A common current issue with flats is whether or not they can be used as holiday lets. From a legal perspective this is a form of subletting.
Most leases of flats have some restrictions on how flats can be sublet. Many leases will have been drawn up long before Airbnb and holiday letting was common, so they probably won’t have anything specific.
There are three places to looks in your lease initially:
- The subletting rules. These should set out whether you are allowed to sub-let the flat at all. Many leases will say you can’t sub-let different rooms to different people, to stop the block becoming overcrowded which can be a problem for letting out rooms within a larger flat.
- The rules on the use of the flat. If the wording there is strict that the flat may only be used for residential occupation by one family, then you could face an argument that holiday letting was a commercial use of the building, like a BNB.
- Most leases have a set of regulations. It is good to look through those and see whether there is a specific regulation stopping holiday letting. Also, many leases give a power to the freeholder to grant new regulations as time goes on. If there have been new regulations published by your freeholder or managers of your block, those might also restrict holiday lettings.
There could be other relevant clauses in your lease, and you may want professional advice on whether your lease stops you or not. If you are buying a flat with the intention to use it for holiday lets, make sure you specifically ask your solicitor whether there is anything that stops you doing that before you buy.
There are also some factors outside the lease that could throw up issues.
- If you have a mortgage which is not a buy to rent style mortgage, it might not permit you to sublet. Breaching your mortgage terms can have far reaching consequences including having the mortgage company seeking possession of the flat back from you.
- Your lease and your mortgage terms will both likely have a clause that says you can’t do anything that voids the buildings insurance. Subletting without proper notification can in some cases void insurance policies, which can mean that by subletting without sorting that out first you risk breaching your lease and your mortgage terms.
- Some local authorities consider holiday letting to be a commercial enterprise. Cases have arisen where owners doing holiday letting have been given demands for business rates approximate to those faced by a BNB since that is what their property is being used for. There are also potentially limits on the amount of days in a year you could let for without the local authority considering that you have breached planning rules on using the property for a residential rather than a business use.