Investment properties and short-term lets

22nd April 2021

A great many people consider investment properties, often taking on a flat in an area where there is high demand for property and then renting the same out; with the traditionally lower cost of purchasing a flat making it more affordable to obtain than a house.

Many people rent investment properties out on a long-term basis through assured shorthold tenancies (AST) that can last for years.

Others are often looking at popular destinations or seaside properties with a view to taking advantage of the market for short term lets through sites such as AirBNB and whereby they rent the property for weekend breaks or short-term holidays.

Be careful

Unfortunately for many potential investors they have built their investment plans around the short term lets before the lease has been reviewed. Often a lease for a flat will contain a clause that actually forbids these types of letting and can leave the potential investor having to change their plans.

It is not uncommon for many leases to state that the flat must be used as a “private residence” which has been interpreted by the Courts as being occupied with a degree of permanence going beyond being there for a weekend or a few nights a week.

This does not mean someone who buys a weekend flat or a flat they use several times a week while working away from home will fall foul of this clause, the Courts have made clear that a person can have more than one private residence at a time, rather it is interpreted as applying to lettings on a short term, holiday or AirBnB style basis.

Anyone renting a property out under an AST does give the occupier the sufficient degree of permanence so as not to constitute a breach of the lease under short-term letting; though potential investors should also know that sometimes there are fees payable to management companies in respect of such rentals.

The distinction made by the Courts is that the occupier of the property must think of it as their private residence, which they have deemed does not apply when the property is only for their use for what can amount to a few days or a week.

Use our knowledge

Accordingly, we recommend that if you are looking for an investment property with a view to undertaking short-term lettings, then you let your conveyancer know at the beginning of the transaction so they can check the lease at the earliest opportunity to advise you of whether you are likely to fall foul of such a clause.

Get in touch

If you would like to ask a question or find out more specific advice, then please do get in touch. You can fill out a contact form online here or call your local office on the numbers provided here.