Earlier this month, the UK’s highest court for dealing with land issues concluded that where the permitted use of a property is for a “private residence”, then such term prevents the use of the property for short lets. This will be an issue to some landlords in the UK who use Airbnb and similar websites. Gibraltar short let landlords may wish to double check their leases just in case.

The case that spurred the Upper Tribunal's Land Chamber's ruling involved a Slovakian designer, Iveta Nemcova, who owned a leasehold property in Enfield, North London and rented it out on various rental services for a few days a week. Her neighbours complained to the freeholder of the block. The subsequent legal case found she was in breach of contract because the property’s use was restricted to a "private residence” only.

The actual lease term upon which the court gave its decision was “Not to use the Demised Premises or permit them to be used for any illegal or immoral purpose or for any purpose whatsoever other than as a private residence.”

The judge gave a lengthy analysis of the term “private residence” in conjunction with the facts of the letting.

The flat owner, Iveta Nemcova, admitted making short term lettings and advertising its availability. She paid council tax due for the flat, as well as the usual utility bills and the flat remained her main residence although it had recently remained empty for 75% of the year as she felt intimidated by her neighbours. She stated that she only let the flat out for about 90 days a year and that her lettings were almost all to business visitors working in London as opposed to holiday lets. She stated that she currently stayed in the flat about three or four days a week, staying with her boyfriend on the nights she was away. In cross examination she stated that she had let the flat out on about seven separate occasions in the past twelve months. She had set up a website advertising her and her partner’s homes as alternatives to hotels and she used the services of a reservation system website which cascaded details of the availability of her flat to several other websites

Counsel for Iveta noted the lack of material restrictions on underletting or granting short term tenancies or licences in the lease, the lack of a positive requirement that the lessee reside in the flat herself or occupy it as her principal home, and the lack of any covenant prohibiting business or commercial use or use of the flat for holidays. It followed, her counsel contended, that provided that the flat was being used as a private residence by someone, the circumstances of their occupation were immaterial.

Her counsel further submitted that the only meaning that can be ascribed to the words ‘private residence’ is whether the flat can physically be described as a private residence, namely whether it retains the physical characteristics of a private residence such as a kitchen, bathroom and living area.

The judge however, did not see it this way.

“I do not consider that the reason the occupier is there is decisive. A person may take the accommodation offered while he or she is working in the area or while he or she is enjoying a holiday from work. In either case, the underlying motive for the occupation does not necessarily mean that the occupier is not using the flat as a private residence.

I have reached the view that the duration of the occupier’s occupation is material. It does seem to me that in order for a property to be used as the occupier’s private residence, there must be a degree of permanence going beyond being there for a weekend or a few nights in the week. In my judgment, I do not consider that where a person occupies for a matter of days and then leaves it can be said that during the period of occupation he or she is using the property as his or her private residence. The problem in such circumstances is that the occupation is transient, so transient that the occupier would not consider the property he or she is staying in as being his or her private residence even for the time being.

Having considered the context of the grant of the lease, and the nature of the intended relationship between lessor and lessee taking account of the obligations entered into, I am of the view that in granting very short term lettings (days and weeks rather than months) as the [flat owner] has done necessarily breaches the covenant under consideration.”

He went on to say that each case is fact-specific, depending upon the construction of the particular covenant in its own factual context.

Each development in Gibraltar will have its own lease and individual terms, which may or may not make reference to 'private residence'. The ones I checked use a variation of that term.  In any event, there may be other clauses which specifically allow or disallow short term letting. If you do let on a short term basis, or are considering doing so and you are in any doubt, it is worth checking your lease and possibly having a word with the management company or your lawyer, to confirm that you are not breaching any rules. 

Click here for the full judgement.