Breach of Covenant: Appeal as to whether a short-term ‘Airbnb’-style let was in breach of lease covenants (Triplerose Ltd v Beattie & Anor – 2020)
The latest in many cases relating to properties let on a short term basis through booking agencies such as Airbnb or booking.com, this case considers an appeal as to whether the leaseholder was in breach of covenant.
The background
In Triplerose Ltd v Beattie & Anor [2020], the leaseholder advertised short term lets for a flat in Newcastle through internet booking sites. The lease contained covenants in standard terms:
- “Not at any time to carry on or permit to be carried on upon the Property any trade or business whatsoever nor to use or permit the same to be used for any purpose other than as a private dwelling house”
- “Not to sublet the whole of the property without the consent of the Landlord…save that the following are permitted:…"
- "The grant of assured shorthold tenancies for…no more than 6 months..."
Interpreting the wording of the first covenant and referencing – and distinguishing – earlier case Nemcova v Fairfield Rents Ltd [2016], the First-tier Tribunal found that the restriction on use as a private dwelling house should be read in the context of preventing a trade or business from being carried out at the property. Wording referred to ‘a private dwelling house’ rather than the dwelling of a specific individual, assured shorthold tenancies of up to 6 months were permitted, the parties agreed that lodgers and other occupants under licence were not excluded from taking occupation. The FTT therefore found in favour of the leaseholder and permitted the use of the property as a short-term residential let.
The landlord appealed.
The decision
The Upper Tribunal allowed the appeal, finding in favour of the landlord. The lease did not need to refer to any specific individual in its language when restricting use to ‘a private dwelling house’, the primary point of the covenant was to control how the property was used. The FTT had erred in its interpretation of the Nemcova judgment.
Further, regardless of whether lodgers were permitted to occupy the property, of which the UT did have some doubt, this did not by default lead to the conclusion that continual short-term lets to different people were likewise permitted.
The UT also considered whether the short-term lets arrangement constituted business or trade. On this point, the UT did agree with the FTT and found that the arrangement did not breach the covenant against carrying on business at the property. Although the property was used ‘for’ a business as a resource, no activity was undertaken at the property, including the taking in of paying guests, which amounted to carrying on a business. The ‘business’ was in fact carried on elsewhere.
Advice and action for landlords
Cases relating to short-term lets continue to arise, and Triplerose provides useful guidance in the application of lease covenants to such claims. The case is of particular interest in its assessment of the ‘trade or business’ prohibition; many short-term let claims refer to this provision as being in breach but here the UT found there to be no breach of this specific covenant. The appeal was allowed on the basis of how the property was used; it was not used as a private dwelling house.
Ultimately, landlords who do not wish for their properties to be used in such a way are strongly advised to incorporate express wording that prohibits the activity in their standard lease forms.
The Upper Tribunal allowed the appeal, finding in favour of the landlord on the basis of how the property was used; it was not used as a private dwelling house and the leaseholder was therefore in breach.
