Is holiday letting a breach of a covenant?

Is short-term holiday letting a breach of a covenant to use a property as "a private dwelling"?

This question is one which crops up a lot when we act for clients looking to purchase investment property and also when we act for lenders who want to secure a mortgage or loan they are making to a borrower against the borrower’s property.

Many title registers and old conveyances forming part of the title to a property include a blanket covenant, or promise, on the owner of the property not to use the property for anything other than “a private dwelling”, resulting in parties being left unsure as to whether they can let the property as a short term holiday let without the threat of enforcement action being taken – does the restriction to only use the property as a “private dwelling” prohibit the use of the property as a holiday let?

First, we need to look at what a “holiday letting” and “a private dwelling” can be defined as;

- “Holiday letting” - where a property is let for the purpose of a holiday.

- “Private dwelling” - a domestic residence housing where no commercial or industrial activity is carried on.

Helpfully, quite a lot of cases have been decided by the courts within this area, which assists our consideration of whether you can use a property as a holiday let.

Triplerose Ltd v Beattie and Beattie (2020)

In this case, there was a covenant within a lease not to use the flat other than as a ''private'' dwelling ''house'’. It was held, by the Upper Tribunal, that short term visitor sublets were in breach of this lease covenant. The short-term visitors were not using the flat as their only or principle home, the landlord’s consent to the short term visitor sublets was therefore required, which was in turn not given and the use of the flat for short term visitor sublets was therefore held to be a breach of covenant.

Nemcova v Fairfield Rents Ltd (2016)

In this case, which was another landlord and tenant case, a long residential lease contained a covenant not to use the premises for any purpose other than as a private residence. The Upper Tribunal held that each case is case-specific and depends upon the construction of the particular covenant in the relevant factual context but that in this particular case, a holiday letting or a short term letting was a breach of the covenant because while the lease covenant did not require that the flat be used as the sole private residence of the leaseholder or any occupier (because the covenant required the use to be as a private residence as opposed to the private residence), it did nevertheless require that the occupier for the time being must use the flat as his or her private residence with some permanence.

The decision of this case was reaffirmed in a later case in 2018 (Bermondsey Exchange Freeholders Limited v Ninos Koumetto (As Trustee In Bankruptcy of Kevin Geoghehan Conway) (2018)) regarding Airbnb-type lettings: Lettings of this type amounted to a commercial use rather than residential use, and therefore breach of a lease covenants to not underlet the property without landlord’s consent, not to share possession of the property and not to use the property for anything other than a residential flat with the occupation of one family only.

Caradon District Council v Paton and Bussell (2001)

This is an older case where the council had applied for an injunction to restrict the defendants from letting their properties on short term lets for holidaymakers, as the council argued it was in breach of a covenant to use the property only as a private dwelling house. The case went to appeal and this succeeded as it was held that the use for lettings of one or two weeks at a time were not lettings as a private dwelling house – the occupation of short term holidaymakers could not be described as being occupation for the purposes of using the dwelling house as a home.

In summary, whether holiday letting is a breach of covenant will largely depend on the construction of the covenant and the surrounding factual matrix. If you need assistance purchasing a property or interpreting covenants contained in a lease or other title documents, contact FD on 01926 954 694 or at info@feldondunsmore.com.

This blog is intended for general information only and does not constitute legal advice.