Airbnb – how it is changing short term lettings
Even if you have never actually used Airbnb, it is difficult to miss the fact that it is an online marketplace that works extremely well. Home-sharing platforms are almost the type of commerce that the internet was designed for.
It is however easy to underestimate the effect that these platforms have on the short-term accommodation market. Traditionally concerns were the reserve of hoteliers and established serviced apartment providers who saw Airbnb as nothing other than straightforward competition. However as the model has taken hold, it has begun to facilitate a real shift towards short-term online lettings in favour of traditional longer tenancies. Recent research has suggested that an increasing number of rental properties in London are being used for short-term holiday lets (using websites like Airbnb) and are no longer available for long-term renting.
So what are the legal ramifications of letting out your home on a short-term basis, either using an online service like Airbnb, or one of the more specialist companies offering accommodation during the Wimbledon fortnight?
A number of cities across the world are introducing their own laws and regulations to prevent the spread of home-sharing platforms – partly to protect their traditional accommodation providers, and partly to ensure there is an adequate supply of accommodation for longer term renters.
At present there is no immediate sign that the UK is going to follow suit in imposing new laws to keep Airbnb “in check”, but there is already in place a requirement that any property being used for short-term lettings for more than 90 days in a year should have planning permission for a change of use. Airbnb is conscious of this fact and in theory impose a 90-day restriction on their listings unless they are satisfied that planning permission is in place.
In the 2015 budget, the UK government increased to £7,500 the Rent-a-Room tax break for home-owners renting out individual rooms. However, this favourable tax treatment does not apply to lettings of whole properties, and only to lettings from your main home.
Unless the Rent-a-Room requirements are met, you will be required to pay tax on your income from the lettings
Breaches of lease
A large number of the properties available on home-sharing platforms are flats or apartments rather than houses. In a large number of cases, there may well be provisions in your own lease which may prevent you from letting out your flat or apartment on a home-sharing platform.
A landmark case last year determined that a fairly common clause in a lease requiring a tenant to use their property “as a private residence only” did prevent them from letting out their property on a short-term basis. Even where this clause does not exist in a lease, other clauses such as “not to use the premises for any trade or business” may well be breached by an Airbnb type arrangement.
Mortgages lenders and insurance
Unless your mortgage has been arranged on a “buy-to-let” basis, it is likely that there will be provisions hidden away in the small print which prevent you from letting out the property without the mortgage company’s consent. This will almost certainly include short-term letting arrangements as well as the more traditional twelve-month tenancy contracts. Unless your buildings insurance has been arranged on the basis that your home is let out, it is likely that an Airbnb arrangement would leave your home uninsured if something happens to it when it is rented out.
Not surprisingly, putting your home on a home-sharing platform requires a great deal of thought beyond concerns about breakages and privacy. There are very serious legal ramifications if you get it wrong.
• Are you letting out your home for more than 90 days a year? If so, you are likely to need planning permission.
• If you are renting out the whole of your home then you will need to pay tax on the income.
• Does your lease contain restrictions which prevent you from letting out your home for short or long periods?
• Is your mortgage lender and insurance company aware of the rental?
This article first appeared in the October 2017 edition of Wimbledon Time and Leisure Magazine