view that it is important to preserve, so far as possible, the character of their developments as properties in which owner/occupiers are prevalent and to discourage transient occupation of homes on their developments. This could be a temporary or permanent ban.

Developers already have to ask themselves whether or not to impose restrictions on lettings by way of Assured Shorthold Tenancies but the growth of very much shorter lettings, to temporary residents or holidaymakers for a month, week or even weekend magnifies this issue. 

Relevant questions are:

  • Could such activity adversely affect ongoing sales of new homes on their developments?
  • Are housebuilders worried that owners of homes on their developments will be adversely affected by disturbance from transient occupiers, with indirect negative connotations filtering back to the developer, as their reputation for development of safe and welcoming communities of family housing is questioned?  
  • Would the presence of such restrictions enhance the attractiveness of a particular development?

What controls can be imposed?

Covenants can be inserted into transfers or leases banning short-term letting arrangements.    

Developers can structure such covenants so as to be enforceable directly between individual purchasers of houses or flats on their developments. This provides a legal remedy for neighbouring owners to take action direct should such activities commence, without having to involve the developer.

In the absence of a specific covenant prohibiting Airbnb type activities, other covenants might be enforced to stop it. This depends very much on the wording used but, for example, covenants which prohibit use of the property for anything other than as a private residence for a single family might be regarded as being breached as a result of frequent transient lettings of short-term duration. Manifestly the occupation by those people is not as their main dwelling-house.  

It has also been established that use of property for holiday letting activity can result in contravention of planning controls on use of property. This gives housebuilders and neighbours a number of potential lines of attack, first by asking the planning authority to serve an enforcement notice, second by enforcing any covenant in the transfer or lease to comply with planning laws and thirdly by inviting any mortgage lender to take action against the breach of mortgage conditions that flows from this.

The existence of a legal remedy is of course no guarantee that short-term lettings will not take place. Ultimately, those with the benefit of the covenant can apply to court for an injunction as occurred in the case of Bermondsey Exchange Freeholders Limited v Minos Koumetto, (see Boyes Turner’s report of July 2018).

For further information please contact Derek Ching at [email protected].

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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