The continuing costs of short-term Airbnb use

An appeal judge (His Honour Judge Luba QC) sitting in the County Court at Central London has held that an injunction restraining a leaseholder from letting his flat as Airbnb accommodation shall continue, and approved the first-instance decision that Airbnb use was a breach of his lease covenants.

The facts in Bermondsey Exchange Freeholders Limited -v- Ninos Koumetto (as Trustee in Bankruptcy of Kevin Geoghegan Conway)

Bermondsey Exchange Freeholders Limited (“the Claimant”) is the freehold owner of the Bermondsey Exchange building in South London. The building was previously a warehouse although in the late 1990s it was converted into 18 flats. Mr Conway (“the Defendant”) holds a 999 year lease of one of the flats (“the Flat”), which he formerly occupied as his home. The Defendant then moved out of the Flat and initially sub-let it on private rental tenancies.

However, in 2015 the Defendant started sub-letting the Flat through Airbnb and other short-term letting services. The Claimant’s position was that this was a breach of various tenant covenants, details of which are below (the sub-letting hereafter being referred to as (“the Breaches”).

The Defendant was asked to cease using the Flat for this purpose although he did not do so. The Defendant pleaded the following:

  • He denied committing the Breaches.
  • In the event that he was found to have committed the Breaches, they did not constitute a breach of covenant.

The Claimant sought an injunction to prevent the Defendant from using the Flat in a way that breaches the tenant covenants.

The terms of the lease

The following clauses were relied upon by the Claimant in this case:

1. Not at any time to assign sub-let or part with possession of part only of the Demised Premises.

2. Not to part with or share possession of the whole of the Demised Premises or permit any company or person to occupy the same save by way of an assignment or underlease of the whole of the Demised Premises.

3. Without prejudice to the absolute prohibitions hereinbefore contained not to assign or underlet the whole of the Demised Premises without the prior written consent of the Landlord such consent not to be unreasonably withheld.

4. Not to use or permit the use of the Demised Premises or any part thereof otherwise than as a residential flat with the occupation of one family only.

The first-instance decision

The Defendant denied committing the Breaches. It is worth noting that the Claimant relied on copies of the website listings advertising the Flat as evidence of the Defendant’s use. The Claimant also relied on booking calendars, email reviews and photographs.

The Judge found that there was “substantial and even compelling” evidence that the property had been “widely advertised on Airbnb and similar websites for letting”. As a result, the Judge was satisfied that an injunction should be granted to restrict the Defendant from using the Flat in a way that breaches the tenant covenants. This was despite it being submitted that the use had ended and would not recur.

The Judge held in relation to the above clauses:

1. No breach as it relates to the use of “part” of the Flat. The Defendant was using the whole premises for short-term lets.

2. Breach as the Defendant had parted with possession of the property. In the alternative, the Defendant had allowed other persons to occupy the property other than by way of assignment.

3. Breach as it was not in dispute that the Defendant did not obtain the prior written consent.

4. Breach as the people hiring the Flat through Airbnb were not using the property as a residential flat. The Judge held that “there is a qualitative difference between letting a property on an assured shorthold basis to a person or family who occupies the same property as their home… and letting the property on a short term let including through Airbnb and other websites…”

Prior to the delivery of the judgment the Defendant was made bankrupt and Ninos Koumetto acting as Trustee (hereafter known as “the Defendant”) was substituted as the defendant in the claim.

The appeal decision

The Defendant was granted permission to appeal on the following points:

  • Whether the Judge was right to hold that the Defendant breached the lease;
  • Whether the Judge exercised her discretion wrongly when deciding to grant an injunction, and should she either have refused the order entirely or granted the injunction on different terms; and;
  • Costs.

On appeal, it was held that the overall finding of breach of the lease terms was unimpeachable and that the appeal Judge could find no error. In relation to the injunction, the Judge was right to consider that the case was tipped in favour of the grant of an injunction by the interest of clarity and certainty. Weighting was placed on the fact that this was not a case where the tenant admitted a breach with a commitment not to repeat.

Commentary

This case is further confirmation that short-term lets via Airbnb and other similar services is likely to amount to a breach of common lease covenants.

Tenants should be aware of the consequences of short-term lettings and landlords (and management companies) should ensure that lease covenants are not being breached by leaseholders.

We have previously written on the subject of Airbnb and long leases. For further information please click here or contact the Real Estate Disputes Team at Hamlins.