With research suggesting that London will become a nation of renters in the next decade, there is one type of tenant that is starting to cause problems for Landlords and residential block management companies specifically in London.
Airbnb is a new way of renting your home and has grown in rapidly in popularity. Their website allows you to list your apartment as a whole or even a room in your home, to rent out to others for long or short periods of time. According to their website, they have around 1.5 million listings across 190 countries (bear in mind, there are only 195 countries in the world).
So why is this a potential problem for Landlords?
Let’s look at 3 reasons why AirBnB may not be the best decision for your flat or the building as a whole:
Renting out the flat may be a breach of the lease
When you bought your flat you signed a Lease, right?
Well, that Lease will have covenants or obligations on how you can use the flat as well as any restrictions within your lease.
Whilst there is no such thing as a standard Lease, there are certain covenants that tend to come up again and again.
Some of these restrictions cover any subletting of your flat, which may include:
- If you require permission from the Freeholder to rent your flat out
- How you can rent your flat out (i.e. minimum rental periods, holiday rentals etc.).
- Any restrictions on noise in the flat
- Any obligations for living in the apartment (i.e. providing access to the Freeholder, disposal of waste and so on)
- Any house rules that may apply (which can include no Airbnb rentals)
Ignorance is no excuse and there are serious implications to breaching the Lease covenants so you need to make sure you review your Lease before agreeing to any Airbnb lets.
Airbnb may impact the building insurance
Building insurance policies do vary so we can only provide a warning from a general point of view but you do need to check your own individual policy.
Part of the service charge you pay each year will be for your building insurance premium, which is dependent on the ‘risk’ associated with the building.
In part, the residents of the building make up an element of that risk and therefore should you rent out your home to an Airbnb guest then this may increase the risk, in turn either increasing the amount of risk to the building and / or increasing the overall premium.
Worst case scenario, something happens and the insurance policy does not cover the cost based on there being an unknown tenant.
If you have a mortgage on your home, you should also check with your mortgage provider that you can provide a short term let otherwise you also run the risk of breaching your mortgage agreement.
Liability for damages caused to communal areas
So here is the scenario, you decide to rent out a room in your home whilst you are away on holiday, you decide to take out the Airbnb Host Guarantee which will cover you for up to £600,000 worth of damages to your home.
There are exceptions to this Host Guarantee such as cash, pets and certain valuables that are not covered but £600,000 is a sizable amount to cover most issues, right?
Well what happens if your Airbnb tenant causes damage to the communal area?
This could then be you who is held responsible for the cost not the tenant from Airbnb!
Most building insurance policies can cover accidental damage to communal areas but as we mentioned above, the insurers may not pay if you haven’t informed them of the new short let.
How can Directors of Resident Management Companies stop allowing Airbnb lets?
There are two main ways in which a Director of a Residents Management Company can prevent harmful Airbnb rents, a legal way and a non-legal way.
The Legal Way
As we have mentioned above, the Lease is quite clear on how a flat can be used and any restrictions that can apply so this is your first move.
Check the Leases, they may say that Landlords must seek permission to rent their flat out, have they received permission to do so in this instance? What were the terms of that permission and were there any restrictions on minimum rental lengths?
With any contract, it’s important to make sure each party, the Residents Management Company and the Landlord are clear on what they are allowed to do and more importantly, what they aren’t.
If there are restrictions in place or permission is simply not been provided, we suggest you broach the subject in a polite notice asking for resolution to the problem. Usually these types of matters are simply an oversight and can be quickly resolved.
Whilst it may be causing problems having Airbnb tenants coming and going, do not start by sending legal desist letters to the Landlord in question. This will only make matters worse and remember that you live in a building that has a community of flat owners, it’s about working together for the overall benefit to the building.
The Non-Legal Way
Residents Management Company are typically formed of the individuals that own a flat in the building, therefore you all naturally have a commonality between you.
It seems logical therefore that the Residents Management Company can agree on a set of house rules, even if these are not supported by the formal Lease terms.
Yes, these can become complicated with new owners but with an engaged approached to all owners in the building, highlighting the problems that short term lets can bring, this can be a low cost, friendly approach.
Airbnb is not all doom and gloom however, it has opened up a new way to experience the world as well as a new business opportunity for portfolio Landlords.
Do not get caught out, check whether you are allowed to rent your flat for Airbnb guests before doing so and you will keep a lot of people happy.