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Government to Relax Laws on Short Lets – But Don’t Forget the Lease Terms

The Government’s Deregulation Bill is now at an advanced stage in the parliamentary process. It has gone through its Third Reading in the House of Lords and the Royal Assent is not far off. One aspect of the Bill relates to the letting of dwellings on a short term holiday/temporary basis. At the moment, many local councils have planning laws which make it illegal for property owners to let out their properties for less than 90 days without planning permission. The Government believes that this restricts the supply of housing, particularly in London where there is a shortage of temporary housing which could be needed for emergency accommodation or even for tourists. The Deregulation Bill therefore proposes to prevent councils imposing this planning restriction. In 2012 there was a lot of demand for accommodation during and around the Olympics that some councils clamped down on property owners seeking to take advantage of this demand. Some councils, particularly in Central London such as Westminster, take a hard line on short lettings which they say create a nuisance.

There are opposing views on whether or not short lets are a good thing for standard residential property particularly with regard to flats. If you are an owner/occupier in a block of flats and there are flats which have a regular turnover of tenants/occupants you would most likely seek short lets as a nuisance with an increased likelihood of noise and general disturbance. There are some very strong views expressed and there does appear to be evidence that nuisance is more likely to occur on a short term let rather than where the property is occupied as a permanent home. However, if you are property owner who wants more flexibility and would prefer to let your property on a short term basis rather than on an assured shorthold standard basis then you may think that the current planning laws are unduly restrictive and interfering with your right to deal with your property as you think fit.

Whichever side of the fence you are on, you need to be aware that this change in the planning law does not override the covenants and restrictions which may affect the title of a property and which may prohibit the use of the property for short term letting. We are usually here talking about flats and the covenants and other restrictions contained in the leases of them. Most flats will be subject to a lease although there are exceptions the most common being where a flat is retained by the freeholder of the building and is thus ‘unsold’.

The change in the law may however affect the implementation of certain covenants.

A lease may contain a specific covenant which prohibits a letting of the flat for say periods of less than six months. If so, then despite the proposed change in the law the flat owner would still be in breach of their lease if they let the property for shorter periods without the landlord/freeholder’s permission, which the latter may or may not have to give.

Many flat leases do not contain purchase specific prohibitions on short lets therefore it is necessary to look at whether there are other covenants in the lease which may be broken by such lettings. One covenant which is common in many leases is one which requires the flat owner/tenant to comply with all planning and similar laws which affect the property. Under the law as it is, a breach of planning law will also be a breach of that covenant in the lease. When the new law comes into force it will not be possible to use this type of covenant to prevent a short term letting of the flat unless some other breach of the law arises as a consequence of the letting.

There are often covenants in the lease which may also be relevant. Commonly there will be covenants and regulations which prohibit actions which cause a nuisance to the landlord/freeholder and/or for other flat owners/occupiers of the building concerned. In this instance, however this type of covenant alone would not in itself prevent a short sublet and action could only be taken if the occupiers of the property made excessive noise or otherwise caused a nuisance.

There might be low level action which a freeholder/landlord of a building could take to try to disrupt short lets in the building or at least to be awkward such as insisting that any formalities in the lease of the flat concerned associated with short lets are complied with. This might be, for example, a requirement that the sub tenant enters into a direct covenant with the freeholder to observe the terms of the lease or to give notice and pay a fee on every sublet.

There main point is that whether you are a flat owner looking to let a property on a short let or a flat owner or freeholder looking to prevent such, it is important to look carefully through the wording of the lease of the flat concerned to see whether there is any relevant covenant that might prevent short lets or which may enable action to be taken should the use of the flat cause a problem.

If the property is a house there may still be covenants on the title which are relevant to sublets although generally the restrictions are much more limited than with flats.

There may also be breaches of covenant by the way in which the flat is used, for example, illegal or immoral purposes which may then bring the authorities into play. If there is no breach of statutory laws it is a case of the landlord/freeholder of the building (and/or owners of other flats if they have the right to do so) to enforce the breach of the lease by private action which may be more costly and time consuming than using the power of the authorities to do so.

For further information contact Christopher Sykes.
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Feb 2015