Are your tenants letting out your property on Airbnb?

Landlords everywhere will agree that trust plays a key role in maintaining good relationships with tenants. Landlords can’t keep a watchful eye on those occupying their properties all of the time. Instead, they must trust that their tenants will abide by the contract and take good care of their rented home.

However, this trust has been tested in recent years, with a more and more landlords discovering that their tenants are profiting from their properties.  

The troublesome rise of subletting

The sharing economy is a growing phenomenon that has given rise to peer-to-peer home rental sites such as market giant, Airbnb. These sites enable people to sublet a room or entire home to others – often strangers – for a short period of time. It’s a quick and easy way to earn some money, but what if the home isn’t theirs to rent; what if it’s yours?

Research from the National Landlords Association (NLA) revealed that almost half of tenants who sublet their property, do so behind their landlord’s back.

A recent article published by Estate Agent Today sets out the potential scale of the issue. It details how well over 50% of the 55,000+ Airbnb listings in London are rented properties; with the tenants subletting, they are very likely to be breaching their tenancy agreement. Without consent from their landlord, they are – usually unwittingly – exposing the property to risk which, as the article states, ‘only breeds resentment and distrust.’

What the law says about subletting

As mentioned, tenants subletting their home are likely to be in breach of their contract. The only exception is if they have received the landlord’s written permission to sublet; and even then, law states that only part of the home can be let out.

If you discovered that your tenant was renting out the entire property, this would invalidate their status as a secure tenant, meaning you could initiate eviction proceedings.

There are also rental laws which apply to certain regions. As an example, in the capital, the Guardian states that it is illegal to provide temporary accommodation for paying guests for over 90 days per calendar year.

What are the risks involved?

Unfortunately, it’s landlords who are most exposed to risk in the event their tenant sublets their property. For instance, it may invalidate your mortgage terms; in the worst-case scenario, this may lead to the lender to seek a full repayment of the loan.

A Telegraph article examining the pitfalls of subletting explains that the majority of lenders do not look favourably on borrowers who host on Airbnb. Meanwhile, some say that they are willing to accept the subletting of just one room, but not the entire property.

Having tenants sublet your property could also invalidate your landlord insurance policy. You could lose out significantly if your insurer denies a claim on grounds of breaching your contract.

What you need to do

The NLA advises that all landlords include a clause into new tenancy agreements to highlight that subletting is only permitted with their permission, which should not be unreasonably withheld. This alone will limit your exposure to a whole host of risks.

As well as including a clause within the tenancy terms, be upfront with your tenant from the offset. Explain the rules regarding subletting and stress that they must seek your permission if they intend to let out a room within their home. Having a conversation with them will ensure they don’t break the law – or land you in hot water.

If you don’t wish them to sublet, explain your reasons in a friendly manner, as well as the potential repercussions if they were to let a room out without your permission. If you allow them to sublet, ask if you can vet potential guests ahead of their stay and make sure your tenant is aware of legal processes, such as checking their immigration status.

If you suspect a tenant is subletting a room behind your back, arrange a time to sit down and talk to them – stay calm, as they might not realise they’re doing anything wrong. Explains the risks and consequences for the both of you; if they continue to sublet after this and you believe they have breached their contract, you can choose to serve a Section 146 notice.

Estate Agent Today predicts that in the future, landlords, agents and tenants will work together to embrace and professionalise subletting to the financial benefit of all stakeholders involved. But until then, it’s important to familiarise yourself with your rights and responsibilities as a landlord, as well as informing your tenants of theirs.

Why not get in contact with Stride to talk through our comprehensive landlords insurance? We offer both buildings and contents policies, plus specialist cover including tenants’ contents insurance, rent guarantee and legal expenses.

Sources:
https://landlords.org.uk/news-campaigns/news/half-tenant-subletting-occurs-behind-landlords%E2%80%99-backs

https://www.estateagenttoday.co.uk/features/2017/8/super-short-term-rentals-and-subletting-the-future-of-the-private-rented-sector

https://www.theguardian.com/money/2016/apr/02/landlords-clamp-down-subletting-without-approval-leaseholders-tenants-repercussions

http://www.telegraph.co.uk/investing/buy-to-let/the-airbnb-pitfalls-that-could-end-up-costing-you-thousands/

Published: 20th September 2017
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