Short Term Letting in London – An Update

I have previously highlighted the proposed relaxation on the prohibition of short-term letting in London. Here I will provide an update on the law and how these provisions are working in practice.

The Deregulation Act
Section 44 of the Deregulation Act 2015 adds a new s25A to the 1973 Act. The Act originally operated by classing short letting in Greater London as a material change of use and so restricting it through the planning system. The new section creates exceptions to the operation of the original provisions. As a re-cap, the original provision provided that the use of residential premises in Greater London for temporary sleeping accommodation for less than 90 consecutive nights was a material change of use for which the owner had to seek planning permission from their local authority.

The new relaxation of this provision applies where two conditions are met. However, both of these provisions must be satisfied in order for the relaxation to be available. The two conditions are:

1. The total number of nights in which the property is used for short lettings does not exceed 90 nights in any one calendar year. This is an aggregate figure and may be reached by multiple lets to more than one person. The calendar year is measured between 1 January and 31 December and resets at each New Year.
2. In respect of each night of short term letting the person authorising that letting must be liable for council tax under Part 1 of the Local Government Finance Act 1992. In other words, the person letting the property must be paying the council tax for it.

Dis-Applying the relaxation
In addition, the Deregulation Act added a new s25B to the 1973 Act. This provision allows individual local authorities or the Secretary of State to make a direction dis-apply the restrictions under s25A. This is at the discretion of the Secretary of State and a local authority may only make such a direction with his consent.

Such a direction can only be made if it is necessary to preserve the amenity value of the local area. Its operation can be relatively blanket, or a local authority can elect to restrict its operation to:

• Just part of the local planning authorities area of responsibility;
• Specific categories of property;
• Certain named premises; or
• Any combination of the above.

Currently, no London Borough has requested that it be allowed by the Secretary of State make such a direction. However, Westminster has indicated that it is considering seeking permission to do so. Westminster is not at all supportive of the relaxation and it rejected the government’s initial proposals, calling for homeowners to register with the local authority when they let out their property for less than 90 days. However, such a measure at this stage would require fresh primary legislation to be passed by the central government and this seems very unlikely to happen.

The provisions in practice
The main aim behind the liberalisation of short-term letting was to change the bureaucratic and disproportionate law surrounding short-term letting in London to be more compatible with the changing way tourists are visiting the Capital. In particular, this has been driven by websites such as “Airbnb” and “booking.com” revolutionising the accommodation market.

One of the main concerns, when the provisions come into force, was how local authorities would enforce the provisions and any breaches of section 25A, particularly those involving aggregate short lets of more than 90 nights in a year. Breaching planning restrictions is not an offence, but it permits entitles the local authority to issue an enforcement notice requiring the cessation of such use. It is only if the use is continued in contravention of the enforcement notice that an offence would be committed and the local authority may then consider a prosecution.

The issue for local authorities is how they enforce the restrictions and prevent short lets exceeding the 90-night threshold. For local authorities with limited resources, this is very difficult to police because the evidence is hard to obtain. In fact, the only local authority to report the issuing of enforcement notices for such activity is the London Borough of Kensington and Chelsea, following noise complaints received from neighbours and specific evidence supplied by them.

Research conducted by the Residential Landlords Association (RLA) in February 2016 revealed that of the 33,000 listings on short letting website Airbnb, 65% were available for more than 90 days per year. Furthermore, 39% of listings which advertise entire homes and apartments are multi-listings with apparent landlords advertising more than one property and 78% of those are available for more than 90 days. So it seems clear that local authorities are so far unable to enforce these provisions effectively.

Concerns for Landlords

The RLA’s research also highlighted the concerns of landlords. Most Assured Shorthold tenancy agreements contain a standard clause which prohibits the tenants from subletting the property, or any part of the property, without the landlord’s prior written consent. Such a breach would allow the landlord to seek possession. Likewise most longer leases of flats contain a similar provision.

Similarly, the Upper Tribunal has recently held in the case of Nemcova v Fairfield Rents Ltd [2016] UKUT 303 (LC) that a lessee had breached a covenant in her lease which stated that she would “not use the demised premises or permit them to be used for any illegal or immoral purposes or any purpose whatsoever other than as a private residence.” The Upper Tribunal decided that such a clause prohibits all other use save as a private residence. Therefore, by letting out a property on a short-term basis, possibly for a few days or weeks this clause would be breached as a short let was a business use which was incompatible with use as a private residence.

Buy-to-let mortgages also often contain a condition that any tenancy must be granted for no less than 6 months by way of an Assured Shorthold Tenancy, so granting occupation for a period of less than 6 months would be a breach of mortgage conditions as would granting a tenancy for the purpose of a holiday which sits outside the AST regime.

There are additional concerns for landlords. A tenant subletting without authorisation could result in the property becoming a licensable HMO and if the correct licence was not obtained then the Landlord could face a criminal prosecution.

The Government’s attempt to liberalise the short term letting market in London and promote the sharing economy has clearly failed to address all the issues and will continue to be a concern for both landlords and local authorities.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*