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07 November 2016

Nemcova v Fairfield Rents Limited [2016] UKUT 303 (LC)

Given the rise of short-term lets, particularly as a result of the growing popularity of platforms such as AirBnB, the judgment of HHJ Stuart Brigg in Nemcova v Fairfield Rents Limited [2016] UKUT 303 (LC) is one of some interest.
 
The facts of this dispute were fairly straightforward. The tenant had admitted to letting her flat to various business visitors on a short-term basis for about 90 days a year. For the remaining period, the flat was her main residence, albeit that it remained empty for long periods. Her lease contained various covenants, including a restriction on alienation during the last 7 years of the term, a restriction on parting with part only of the flat and a requirement not to use the flat “for any illegal or immoral purpose or for any purpose whatsoever other than as a private residence”.

The landlord took the view that the short-term lettings constituted a breach of the covenants contained with the tenant’s lease. Accordingly, the landlord sought a determination under section 168(4) of the Commonhold and Leasehold Reform Act 2002 that the tenant was in breach of her lease.
 
At first instance, the First-tier Tribunal held that the covenant in question required the flat to be occupied “as a home”. The question before the Upper Tribunal was whether advertising and the letting the flat for a series of short-term periods constituted a breach of the relevant covenant.
 
In reaching his decision, the Judge made the very important observation that each lease is different and any similar claim would depend on its facts and on the meaning of the relevant words in the lease used in that specific context. It is therefore necessary to exercise caution when considering past decisions.
 
The Judge then looked at the lease clause within the context of the lease. Based on the fact that there was no restriction on alienation of the flat as a whole, he came to the conclusion that the intention of the parties when the lease was granted was to allow the lessee to deal with the flat with substantial freedom. The clause also could have expressly prohibited certain uses of the flat, such as a holiday let. It did not do this and so the Judge found that as long as the occupier used the flat as a private residence there was no breach of the covenant.
 
However, the Judge came to the conclusion that the duration of the occupation was relevant. He held that in order for the flat to be properly said to be a private residence, there must be a degree of permanence, going beyond a stay of a few nights or a weekend. A short-term occupation of days and weeks rather than months was a breach of the covenant.
 
This case raises some interesting points about short-term lets, not least that each such instance will be fact specific and depend on the terms of the lease in question. If you are considering letting your flat on a short-term basis, it is important to carefully check your lease. In addition, if the property is subject to a mortgage you will need to check your mortgage terms to see if you have your lender’s consent.

This is a general summary of the law as at the date of this article. It should not replace legal advice tailored to your specific circumstances. If you wish to discuss the implications of this matter further please contact us on 020 8909 0400 or by email at info@millschody.com.