Airbnb lettings - continuing challenge for developers and owners

Breach of planning law

A recent planning inquiry decision has emphasised the difference under planning law between a normal residential property and a property used to provide holiday accommodation, in this case for short term accommodation by visitors using Airbnb to book accommodation.  

There can be a slight element of overlap in planning law between standard residential use and occasional use for holiday accommodation, but it is now clearly established that intensive use of a property on a regular basis for commercial holiday lettings (whether for short term or longer periods) represents a material change of use for which planning permission is required.  

Should developers allow AirBNB style short term lettings?

Developers selling new flats in a block or houses on a new estate, with shared accessways and other communal areas, need to decide whether to seek to ban such lettings or whether to treat the freedom to use property for such lettings as a positive element which may enhance the price. In areas where there is a lot of tourist demand, the freedom to rent out property by way of Airbnb lets may present a positive benefit.  For other developments, the presence of short term Airbnb occupiers, who may not be as careful in how they use the properties as long term residents (for example by causing noise, holding parties or leaving refuse in inappropriate places), could be seen as damaging to the character of the development.

For Developers, the most sensitive time is during the period when they are trying to sell new homes on a development.  Developers will wish to avoid anything which hinders successful sales and although they are not directly responsible for the conduct of earlier purchasers on their estates, they certainly have an interest in avoiding being dragged into disputes between neighbours or with the planning authority as to how the property is being used or having potential buyers being put off by seeing possibly critical social media traffic about the use of homes on the development which have already been sold. Developers often impose covenants banning their buyers from breaching planning law but can choose also to impose a specific permanent or temporary ban on short term lettings on their estate, depending on how serious they consider the issue to be.

Each development needs to be looked at on its merits and the outcome may reflect the particular developer’s own perceptions about the type of occupiers they want to see on their estates and whether they consider that use of their new homes for short term lets might (perhaps indirectly) have an effect on their reputation as housebuilders.  

Risks for property owners too

For property owners considering Airbnb lettings, not only do they have to worry about the application of planning law but also should check the terms of the transfer or lease of their property.  If there is a prohibition in the deeds, letting to Airbnb customers may be a breach of covenant as well as a breach of planning law.
Most standard residential owner-occupier mortgages also prohibit lettings without the prior approval of the lender and therefore letting the property out even on an Airbnb basis is likely to give rise to a breach of the mortgage covenants too.  

Owners need to ensure that their home insurance policy remains valid and comply with health and safety and gas supply and electrical safety rules. In London there are also rules which apply a 90 day limit to the number of days per year that homes can be rented out for on a short term basis without needing planning permission. This period can be modified by individual Councils.

As well as being on the receiving end of complaints from neighbours objecting to a property being used for Airbnb occupations, a property owner needs to be aware therefore that objectors may complain directly:

• to the planning authority
• to the owner and insurer of the freehold block of flats in which the property is located
• to their mortgage lender who has a mortgage over the affected property
• to a management company who may also have the benefit of covenants from owners of each property in a development.