My AST Tenants have turned my House into an Airbnb

ALondonLandlord

As a newish landlord (this is not my job), I have just found out I have a possibly major problem (in fact several), and would be grateful for any salient advice.

FACTS:
I own a mortgage-free 3-storey 4-bedroom freehold house in London which I have let out to 3 tenants via an AST (12 months, no Break Clause; each is listed on the contract) for the past 2 years via a local Letting Agent.
They have been unproblematic (until now); kept the property in good condition (even minorly improved it in some areas); always paid rent on time; never caused problems or nuisance; never even asked for any repairs.
They renewed their Tenancy a week ago and I intend this to be the last year of rental.
I hope to get planning permission over the coming year to start major construction works on it in a year’s time. I need the rental income to help fund the future build.
.
I have just discovered to my horror (initially online, and then via a visit to the inside of the building) that the tenants have turned the entire building into a series of Airbnb lets - with 6 rooms (including the 2 living rooms) listed at the property.
Upon further research I found that they are also doing this at almost 40 other listings across 6 other properties – some of which, including mine, they have listed on Booking.com & other sites.
This is contrary to the terms of my contract with them, which forbids subletting (as well as use of the living rooms as bedrooms).
.
Deeply worryingly, their subletting also potentially invalidates my landlords insurance (which I just renewed and paid for in full up-front), which is invalid with change of tenant circumstances, & any loss or damage caused by non-tenants.
.
(1) INSURERS:
I want to tell them immediately and discuss this with them, thought fear that they will regard this as void; refuse to alter the contract; refuse to repay any portion relating to the remaining term.
--Is there any way in which Insurance Policies in such instances can be honoured, e.g. though amendment? I worry that they may agree to an amendment yet later claim that the Policy was automatically invalidated when the tenants started renting out.
--Is there any insurer out there who would insure this situation?
.
(2) ENDING THE TENANCY:
(a) My initial instinct is to talk to the tenants and get them to stop, but that might not work – and they clearly have a large number of upcoming bookings which they would probably want to try and honour – motivating their resistance.
Despite having suffered broken trust, I’d be amenable to them staying if they desist, though I’d clearly need to more actively monitor the property, and would probably be best getting them out ASAP.
My concern about the Airbnb discovery rests with the invalidation of insurance and any potential illegality, rather than increased wear & tear on a property that I hope to eventually gut.
The Letting Agent says they cannot amend the contract in any way that will allow subletting.
(b) From my understanding I cannot serve the Tenants a Section21 notice until 2 months before the end of their AST – almost 10 months away. There is no Break Clause.
(c) From my understanding I could theoretically serve them a Section8 notice – on discretionary rather than mandatory grounds (#12) –– but because there are no rent arrears, this would not be likely to succeed, and be a waste of time and money, going to court & hiring a solicitor.
I have heard and read this depressing (and seemingly illogical) advice from several people, including the National Landlords Association helpline earlier today.
Everyone seems to be in agreement to avoid Section8 if at all possible
So, scarily, it seems I am all out of options and cannot get the property insurable – unless we come to a Mutual Agreement of some sort, which I’ve read is usually triggered by Tenant request; best executed by deed; and difficult to achieve.
The Letting Agent says my only option is a good solicitor.
--Does anyone have any good advice on how to remedy this situation?

(3) LICENSING:
I have been reading around the topic since this arose and discovered another horror fact: that the local council designated a selective licensing zone 18 months ago – and my house falls just within the zone, and should be licensed, even though my tenant arrangement would not ordinarily be subject to the HMO licensing covered by broader UK legislation.
There seems no way round this other than to confess my idiocy in not knowing, and hope we can come to some agreement – which could entail large repayment of rent to them, and worse (though I do wonder how I would and could have known without reading the entire council’s website – and why the Letting Agent didn’t know).
I’m scared (a) of possible punitive measures for something I had no idea about, and (b) that any remedies to the property that the council might require (e.g. it has basic carbon monoxide detector and battery smoke alarms, not interlinked electrical ones; no fire-escape signage or lighting) will be inordinately expensive for the brief period of further time that I hope will lapse before we start building works.
--Does anyone have any good advice on how to remedy this situation, and pitfalls I should avoid?
.
Sorry for such a long post; I’m just trying to provide the detail helpful readers might ask for.
Any helpful advice would be very gratefully received.

Thank you.

[Deleted User]

Right at the top of this article, and the last third of it say you can evict a tenant for breaking the terms of their lease. I will leave it to the professional LL's on here to confirm or deny.https://www.theguardian.com/money/2016/apr/02/landlords-clamp-down-subletting-without-approval-leaseholders-tenants-repercussions

It should be possible (from other articles on the net if you google 'tenant using AirBnb' to complain to AirBnB who state that a tenant should have the permission of a LL to rent rooms. Please check AirBnB terms to confirm this though. I have no idea about other similar companies.

It seems strange that they have rented the property for a couple of years (if I read your post correctly) and have just signed another TA.., and suddenly decided to rent out multiple rooms on AirBnB. I know there's money to be made.., but there's something missing here. Are you sure they weren't renting rooms out previously?

Pixie5740

ALondonLandlord wrote: »

As a newish landlord (this is not my job), I have just found out I have a possibly major problem (in fact several), and would be grateful for any salient advice.

FACTS:
I own a mortgage-free 3-storey 4-bedroom freehold house in London which I have let out to 3 tenants via an AST (12 months, no Break Clause; each is listed on the contract) for the past 2 years via a local Letting Agent.
They have been unproblematic (until now); kept the property in good condition (even minorly improved it in some areas); always paid rent on time; never caused problems or nuisance; never even asked for any repairs.
They renewed their Tenancy a week ago and I intend this to be the last year of rental.
I hope to get planning permission over the coming year to start major construction works on it in a year’s time. I need the rental income to help fund the future build.
.
I have just discovered to my horror (initially online, and then via a visit to the inside of the building) that the tenants have turned the entire building into a series of Airbnb lets - with 6 rooms (including the 2 living rooms) listed at the property.
Upon further research I found that they are also doing this at almost 40 other listings across 6 other properties – some of which, including mine, they have listed on Booking.com & other sites.
This is contrary to the terms of my contract with them, which forbids subletting (as well as use of the living rooms as bedrooms).
.
Deeply worryingly, their subletting also potentially invalidates my landlords insurance (which I just renewed and paid for in full up-front), which is invalid with change of tenant circumstances, & any loss or damage caused by non-tenants.
.
(1) INSURERS:
I want to tell them immediately and discuss this with them, thought fear that they will regard this as void; refuse to alter the contract; refuse to repay any portion relating to the remaining term.
--Is there any way in which Insurance Policies in such instances can be honoured, e.g. though amendment? I worry that they may agree to an amendment yet later claim that the Policy was automatically invalidated when the tenants started renting out.
--Is there any insurer out there who would insure this situation?

I'm not entirely sure about the insurance situation. You are not operating the AirBnb business, your tenants are so surely it's for them to insure that side of things whilst you insure as if you were a landlord letting the property on an AST basis.....? Yes if something happened you could sue your tenants but I imagine the chances of seeing any money from them would be slim to none.
.

ALondonLandlord wrote: »

(2) ENDING THE TENANCY:
(a) My initial instinct is to talk to the tenants and get them to stop, but that might not work – and they clearly have a large number of upcoming bookings which they would probably want to try and honour – motivating their resistance.
Despite having suffered broken trust, I’d be amenable to them staying if they desist, though I’d clearly need to more actively monitor the property, and would probably be best getting them out ASAP.
My concern about the Airbnb discovery rests with the invalidation of insurance and any potential illegality, rather than increased wear & tear on a property that I hope to eventually gut.
The Letting Agent says they cannot amend the contract in any way that will allow subletting.
(b) From my understanding I cannot serve the Tenants a Section21 notice until 2 months before the end of their AST – almost 10 months away. There is no Break Clause.
(c) From my understanding I could theoretically serve them a Section8 notice – on discretionary rather than mandatory grounds (#12) –– but because there are no rent arrears, this would not be likely to succeed, and be a waste of time and money, going to court & hiring a solicitor.
I have heard and read this depressing (and seemingly illogical) advice from several people, including the National Landlords Association helpline earlier today.
Everyone seems to be in agreement to avoid Section8 if at all possible
So, scarily, it seems I am all out of options and cannot get the property insurable – unless we come to a Mutual Agreement of some sort, which I’ve read is usually triggered by Tenant request; best executed by deed; and difficult to achieve.
The Letting Agent says my only option is a good solicitor.
--Does anyone have any good advice on how to remedy this situation?

If the tenants are doing this across several properties in London do they even live in yours? Does part of your contract with the letting agency include inspections?

If so how did the letting agent not notice the tenants had turned the property into an AirBnB?

The letting agent is talking rubbish. If both parties want to amend the tenancy agreement then they can it's just that you can't unilaterally change the terms.

Why did you sign a new 12 month fixed term contract rather than letting the tenancy become periodic? Was this a recommendation of the letting agency per chance?

I am surprised that the National Landlord Association has told you to avoid issuing a Section 8....I'm not saying they are wrong just that I am surprised. I suppose it's because any of the grounds you could use are discretionary rather than mandatory.

ALondonLandlord wrote: »

(3) LICENSING:
I have been reading around the topic since this arose and discovered another horror fact: that the local council designated a selective licensing zone 18 months ago – and my house falls just within the zone, and should be licensed, even though my tenant arrangement would not ordinarily be subject to the HMO licensing covered by broader UK legislation.
There seems no way round this other than to confess my idiocy in not knowing, and hope we can come to some agreement – which could entail large repayment of rent to them, and worse (though I do wonder how I would and could have known without reading the entire council’s website – and why the Letting Agent didn’t know).
I’m scared (a) of possible punitive measures for something I had no idea about, and (b) that any remedies to the property that the council might require (e.g. it has basic carbon monoxide detector and battery smoke alarms, not interlinked electrical ones; no fire-escape signage or lighting) will be inordinately expensive for the brief period of further time that I hope will lapse before we start building works.
--Does anyone have any good advice on how to remedy this situation, and pitfalls I should avoid?
.
Sorry for such a long post; I’m just trying to provide the detail helpful readers might ask for.
Any helpful advice would be very gratefully received.

Thank you.

I don't think you need to worry about the HMO licensing. You are not operating a HMO but your tenants are and it's them who should be licensed not you.

What an awful situation. It seems like you're stuck between a rock and a hard place. My initial reaction was to get the gits out the property but if you've been advised against issuing a Section 8 then that might not be the best course of action.

Perhaps you could contact AirBnb, Bookings.com, etc and explain the situation to see if they will remove the adverts and your tenants are users of those sites. Then when the guests dry up and therefore their income you might be able to agree a mutual surrender of the tenancy.

I would also look at changing letting agent because I think the one you've got has been giving you a bum steer.

See G_M's guide to Letting Agents: tips for selecting and tips for sacking. Taken from his Guide to Tenancies in England and Wales: Advice for Landlords and Tenants.

theartfullodger

3 stories, 6 people -it's a HMO requiring a licence, painful consequences if you don't have one.

As 3 tenants presumably unrelated it was anyway a HMO, albeit not needing licence. Still needs to comply with regulations, fire doors etc

Pixie5740

theartfullodger wrote: »

3 stories, 6 people -it's a HMO requiring a licence, painful consequences if you don't have one.

As 3 tenants presumably unrelated it was anyway a HMO, albeit not needing licence. Still needs to comply with regulations, fire doors etc

It's a 3 story building being let out to 3 tenants on a joint AST so I don't think it is/was subject to mandatory licensing.

ALondonLandlord

Many thanks for your reply, @deannatrois

-I can't evict them (or gain possession) with a Section 21 because they've just renewed their 12-month tenancy without break clause.
-I am pretty sure that a Section 8 is the only available eviction option - but have been advised by many that beyond just being difficult, painful and expensive - it will probably fail due to lack of mandatory grounds.
-I can absolutely complain to Airbnb, but I'm pretty sure they're unlikely to care or action the complaint; & in any case, the tenants use a variety of other platforms. Their T&Cs are pretty toothless.
-The evidence shows the tenants have been running the Airbnb rentals in my property for months (and in other properties for years), before renewal - a harsh lesson to carry out more frequent inspections.

@Pixie5740, thank you.
-The tenants will possibly have contents insurance beyond Airbnb's, but I have to ensure the building and carry landlord's insurance - and its terms are probably null & void with the multiplication of occupants and its use by tenants outside my lease; i'd absolutely never expect to rely on insurance held by these tenants for any major issues.

-My contract does include inspections and once i found the airbnb listings, i did inspect, and found the main evidence; i just didn't inspect every room (some of which were locked by their "guests") because i wanted to do research and gain advice and know where i stood before thoroughly confronting them.
-I am pretty sure 1 of them lives there - and that at least 1 (if not 2) of them lives elsewhere. 1 of them describes himself as "living here" on another of their listings ~4 miles away - which would enable him to manage the 20 listings he would manage there. The letting agent never visits. And their fee - which excludes management, and which was negotiated down - has sadly already been paid for the year ahead. I am asking them what I get for this and hoping to be able to manoeuvre them into being more useful..

-I signed a 12-month contract because everything seemed fine and that seemed fair; why would I not? The Letting Agent did indeed recommend it, and it does offers security and the promise of less hassle to both parties.

-Indeed the National Landlord Association Helpline's gripe with the Section 8, though purely fair, was that it often fails - even on fair, mandatory grounds, let alone these discretionary ones.

-HMO licensing: though not subject to mandatory licensing, sadly everything I've read suggests the landlord IS liable - including here for the selective licensing that the tenants haven't affected & that I knew nothing about, but ignorance is no defence (including for the Letting Agent) and I only hope the council will be willing to help me resolve this without being unduly punitive.

anselld

ALondonLandlord wrote: »

-HMO licensing: though not subject to mandatory licensing, sadly everything I've read suggests the landlord IS liable - including here for the selective licensing that the tenants haven't affected & that I knew nothing about, but ignorance is no defence (including for the Letting Agent) and I only hope the council will be willing to help me resolve this without being unduly punitive.

If 5 or more people are living there it would come under mandatory licensing. However the Council may consider it is being operated as a guest house (C2). Either way there are serious consequences.

However, as Pixie states, you are not the Landlord as far as these activities are concerned.

So you can either keep your head down for another 12 months or come clean to the Council and hope they assist you in shutting this down rather than throwing it in your face.

Barter

There was something about this on You & Yours yesterday. (Radio 4 12:15; you could listen on iplayer). Didn't hear it all, but did say that AirBnB take them off, but there are (at least) 2 other similar companies that delisted places move their ads to.

Pixie5740

ALondonLandlord wrote: »

@Pixie5740, thank you.
-The tenants will possibly have contents insurance beyond Airbnb's, but I have to ensure the building and carry landlord's insurance - and its terms are probably null & void with the multiplication of occupants and its use by tenants outside my lease; i'd absolutely never expect to rely on insurance held by these tenants for any major issues.

Check with the insurer. State that you are letting the property on an AST basis to three tenants. Ask what would happen if your tenants were to sublet the property or operate an AirBnB business in it.

ALondonLandlord wrote: »

-My contract does include inspections and once i found the airbnb listings, i did inspect, and found the main evidence; i just didn't inspect every room (some of which were locked by their "guests") because i wanted to do research and gain advice and know where i stood before thoroughly confronting them.
-I am pretty sure 1 of them lives there - and that at least 1 (if not 2) of them lives elsewhere. 1 of them describes himself as "living here" on another of their listings ~4 miles away - which would enable him to manage the 20 listings he would manage there. The letting agent never visits. And their fee - which excludes management, and which was negotiated down - has sadly already been paid for the year ahead. I am asking them what I get for this and hoping to be able to manoeuvre them into being more useful..

Are you only paying the letting agency to collect the rent? Do you live overseas?

ALondonLandlord wrote: »

-I signed a 12-month contract because everything seemed fine and that seemed fair; why would I not? The Letting Agent did indeed recommend it, and it does offers security and the promise of less hassle to both parties.

There is absolutely no need whatsoever to keep signing new fixed term contracts. Let me guess the letting agent charged both you and the tenants for the privilege of changing a date and hitting Ctrl+P. Allowing tenancies to become periodic gives both the landlord and tenant more flexibility, and would have allowed you to issue a Section 21 now.

ALondonLandlord wrote: »

-Indeed the National Landlord Association Helpline's gripe with the Section 8, though purely fair, was that it often fails - even on fair, mandatory grounds, let alone these discretionary ones.

Then I guess you are stuck. If operating this business is the only thing (ha ha only) your tenants are doing then it might not be worth rocking the boat and waiting it out until you can issue a Section 21.

ALondonLandlord wrote: »

-HMO licensing: though not subject to mandatory licensing, sadly everything I've read suggests the landlord IS liable - including here for the selective licensing that the tenants haven't affected & that I knew nothing about, but ignorance is no defence (including for the Letting Agent) and I only hope the council will be willing to help me resolve this without being unduly punitive.

Can you please cite your sources? As far as I understand it you have a contract with the 3 tenants...that's it. You have no contract with the AirBnB guests and are therefore not creating a HMO which requires a licence.

Annie35

What an awful situation! I'd get talking to some professional eviction companies to get some more options but section 8 isn't just for arrears.

Our could go for these 2 grounds, yes they are discretionary but it's more about not making innocent people homeless, in this case they do have other homes to go to. It's worth looking into this before dismissing -

Ground 12(breach of contract)
Ground 17(false info provided by tenant)

However it's Ground 6 which maybe your trump card, (redevelop the property) which is a MANDATORY ground! There are steps to take but if your wanting to do building work anyway next year a push to gain the gain finance now could get you out this mess.

Oh! would ground 1 work? (Ll wanting to move back in, but you need to have lived their before)

theartfullodger

Pixie5740 wrote: »

It's a 3 story building being let out to 3 tenants on a joint AST so I don't think it is/was subject to mandatory licensing.

HMO regulations are about

the living accommodation is occupied by persons

- see the 2004 Housing Act - not about signed-up tenants.
http://www.legislation.gov.uk/ukpga/2004/34/part/7/crossheading/meaning-of-house-in-multiple-occupation
(it would apply if you had a 3-storey house in England with 8 bedrooms and you invited 7 unrelated people to live with you for free...)

He says he's got 6 people there (yes, he only wants 3..) so he's got a licensable HMO. The council should be sympathetic, but..

Slàinte mhath!