Landlord and tenant – Breach of covenant – Section 168(4) of Commonhold and Leasehold Reform Act 2002 – Lease containing covenant against use of flat other than as private dwelling house and prohibiting use for trade or business – Appellant applying for determination that respondents in breach of covenant – First-tier tribunal dismissing application – Appellant appealing – Whether respondents breaching covenant by use of flat as serviced apartment advertised on internet booking sites – Appeal allowed
The respondents held a lease of Apartment 86, Hanover Mill, Hanover Street, Newcastle-Upon-Tyne granted in 2009 for a term of 125 years. The appellant was their immediate landlord.
By paragraph 18 of schedule 4 to the lease the respondents agreed “Not at any time to carry on or permit to be carried on upon the property any trade or business whatsoever nor to use or permit the same to be used for any purpose other than as a private dwellinghouse for occupation by one family at any one time”.
The lease also included an absolute prohibition on assigning, sub-letting or parting with possession of part of the property and a qualified covenant against subletting the whole of the property without the consent of the landlord, such consent not to be unreasonably withheld or delayed; the grant of assured shorthold tenancies for no more than six months and the grant of underleases giving effect to a shared ownership scheme, or similar, were permitted without the landlord’s consent.
The respondents relocated their home and arranged for the flat to be advertised on the Airbnb and Booking.com websites as available to let for short-term occupation. The first respondent still made regular use of it.
The appellant applied to the First-tier Tribunal (FTT) under section 168(4) of the Commonhold and Leasehold Reform Act 2002 for a determination that the respondents were in breach of covenant. The FTT dismissed the application.
The appellant appealed contending that the FTT had been wrong: (i) to construe paragraph 18 as permitting the provision of serviced accommodation on a commercial basis because such use was not use “as a private dwellinghouse”; and (ii) to disregard the decision of the Court of Appeal in Tendler v Sproule [1947] 1 All ER 193 that taking in paying guests was a breach of a covenant not to use premises for a business.
Held: The appeal was allowed.
(1) The question was whether the person occupying under the short-term let was using the property as a private dwellinghouse. That was a question of fact which involved consideration of the degree of permanence of the occupancy, the relationship between the occupants, whether payment was made for the occupation and whether the owner had people at the property supervising and offering support to the occupants. The use of residential property for short term occupation by a succession of paying guests had always been treated as a breach of a covenant requiring use only as a private residence or dwellinghouse. Occupation by a sub-tenant who used the property as his or her own private residence was permitted, as might be occupation by a group of individuals living collectively, or by non-paying guests, family members, or servants occupying with the tenant. But short-term occupation by paying strangers was the antithesis of occupation as a private dwellinghouse. It was neither private, being available to all comers, nor use as a dwellinghouse, since it lacked the degree of permanence implicit in that designation: C&G Homes Ltd v Secretary of State for Health [1991] 1 EGLR 188, Caradon District Council v Paton and Bussell [2000] EGLR 57 and Nemcova v Fairfield Rents Ltd [2016] UKUT 303 (LC) followed.
(2) In Nemcova, the Upper Tribunal concluded that the use of a flat for short-term occupation by guests sourced via internet booking agencies was a breach of a covenant prohibiting its use “other than as a private residence”. The FTT had distinguished that case on the basis that the prohibition on use other than as a private dwellinghouse was set in the context of the restriction on trade or business; the wording referred to “a” private dwellinghouse and not “his or her” private dwellinghouse; the lease also specifically permitted short-term assured shorthold tenancies not exceeding six months; it was common ground between the parties that the taking of a lodger was not prohibited; and the lease did not prohibit other forms of occupation under licence.
However, the fact that the covenant had two limbs, prohibiting any trade or business as well as prohibiting use other than as a private dwellinghouse, did not require that one limb be treated as subordinate to the other. Effect had to be given to both. There was no difficulty in giving full effect to both limbs of the covenant as there was no inconsistency between them. There was no need to qualify the second prohibition by reading it as permitting uses which would not usually be described as use as a private dwellinghouse provided they did not involve conducting a business from the premises.
(3) Whether looked at individually or in combination, the five factors identified by the FTT as distinguishing paragraph 18 from any other prohibition on use other than as a private dwellinghouse or residence, did not justify its conclusions. On the facts found, the individuals who occupied the flat for weekends or other short periods after responding to internet advertisements were not using the flat as a private dwellinghouse for occupation by one family at any one time. By permitting that use the respondents were in breach of paragraph 18 of schedule 4 to their lease.
(4) No activity was carried on at the property which in itself amounted to a business. The provision of laundry services between lettings, leaving breakfast goods for visitors, and handling check-in and check-out (which had not happened here) did not alter that assessment and did not amount to carrying on business at the property. Therefore, the FTT was right to find that letting the flat for short-term residential use did not breach the covenant against carrying on business at the property.
(5) The respondents had sought to argue that a demand for and payment of sub-letting fees had waived the breach. However, there was no evidence that those fees authorised use of the flat for any purpose other than as a private dwellinghouse.
Piers Harrison (instructed by Scott Cohen Solicitors, of Henley-on-Thames) appeared for the appellant; Dominic Crossley (instructed by Gunnercooke LLP) appeared for the respondents.
Eileen O’Grady, barrister
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