3 surprising ways Airbnb can create problems for Landlords

With research suggesting that London will become a nation of renters in the next decade, there is one type of tenant that is starting to cause a problem for Landlords and residential block management companies in London.

Airbnb

Airbnb (for those who don’t already know) is a website that allows you to list your apartment as a whole or even a room in your home, to rent out to others for long or short periods of time. According to their website, they have around 1.5 million listings across 190 countries (bear in mind, there are only 195 countries in the world).
Airbnb is now a common word on Landlord’s lips in London.
It has seen a staggering growth in the London rental market. In fact, Airbnb’s UK and Ireland general manager James McClure has been quoted as saying that growth in London is up 75% year on year.
Since the company’s inception in 2007, Airbnb has grown to a turnover in 2015 of an estimated $900 million so is it any wonder why London, one of the greatest cities in the world, has seen a huge impact.
But, is it a reason for Landlords to jump on this powerful bandwagon or is it causing huge problems in London’s leasehold properties?
As recently as the 30th April 2016, Berlin has now banned Airbnb rentals leaving people only able to rent out a specific room in their home as opposed to the entire place. The reasoning behind this decision is due to the increasing rental costs in Berlin, so with London’s average rent per month now topping £1,500, is this a possible route for the new London Mayor to look in to?
Let’s look at 3 reasons why AirBnB may not be the best decision for your flat or the building as a whole:

1. Renting out the flat may be a breach of the lease

When you bought your flat you signed a Lease, right?!
Well that Lease will have covenants or obligations on how you can use the flat as well as any restrictions.
Whilst there is no such thing as a standard Lease, there are certain covenants that tend to come up again and again.
Some of these restrictions cover any subletting of your flat which may include:

• If you require permission from the Freeholder to rent your flat out
• How you can rent your flat out (i.e. minimum rental periods, holiday rentals etc.).
• Any restrictions on noise in the flat
• Any obligations for living in the apartment (i.e. providing access to the Freeholder, disposal of waste and so on)
• Any house rules that may apply (which can include no Airbnb rentals)

As we keep re-emphasising, ignorance is no excuse here and there are serious implications to breaching the Lease covenants so you need to make sure you review your Lease before agreeing to any Airbnb lets.

2. Airbnb may impact the building insurance

Building insurance policies do vary so we can only provide a warning from a general point of view but you do need to check.
Part of the service charge you pay each year will be for your building insurance premium which is dependent on the ‘risk’ associated with the building.
In part, the residents of the building make up an element of that risk and therefore should you rent out your home to an Airbnb guest then this may increase the risk, in turn either increasing the amount of risk to the building and / or increasing the overall premium.
Worst case scenario, something happens and the insurance policy does not cover the cost based on there being an unknown tenant.
If you have a mortgage on your home, you should also check with your mortgage provider that you can provide a short term let otherwise you also run the risk of breaching your mortgage agreement.

3. Liability for damages caused to communal areas

So here is the scenario, you decide to rent out a room in your home whilst you are away on holiday, you decide to take out the Airbnb Host Guarantee which will cover you for up to £600,000 worth of damages to your home.
There are exceptions to this Host Guarantee such as cash, pets and certain valuables that are not covered but £600,000 is a sizable amount to cover most issues, right?
Well what happens if your Airbnb tenant causes damage to the communal area?
To answer this question quickly for you……it could you be you!
Most building insurance policies can cover accidental damage to communal areas but as we mentioned above, the insurers may not pay if you haven’t informed them of the new short let.
So you are left with damages that aren’t covered by the building insurance, nor by the Host Guarantee. Therefore, you are left with a potentially sizable invoice as well as a few very angry neighbours.

How can Directors of Resident Management Companies stop allowing Airbnb lets?

There are two main ways in which a Director of a Residents Management Company can prevent harmful Airbnb rents, a legal way and a non-legal way.
The Legal Way: As we have mentioned above, the Lease is quite clear on how a flat can be used and any restrictions that can apply so this is your first move.
Check the Leases, they may say that Landlords must seek permission to rent their flat out, have they received permission to do so in this instance? What were the terms of that permission and were there any restrictions on minimum rental lengths?
With any contract, it’s important to make sure each party, the Residents Management Company and the Landlord are clear on what they are allowed to do and more importantly, what they aren’t.
If there are restrictions in place or permission is simply not been provided, we suggest you broach the subject in a polite notice asking for resolution to the problem. Usually these types of matters are simply an oversight and can be quickly resolved.
Whilst it may be causing problems having Airbnb tenants coming and going, do not start by sending legal desist letters to the Landlord in question. This will only make matters worse and remember that you live in a building that has a community of flat owners, it’s about working together for the overall benefit to the building.
The Non-Legal Way: Residents Management Companys are typically formed of the individuals that own a flat in the building, therefore you all naturally have a commonality between you.
It seems logical therefore that the Residents Management Company can agree on a set of house rules, even if these are not supported by the formal Lease terms.
Yes, these can become complicated with new owners but with an engaged approached to all owners in the building, highlighting the problems that short term lets can bring, this can be a low cost, friendly approach.

What can Managing Agents in London do to help Landlords?

It can be difficult to know if a Landlord has rented their flat out to an Airbnb tenant however there are a few simple tactics Managing Agents can use to try and manage the situation if neither a legal or non-legal methods of resolution have worked.

• Property Management Software

In an ever evolving world of technology, Managing Agents can use an online portal for the building to engage with owners and highlight the potential issues that can arise from these short term rents.
These days Landlords want information on demand, at their convenience and therefore Managing Agents need to ensure they are proactively providing this information when Landlords want it.

• Engaging Landlords at meetings

Meetings of Landlords and Resident Management Companys are a perfect opportunity to give a brief presentation to the attendees.
Face to face meetings will always give a lasting impression and therefore Managing Agents should take the opportunity to provide the information on short term lets.

• Building Reviews

Managing Agents understand the problems with having multiple guests coming and going through communal areas and as such, a building review would be prudent to try and prevent any damage that can be caused.
Through experience we have fixed Perspex sheets to walls in areas of high traffic, we have introduced new safety measures to entrance doors to increase security as well as introducing CCTV to communal parts, all in order to prevent issues before they arise.

Conclusion

Airbnb is not all doom and gloom however, it has opened up a new way to experience the world as well as a new business opportunity for portfolio Landlords.
Do not get caught out though and check whether you are allowed to rent your flat for Airbnb guests before doing so and you will keep a lot of people happy.