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Landlord & Tenant – Unlawful sub-letting

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10th October 2016

Summary

The Upper Tribunal upheld the FTT’s determination that the lessee had breached a covenant in her lease not to use her flat other than as a private residence by granting a series of short-term lettings of the property. The fact that the lessee had granted the lettings meant that her occupation of the flat was so transient and not sufficiently permanent that she would not consider the property her private residence.

Facts

The respondent (R) is the freehold owner of a building in which the appellant lessee (N)’s flat is situated. N’s lease is a long lease for a term of 99 years commencing on 25 December 1997, in which she covenanted:

• 2.7 – During the last seven years of the term hereby granted not to assign underlet or part with the possession of the Demised Premises or any part of them without the previous consent in writing of the Lessor such consent not to be unreasonably withheld.
• 2.8 – Not to assign underlet or part with the possession of part only of the Demised Premises.
• 2.11 – At all times after the date of this Lease to observe and perform any restrictions covenants conditions and stipulations contained or referred to in Part III of the Schedule.”

Further, Part III of the Schedule contains the following covenant on the part of the Lessee with the Lessor the Company the Management Company and the lessees for the time being of the other flats in the block:

(1) 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 appellant admitted having made short term lettings of the flat and advertising its availability for letting. She gave evidence that she paid council tax and utility bills due for the flat, and that 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 further gave evidence that she only let the flat for about 90 days a year, and these lettings were to business workers rather than as holiday lets. She had also set up a web-site advertising her and her partner’s homes as alternatives to hotels.

Before the FTT, the appellant’s counsel had submitted that (a) 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, and (b) no breach of covenant had occurred as the flat had at all times retained the physical characteristics of a private residence.

First instance

Having directed itself that the appropriate starting point in construing the covenant was ‘the ordinary and natural meaning of the words, read together with the whole of the Lease, having regard to the factual context surrounding entry into the Lease in so far as this can be identified’, the FTT went on to:

• Reject the appellant’s submission that the only meaning that could be ascribed to ‘private residence’ was whether or not the flat had the physical characteristics of a private residence;
• To hold that applying the ordinary and natural meaning of the words, there was no material difference between use as a private residence and use as a private dwelling house;
• As those persons who would be occupying the flat on a short term letting would not be occupying it as their home, it followed that the appellant was using the flat for a purpose other than use as a private residence; and
• The appellant had breached the covenant in her lease by using the Flat other than as a private residence.

Issues

A long lease contains a covenant 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. If the leaseholder advertises on the internet the availability of the premises (a flat) for short term lettings and grants a series of such lettings, do the leaseholder’s actions breach the covenant?

Decision on appeal

In dismissing the appeal, the Upper Tribunal held:

• Applying the principles of construction in Arnold v Britton [2015] UKSC 36, the relevant clause in the lease contains no restriction on alienation of the property as a whole save for in the last seven years of the term, but does prohibit certain uses of the demised premises. Use for ‘any illegal or immoral purpose’ is first prohibited, then the clause widens in its impact so as to prohibit use for ‘any purpose whatsoever other than as a private residence.’ The clause therefore operates to prohibit all uses save use as a private residence.
• No breach of the covenant under consideration will occur if and so long as the (lawful) occupier for the time being continues to use the premises only as a private residence.
• However, 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. 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, but the occupation is 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.
• The appellant’s actions in granting very short-term lettings of the flat of which she was the leaseholder comprised breaches of the covenant.

The Upper Tribunal observed that each case is fact-specific, depending upon the construction of the particular covenant in its own factual context.

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