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With many facing a sudden loss of income as the pandemic progresses, lockdown easing and Brits desperate for a holiday, some may be considering whether they can turn their property into a business resource. For those flat owners who may be considering whether to try out listing their flats on sites such as Booking.com and Airbnb, we look at the decision in Triplerose which serves as a timely reminder about the risks of doing so.

Facts

Mr and Mrs Beattie were the long leasehold tenants of 86 Hanover Mill. Triplerose Ltd was their landlord.

The user covenant in the lease pursuant to which Mr and Mrs Beattie occupied stated that the tenant would not permit to be carried out “upon” the property any trade or business, and that the flat would not be used for anything other than a private dwelling house for occupation by one family at any one time. The Beatties were however permitted to sublet the flat without the consent of Triplerose under an assured shorthold tenancy for no more than 6 months.

When Mr Beattie’s employment arrangements changed, the Beatties had to relocate and they arranged for the flat to be listed on Airbnb and Booking.com through a company as serviced accommodation. This company arranged check-ins and check-outs and provided facilities such as a laundry service. As well as letting out the flat on a short term basis, Mr Beattie still regularly used the flat for a few nights a week.

Triplerose objected, and argued that letting the flat in this way was a breach both of the covenant not to allow a business to be conducted at the flat and of the obligation to use the flat as a private dwelling house.

Triplerose took the Beatties to the Tribunal over their alleged breaches of the user clause by letting the flat serviced accommodation on a commercial basis.

Decision

The Tribunal was asked to look at two questions.

First, did the letting as serviced accommodation breach the requirement to use the flat as a private dwelling. Yes. The Tribunal confirmed that the use of residential property for short term occupation by a succession of paying guests has always been treated as a breach of this type of user covenant. In fact, the Tribunal went as far as to say that short-term occupation by paying strangers is the “antithesis of occupation as a private dwelling”. The use as a private dwelling did not need to be that of the Beatties, the fact that they could sub-let without consent under an AST indicated this. The requirement was that whoever is in occupation for the time being must use the flat as their dwelling.

Secondly, did taking in paying guests breach the prohibition on carrying at a business “upon” the premises? No. The Beatties were using the property as a business resource, but were not carrying on a business “upon” the property.  As the Tribunal stated in “other words, the prohibition is against conducting business in the flat, not against using the flat for short term residential purposes albeit as part of a business.”

Commentary

There are, of course, many things to consider for flat owners thinking about listing their properties on sites such as Airbnb or Booking.com – what insurance cover do you need? Will it breach the terms of a mortgage? What are the security risks and risk of damage and how can these be managed? The decision in Triplerose serves as a timely reminder that owning a leasehold interest, even a long one (here it was 125 years) does not mean that you can use the property without restriction. Most residential leases will contain a covenant that restricts a tenant’s ability to carry out a trade or business from their flat. This makes sense; landlords want to ensure that the neighbours, other tenants or even themselves if they retain an occupational interest in a property are not disturbed by a more intensive use of the property. As always, it pays for tenants to familiarise themselves with the terms of their leases.

This judgment also comes as a warning to those during these troubling times who have or are considering moving their businesses permanently from commercial premises to their flats.  Careful consideration will need to be given to this and a review of your residential lease shall be required to see if this is allowed.

If you have any queries about this topic, please contact Harry Rudolf, Eleanor Stark or any member of the Property team.

Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.

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