NOVOSTI October 2016 - Real Estate - RSL Law
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NOVOSTI October 2016 – Real Estate



Our Real Estate Solicitor, Uba Ngenegbo, writes about the risks associated with subletting properties via online platforms…

Founded in August 2008 and headquartered in San Francisco California, Airbnb is an online market place that enables people to list, find, then rent holiday/vacation homes for a processing fee. It has over 1,500,000 listings in 34,000 cities and 191 countries. A selling point of Airbnb is its global reach and the fact that no upfront cost is incurred.

Not a few tenant with long leases have been attracted to the possibility of using the platform of Airbnb to sublet their properties rather than adopt the conventional approach of granting short term residential tenancies. The idea here is that such tenants would benefit more from the income generated from Airbnb letting (as a furnished holiday letting business) especially in the aftermath of government plans to curtail deductions available to traditional landlords of residential properties when their rental incomes are assessed for tax purposes. A further £1,000 tax free allowance and the ability to claim capital allowances and potential access to more favourable rates of capital gains on a disposal of the property acts as further incentive to the increasingly popular form of sub-letting properties driven by these digital platforms.

Tenants of long lease as described above should however be wary in their dealing with Airbnb and similar vehicles (House Trip) as such long leases often come with provisions that restrict alienation of the property in whatever guise; even when alienation is permitted it often comes with stringent conditions in form of landlord’s consent. A lease sub-let without the requisite landlord consent will constitute a breach of the lease provisions.

In addition, in a situation where the tenant has a mortgage on the property, the terms of the mortgage must be scrutinised to Identify if any kind of subletting is permitted and if so the conditions under which the lender will permit the same. In the same vein, the terms of the building insurance of the property should be checked to ensure sub-letting will not invalidate the terms of the building insurance.

Lastly, although Airbnb has a guarantee in its terms of business that it will pay out if a visitor damages property let under its platform this is not the same as insurance. There are also a number of exclusions; for instance, cash and jewellery is not covered by such guarantees.  And homeowners are often not covered by their insurance policies if a guest is hurt in an accident – for example, if they fall down a rickety flight of stairs.

In conclusion, although renting out properties on Airbnb and like platforms can seem a lucrative and seamless way of bringing in extra income for a long lease holder, the hidden pitfalls inherent in this trending practice should be borne in mind to avoid situations where either a landlord, a mortgagee or an insurance company may question the validity of the sub-let to the detriment of the long lease holder.

If you are a leaseholder and have already sublet or are planning on subletting your property via Airbnb or similar platforms, we recommend you to talk to our Real Estate solicitor to make sure that the terms of your lease, mortgage, insurance or any other existing agreements allow you to do so.

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