Triplerose Limited v Beattie and Beattie [2020] UKUT 180 (LC)

Summary

A lease that contains a covenant against use other than as a private dwellinghouse is breached where the tenant opts to let the property out on short term lets through sites such as Airbnb and Booking.com. However, where the tenant still makes regular use of the property as a residence in and around those bookings, the tenant will not be in breach of a separate covenant not to carry on a business from the property (as distinct from a covenant not to use the property for a business). 

Facts

T is B&B’s landlord of a flat pursuant to a 125-year lease granted in 2009. Under Paragraph 18 of Schedule 4 to the lease, B&B covenanted: 

“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 dwelling house for occupation by one family at one time.” 

Paragraph 31 of Schedule 4 to the lease also included an absolute prohibition on assignment, sub-letting or parting with possession of part of the flat, and a qualified covenant against sub-letting the whole of the flat without T’s consent (except that ASTs granted for 6 months or less, and underleases giving effect to shared ownership schemes, did not require any consent). 

B&B had initially lived in the flat, but then relocated. Whilst trying to sell the flat, B&B made arrangements with a company for the flat to be advertised on Airbnb and Booking.com for short-term lettings. The company would advertise the flat for let mainly over the weekends, as B&B continued to make regular use of the flat on weekdays. The company would provide laundry services between lettings, leave breakfast goods for visitors, and handle both check-in and check-out. 

T applied under Section 168(4) of the Commonhold and Leasehold Reform Act 2002 for a determination that B&B were in breach of the above covenants. 

Issues

There were two distinct points on appeal. Whether B&B permitting their flat to be used as a serviced apartment advertised for short term occupation through internet booking agencies was a breach of Paragraph 18 of Schedule 4 to their lease because that covenant prohibited: 

1. Use “for any purpose other than as a private dwelling house for occupation by one family at one time”; and/or 
2. B&B to “carry on or permit to be carried on upon the Property any trade or business whatsoever”

First instance

The FTT distinguished the decision in Nemcova v Fairfield Rents Ltd [2016] UKUT 303 (LC), in which the UT found that use of a flat for short term occupation by guests sourced by internet booking agencies was a breach of a covenant prohibiting its use “other than as a private residence”.  

It did so for two main reasons: 

1. Because Paragraph 18 of Schedule 4 to the lease suggests “that the purpose of the clause is to prevent a trade or business being operated from the property, thereby maintaining residential use”; and 
2. The qualified covenants contained in Paragraph 31 of Schedule 4 to the lease “suggest that use as temporary accommodation, whether as a tenant, licensee or lodger, is envisaged.” 

As a result, the FTT found that B&B were not in breach of the terms of their lease. 

Decision on appeal

On the first issue on appeal, Martin Roger QC directly followed Nemcova. The correct question was whether the person who was in occupation of the flat at any particular time was using it for “any purpose other than as a private dwelling house for occupation by one family at one time”. And at [20] he made clear that “short-term occupation by paying strangers is the antithesis of occupation as a private dwellinghouse. It is neither private, being available to all comers, not use as a dwellinghouse, since it lacks the degree of permanence implicit in that designation.”  

Martin Roger QC considered that it was very clear that B&B had breached the first limb of Paragraph 18 of Schedule 4 of their lease, because the individuals who occupied the flats for weekends or other short periods were not using the flat as a dwellinghouse for occupation by one family at one time. 

A key mistake by the FTT was that it had failed to correctly interpret Paragraph 31 of Schedule 4 to the lease. Although that covenant did give express permission for assured shorthold tenancies of a duration not exceeding six months, it certainly did not envisage that a succession of short-term occupiers would be permissible. It is a condition of an AST, pursuant to Section 1(1)(b) of the Housing Act 1988, that the tenant occupy the dwellinghouse as their only or principal home, which is perfectly consistent with the requirement that the flat be used “as a private dwelling house”. But a short term letting to someone who did not use the flat as their only or principal home (and therefore is not an assured shorthold tenant) would plainly require the landlord’s consent, which was not given to B&B by T. 

Another key mistake the FTT made was in treating this question as subordinate to the other limb of Paragraph 18 of Schedule 4 of the lease, which is the other issue under appeal. Effect should have been given to each limb of the covenant independently, instead of allowing one limb to subvert the other. 

As to the second limb of the covenant, Martin Roger QC determined that B&B had not carried on or permitted to be carried on “upon the Property any trade or business whatsoever”.  

The FTT had directed itself to the decision in Florent v Horez (1948) 48 P&CR 166, where the Court of Appeal determined that it was a question of degree “whether on the one hand, the use of premises was ancillary or subordinate to their residential use and therefore not a breach, or, on the other hand, amounted to carrying on business (in the widest sense) on the premises”. And the FTT had made a finding of fact that B&B did continue to make use of the flat as a residence. Third party use of the flat was “both ancillary and subordinate” to B&B’s use of the flat, and in that context no business was being carried out in the flat. Martin Roger QC agreed with that conclusion. 

And importantly, there is a real distinction between using premises for a business, and carrying out a business upon premises. As Paragraph 18 of Schedule 4 to the lease only prohibited the latter, it was irrelevant whether the property was being used for a business by the company that contracted with B&B to manage the short-term lettings. 

Given this, B&B had not breached the second limb of Paragraph 18 of Schedule 4 to the lease. 

Comment

It appears that it was crucial, in respect of the second limb of Paragraph 18 to Schedule 4 of the lease, that B&B continued to make regular residential use of the flat during the week. Had B&B ceased to regularly make use of the property, third party use of the flat would not have been ancillary and subordinate, and per Florent B&B may have also been found to have also breached the second limb.  

By James Castle