Renting out your home over the summer? Here’s what you need to know…
As summer approaches, people may consider renting out their homes on a short-term basis to take advantage of the influx of visitors, participants, coaches and trainers looking for properties located near the venues for international sporting events such as the Queens tennis tournament, Wimbledon and Ascot.
There are however several considerations to bear in mind if you are thinking about renting out your property on a short-term basis, which are easily overlooked.
If you are a freeholder…
If you own the freehold of your property and have a mortgage, it will usually be a condition of your mortgage that you cannot rent out your property without the written consent of the lender.
You should obtain this consent as far as possible in advance, as obtaining your lender’s written consent can take several weeks.
You will also need to consider planning laws and regulations and check whether renting out your property on a short-term basis is a breach of any planning laws, as it may be deemed to be a change of use from which planning permission is granted.
Mortgage conditions will also require you to comply with any planning laws.
You should also check the terms and conditions of your buildings and contents insurance to ensure that short-term letting does not invalidate any insurance policies that you have in place, and if it does, to make sure you have appropriate cover during the period of the letting.
If you are a leaseholder…
In respect of leasehold property, as with freehold property, you will need to check your mortgage conditions to see if you need your lender’s consent and you will also need to check the planning laws, but there are additional considerations when you own leasehold property.
You will need to consider the terms of your lease, as it is common to find that any under-letting requires the written consent of the landlord and in addition, in nearly all cases, you will need to notify the landlord of your subletting, which then allows the landlord to ensure they comply with any buildings insurance requirements.
In most cases, where the landlord’s consent is required, they will want to know who is going to rent the property and to see copies of references for the subtenants. This can be problematic where the proposed sub-letting is for a short term only and the sub-lessees details may not be known until shortly before the required stay because, as with lenders, obtaining landlord’s written consent can sometimes take several weeks.
Landlord’s consent should therefore be obtained as far as possible in advance of the proposed letting. Landlords will likely also charge the professional fees they incur for providing their consent, which would commonly be their solicitors’ reasonable professional costs for preparing a licence to sublet and any managing agents’ costs in approving the references.
Another consideration for leasehold property owners is that their leases will often have a provision which also requires that the property be used for the purposes of a residential flat in the occupation of one family only, or similar wording to that effect.
Last year there was a case in the county court: Bermondsey Exchange Freeholders Limited v Ninos Koumetto (as trustee in bankruptcy of Kevin Geoghehan Conway). In this case, the tenant let out his property on short term lets through Airbnb. The court decided that the tenant was in breach of the user provision in his lease, which required it to be used for residential purposes, because the short term nature of the paying guests meant that the use of the property was not residential in character, as the people residing in it for that period were not using it as their main home.
Therefore, if you have a user provision to use your property for residential purposes only you will need your landlords consent to rent out the property on a short-term basis, as technically it would otherwise be a breach of the lease. If you breach your lease, the landlord can require you to make good any such breach and if you fail to do so, can take steps to forfeit the lease through the courts. Your mortgage conditions will also require you to comply with the terms of your lease.
Lucy Barber is partner and head of residential property at Forsters LLP