Leaseholders should take note of the decision in the recent case of Bermondsey Exchange Freeholders Limited v Ninos Koumetto (trustee in bankruptcy for Kevin Conway), which addresses whether leasehold properties can be used as temporary accommodation through short–term letting agencies such as Airbnb.

The property in question was a flat owned by Mr Conway, situated in the South London Bermondsey Exchange building, a converted warehouse made up of 18 flats each let on a 999 year lease. In 2015, following a period of subletting his flat on assured shorthold tenancies for minimum periods of six months, Mr Conway started to let his flat on a more temporary basis through Airbnb and other websites.

The landlord company which owned the freehold (whose shareholders included the leaseholders of other flats within the building) took issue with the flat being used as Airbnb accommodation, raising security and nuisance issues as well as questioning the adverse impact of such temporary lettings on the “community atmosphere” within the building. Mr Conway was therefore asked to stop, and when he continued, the freeholder sought an injunction to prevent him from doing so.

The matter was heard in the Lambeth County Court and heard by District Judge Desai. Mr Conway contended that he was not using his flat in the manner complained-of; however, the District Judge ruled against him, finding that advertisements for the flat evidenced the fact that it had been let on a temporary basis without the landlord’s approval, which was a breach of the lease. An injunction was therefore granted to enforce its terms.

The decision was appealed by Mr Conway’s trustee in bankruptcy (as Mr Conway was made bankrupt soon after the judgment was given). It was argued that the District Judge was wrong in her findings because (1) the lease did not prohibit the temporary letting of the flat, and (2) even if it did, it was inappropriate to grant an injunction when there was no proven likelihood of future interference with the claimant freeholder’s rights.

The appeal, heard in the Central London County Court, was rejected on all grounds. HHJ Luba found that (1) it was a breach of the lease for the flat to be let to “transient short-term paying occupants engaged through Airbnb style platforms” which did not constitute “residential use” as required by the lease and (2) the District Judge’s judgment and reasons clearly showed that there had been a careful weighing up of the facts and arguments on both sides, so the grant of an injunction was justified.

The leaseholder was found to have breached the following covenants in the lease:

  1. Clause 2.10.2 – “Not to part with or share possession of the whole of the Demised Permises or permit any company or person to occupy the same save by way of an assignment or underlease of the whole of the Demised Premises” – the leaseholder had parted with possession and/or had allowed other persons to occupy the property other than by assignment or underlease.
  2. Clause 2.10.3 – ”Without prejudice to the absolute prohibitions hereinbefore contained not to assign or underlet the whole of the Demised Premises without the prior written consent of the Landlord” – no consent had been given.
  3. Clause 2.4 – “Not to use or permit the use of the Demised Premises or any part thereof otherwise than as a residential flat with the occupation of one family only…” – the very short-term letting did not amount to residential use.

This type of case will undoubtedly continue to be brought before the courts given the increase in demand for very temporary accommodation via online agencies such as Airbnb and similar platforms, alongside the desire of freeholders to prevent tenants undertaking this type of activity. The issue will be whether tenants’ covenants, often drafted long before the invention of such sites, go far enough to protect the interests of freeholders.

For more information on leasehold and assured shorthold tennacy disputes, please contact Russell May

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