Airbnb & social tenancies

Introduction

Short term “holiday lets” through companies such as Airbnb, Booking.com and HomeAway are increasingly common, and their use (and overuse) has attracted the attention of legislation and legislators, particularly in London.

On the social housing front, there has been much comment of late concerning a county court case in which the City of Westminster obtained a possession order against one of its (former) tenants because of his use of his local authority property (he had been reportedly advertising the local authority property on the Airbnb website since 2013, and indeed had received more than 300 reviews). Permission to appeal that decision was refused.

The two issues which attracted most publicity were:

(a) The size of the unlawful profit order (UPO) subsequently made, frequently misreported as a ‘fine’.

(b) The fact that the sub-letting alleged and proved was by way of the Airbnb bookings, rather than the more “usual” and “traditional” longer-term tenancy arrangement.

Unlawful Profit Orders

To enable a UPO to be made in a secure tenancy case, section 5(3) of the Prevention of Social Housing Fraud Act 2013 (“the 2013 Act”) provides the requirement that the tenant:

“(a) in breach of an express or implied term of the tenancy, has sub-let or parted with possession of—

(i) the whole of the dwelling-house, or

(ii) part of the dwelling-house without the landlord’s written consent,

(b) has ceased to occupy the dwelling-house as the tenant’s only or principal home, and

(c) has received money as a result of the conduct described in paragraph (a).”

In other words, in the Westminster case it must have been sufficiently demonstrated (as well as the obvious receipt of money from the Airbnb activity) that:

  1. The tenant was no longer living at the demised premises as their only or principal home.
  2. His use of Airbnb represented either a sub-letting (which the reports of the case suggest) or a parting with possession.
The issue

It is the second of those issues that has for some time led to questions as to whether such activity as allowing Airbnb-style activity is sufficient to constitute sub-letting or parting with possession. Or indeed whether the occupants are rather lodgers of sort or licensees. The reason for such questions often surrounds the short-term nature of the individual booking, and whether that impacted upon the nature of the occupation (see Koumetto below, and paragraph 57 of the court judgment).

It should be remembered at this point that in a different factual scenario, such as where a tenant allows an Airbnb-style “guest” to stay in the premises at the same time as them, or even where they move out for the period of one or more bookings without having any other “principal home”:

(a) There may still be a breach of tenancy condition (or even perhaps a sub-letting, if only of part, though see the “lodgers” section below), allowing for a possession and/or injunction claim – social landlords may well wish to bring their tenancy agreements ‘up to date’ to expressly address this form of property use, if they haven’t already done so, where existing terms are insufficiently clear. To illustrate the benefits, in Koumetto (see below) the Australian case of Swan v Uecker [2016] VSC 313 was cited, and Croft J there ended a judgment with these concluding remarks at [80] (emphasis added): 

“…the context provided by the terms of the particular apartment lease are important. Although this apartment lease is a residential lease, many commercial leases restrict the tenant from sub-leasing, assigning the lease, granting any licence to occupy all or part of the leased premises or otherwise parting with possession without the landlord’s prior consent. Broad terms such as this would prevent, for example, sub-letting or licensing without the landlord’s consent and would avoid the need—as in the present case—to characterise the nature of the same arrangement like the AirBnB arrangement for occupation of the whole of the leased premises as a sub-lease or a licence 

(b) No criminal offence is committed under the 2013 Act – section 1 (secure tenancies) or section 2 (assured tenancies) – unless the tenant no longer lives at the demised premises as their only or principal home.

(c) Similarly, no (section 5) civil UPO is available if the tenant still lives there as their only or principal home (see above for the secure tenancy UPO conditions).

(d) Where there is sufficient evidence to show that the tenant has in fact moved out, and no longer lives at the subject premises as their only or principal home, then the only benefits in seeking evidence of parting with possession/sub-letting as well are:

  • It could help in demonstrating a criminal offence had been committed.
  • It would allow a UPO to be sought.
  • It avoids the possibility of the tenant preventing the termination of their tenancy following the service of a notice to quit by returning to live at the premises prior to its expiry: Hussey v Camden LBC (1995) 27 H.L.R. 5 at 7, and sections 93(2) and 15A of the Housing Acts 1985 and 1988.
Lodgers

If a tenant has a lodger, this will not be treated as a sub-letting, and by definition the tenant remains at the property and cannot therefore ordinarily be said to have parted with possession (though see the reference to the case of Stening below).

Woodfall, Landlord and Tenant says at 1.028:

“The occupier of apartments is not a tenant unless the premises are exclusively let to him, which distinguishes such a person from a lodger…The use of the expression “lodger” connotes that the lodger must lodge in the house of another person and lodge with him; if a householder retains to himself the general control of a house, with the right of interference, a person who occupies a part of that house would seem to be a lodger. The word interference simply means that the householder must retain sufficient control of the accommodation as to prevent the lodger from having exclusive possession.”

By way of example, in Monmouth BC v Marlog (1994) 27 H.L.R. 30, where a person shared a council house with the tenant, each having their own bedroom, under an informal rent sharing arrangement, the Court of Appeal held that the natural inference to be drawn from this was of a licence rather than sub-tenancy.

In Aslan v Murphy [1990] 1 W.L.R. 766 Lord Donaldson said at 770F-G:

“The occupier has in the end to be a tenant or a lodger. He cannot be both. But there is a spectrum of exclusivity ranging from the occupier of a detached property under a full repairing lease, who is without doubt a tenant, to the overnight occupier of a hotel bedroom who, however up-market the hotel, is without doubt a lodger. The dividing line — the sorting of the forks from the spades — will not necessarily or even usually depend upon a single factor, but upon a combination of factors.”

(Secure tenants have an unconditional (statutory) right to take in lodgers, and can also sub-let part with consent: see section 93(1), Housing Act 1985.)

However, when moving away from the traditional concept of lodgers and considering use of the premises for one or more licensees whilst the tenant lives elsewhere, in Stening v Abrahams [1931] 1 Ch. 470 Farwell J cautioned against a simplistic take that a licence cannot be a parting with possession at 473:

A lessee cannot be said to part with the possession of any part of the premises unless his agreement with his licensee wholly ousts him from the legal possession of that part. If there is anything in the nature of a right to concurrent user there is no parting with possession. Retention of a key may be a negative indicium, and the authorities on the whole show that nothing short of a complete exclusion of the grantor or licensor from the legal possession for all purposes amounts to a parting with possession. The fact that the agreement is in form a licence is immaterial, as the licence may give the licensee so exclusive a right to the legal possession as to amount to a parting with possession.

The conclusion I would draw from the above is that, subject to the precise terms of the Airbnb or similar arrangement, it cannot readily be concluded that the “guest” is occupying by way of being a lodger even where the tenant remains in occupation. That view is compounded by my conclusion on the issue of sub-letting or parting with possession.

Sub-letting or Parting with Possession?

As therefore for whether an Airbnb-style arrangement can be seen as a parting with possession or subletting, and acknowledging the case-law ‘background’ of Stening outlined above, at paragraph 32(5) of the judgment of Ward LJ in Clarence House Ltd v National Westminster Bank plc [2010] 1 W.L.R. 1216, referring to a series of judgments, including Stening and Lam (see below), the basic principle was set out as follows:

“This stream of cases is consistent with the notion that a leasehold covenant against parting with or sharing possession is concerned with the question of whether the tenant has allowed another into physical occupation with the intention of relinquishing his own exclusive possession of the premises to that other.”

Sir Harry Gibbs had said as to such general principles behind parting with possession, in Lam Kee Ying v Lam Shes Tong [1975] A.C. 247 at 256C:

“A covenant which forbids a parting with possession is not broken by a lessee who in law retains the possession even though he allows another to use and occupy the premises. It may be that the covenant, on this construction, will be of little value to a lessor in many cases and will admit of easy evasion by a lessee who is competently advised, but the words of the covenant must be strictly construed, since if the covenant is broken a forfeiture may result”.

Demonstrating the potential difficulties in demonstrating either sub-letting or parting with possession, Stening and Lam were again (as with Clarence House) both cited in the Court of Appeal authority of Hussey already referred to above, a case where the local authority sought possession on sub-letting grounds – the tenant living away from his flat at times, whilst third parties were conversely in occupation of the flat on occasions too. Leggatt L.J. said in delivering the main judgment of the Court in allowing the tenant’s appeal, at p. 11:

Airbnb use was expressly considered in Bermondsey Exchange Freeholders Ltd v Ninos Koumetto (as Trustee in Bankruptcy of Kevin Geoghehan Conway) [2018] 4 WLUK 619, an appeal against an injunction granted to prevent the use of a leasehold flat for short-term rental or commercial hire. HHJ Luba QC, who I understand heard the permission to appeal application in the Westminster case, said in obiter remarks (given that the relevant lease clause below prevented allowing others into possession, as well as the more formal sub-letting, etc):

“56. Despite Mr Hanham’s attractive submissions that a decision that there had been an ‘underletting’ was not open to her, I am not satisfied that there were the necessary features here to displace the presumption from Street v Mountford that the provision of exclusive possession of premises to another for a period and for payment for that period constitutes a letting.”

The Judge was, at that part of his judgment dismissing the appeal, dealing with the clause of the subject lease which provided that the tenant covenanted:

“Not to part with or share possession of the whole of the Demised Premises or permit any company or person to occupy the same save by way of an assignment or underlease of the whole of the Demised Premises”

Crucially and typically HHJ Luba QC addressed the particular nature of Airbnb head-on, as he followed on from paragraph 56 of his judgment cited above:

57. Neither the short duration of the arrangement, nor any notional provision for ‘services’ (such as leaving the flat stocked with material from which to assemble a breakfast or other meal), nor reservation of a right of entry, nor any combination of those features, displace that presumption from applying to an Airbnb-style arrangment.”

The district judge at first instance had found that the arrangement represented a parting with possession and HHJ Luba QC therefore rejected the appellant’s argument, as set out at paragraph 48 of the judgment:

“As to the first limb of the sub-clause, he contended that the Judge had been wrong to find that the nature of the arrangements made with occupiers had been lettings akin to holiday lets. He submitted that the arrangements that had been in evidence were those entered into with Airbnb and they did not amount to tenancies but only licences. There had thus been neither parting with ‘possession’ nor sharing of ‘possession’. The Judge had been wrong in law to hold that the arrangements amounted to lettings or any parting with or sharing of ‘possession’.”

Subject to the precise terms of arrangement it seems to me that there is a strong argument against characterising the occupation of any such ‘guest’ as a mere licensee such that there could be said to be no sub-letting or parting with possession.

Conclusion

Congratulations are rightly due to the City of Westminster and their legal team in obtaining possession in the case which opens this blog. What the above shows however is that the housing/legal status of an Airbnb or similar booking is not without some uncertainty and argument.

Whilst there may ultimately be a case on this issue in the higher courts, the reality for a local authority or private registered provider of social housing (or registered social landlord) is that their concerns will focus on those tenants moving away from their properties with a view to raising money by such arrangements as took place in the Westminster case (though that is not to say that “tenant-remaining arrangements” should not and do not justify vigorous investigation, and raise related issues such as benefit fraud, property condition and anti-social behaviour).

They may secure possession of the relevant property, as already explained, without needing to show a sub-letting or any parting with possession. But should they choose or need to adopt the Westminster route then with the usual caveats there are positive indications that such action could be taken, and taken successfully.

Public policy and the false statement possession ground

Introduction

I have just concluded the second of 2 trials where my client, a London housing association, was seeking possession of properties “let” to individuals who colluded with a former housing officer in 2004 to provide for (assured) tenancies to which they were not entitled:

Though fraudulent misrepresentation was pleaded as the first of 2 alternative bases of claim, it was the second one (ground 17 of Schedule 2 to the Housing Act 1988) which was ultimately relied upon (see Islington LBC v Uckac [2006] 1 WLR 1303 at para. 29):

The tenant is the person, or one of the persons, to whom the tenancy was granted and the landlord was induced to grant the tenancy by a false statement made knowingly or recklessly by—
(a) the tenant, or
(b) a person acting at the tenant’s instigation.

In both claims the Judge found that ground 17 was satisfied. The ‘modus operandi’ was the housing file showing that the defendant was in occupation of the subject premises by purported reason of a mutual exchange even though no such arrangement in fact occurred (though the defendants signed the sham deeds of assignment).

This article focuses not on the constituent elements of ground 17, and there is a mirror provision for secure tenancies to be found at ground 5 of Schedule 2 to the Housing Act 1985, but the particular approach to ‘reasonableness’ and whether any possession order made should be outright or suspended on terms.

Discretionary ground

Ground 17, as with ground 5 for secure tenancies, is a discretionary ground in Part II of Schedule 2 and so the landlord must show that it is reasonable to make a possession order. As section 7 of Housing Act 1988 provides:

(4) If the court is satisfied that any of the grounds in Part II of Schedule 2 to this Act is established, then, subject to subsections (5A) and (6) below, the court may make an order for possession if it considers it reasonable to do so.

As for the nature of any such order made, section 9 goes on to explain:

(2) On the making of an order for possession of a dwelling-house let on an assured tenancy or at any time before the execution of such an order, the court, subject to subsection (6) below, may—
(a) stay or suspend execution of the order, or
(b) postpone the date of possession,
for such period or periods as the court thinks just.

The proper approach in false statement cases to the court’s exercise of discretion is described below but it is worth recording at this point Sedley LJ’s dicta in Lewisham LBC v Akinsola (2000) 32 HLR 414 at 417:

“Mr Riza rightly points out that whatever else may be in doubt, there is no doubt, under the Housing Act 1985, that even in cases of fraud, eviction is not the inexorable consequence. Section 84 quite plainly shows that there may be cases of fraudulently obtained tenancies which nevertheless it is not reasonable in the County Court’s view to determine by the making of a possession order. One can readily see that into the consideration of such a question may enter connivance, or laxity of procedure, or delay on the part of the local authority which now seeks to rely on the fraud, as well as, of course, the gravity of hardship on the tenant. All these things will be for the County Court to decide from case to case.”

Public policy approach

In possession proceedings for, say, anti-social conduct (grounds 12, 14) the approach to the court’s discretion is well-worn and established. For example, once the court has determined that it is reasonable to make a possession order the burden of producing cogent evidence to show that the matters complained of will not recur (or is unlikely to do so), such as to “allow” a suspension of any order in terms, shifts to the defendant: Birmingham CC v Ashton [2013] HLR 8, para. 42.

Unless there are other complaints against the tenant in a ground 17 case a suspended order is of little value – in most instances it is therefore an all or nothing claim, outright possession order or none at all.

In Rushcliffe BC v Watson (1992) 24 HLR 124 the tenant appealed against the making of a (ground 5) possession order. She complained that the judge failed to take account or give sufficient weight to the problems she would face in obtaining alternative housing for herself and her children.

At pages 130-131 of the main judgment, which dismissed the appeal, Nourse LJ said this about public policy considerations:

“Mr. Westgate accepts that, in doing that, the judge was entitled, and indeed bound, to take account of the public interest. But he says that he took too narrow a view of it, in particular by not recognising the public interest in keeping a family together as a unit. The judge’s view of the public interest was wrongly confined to a policy of discouraging deceitful applications which result in the unjust relegation on the housing list of applicants who are honest.

Again I cannot accept this submission. I am quite certain that the judge recognised the public interest in keeping a family together as a unit. But since he thought that there was no real likelihood that this family would be split up, that was not something which affected his consideration of the public interest in this case. On the broader aspect of the public interest the judge was fully entitled to attach the importance which he evidently did to the policy to which I have referred. The statistics which he recounted demonstrate the acute shortages in the plaintiff’s housing stock.”

Over 5 years later, the Court of Appeal was called upon to consider this issue again, in Shrewsbury & Atcham BC v Evans (1998) 30 HLR 123. Beldam LJ held at page 132, in dismissing the tenant’s appeal:

“The effect of the decisions, in my view, is that in a case such as this, where there has been a deliberate lying to obtain public housing that only in exceptional cases would the court consider the effect of the homelessness legislation. It is not the function of the court to decide whether or not a person is intentionally homeless. That is the function of the local authority and has been entrusted to the local authority by Parliament.

Those who are on the housing list who have an equal or even greater claim to public housing would, in my view, justly be indignant to find that the court did not think it reasonable in circumstances where someone has obtained accommodation by a deliberate and flagrant lie, to make an order for possession merely because the effect of the order would result in the occupant having to be considered by the local authority as homeless or intentionally homeless.

It seems to me, that in deciding questions of reasonableness in a case such as this, a court can, in exceptional cases take into account the nature and the degree of the untrue statements which have been made and the circumstances in which they are made and whether, for example, they are deliberate or reckless. If the court had considered the matters in detail in this case it would have concluded, as the evidence showed, that this appellant had flagrantly and deliberately lied about her circumstances and had done so with the express purpose of providing herself with a higher score under to the local authority’s qualifications for public housing, than she would otherwise have had; not merely a point or two more, but, according to the evidence, very substantially more.

Next, the court could reasonably, it seems to me, take into consideration the attitude of the appellant when the deception was discovered. Her attitude was to lie and lie again to deny completely that she had made the application to the District Council, suggest that this had been made by someone using her name, and when this was not wholly accepted by the officers of the respondents, to complain about the conduct of the housing officer quite unjustifiably. In my view, the court could take into account, as was said, the current position in which the appellant found herself, but at the same time it would have to have in mind, as I have previously indicated, the great importance to be attached to honesty in making application for public housing accommodation.”

And so in both the trials referred to in the Introduction, the Judges were influenced in the making of an outright possession order by:

  1. The evidence of the shortage of social housing at the time of the deception and now.
  2. The continued lies perpetrated by the defendants, in one case including at a caution interview, up to and including trial.
  3. The availability of alternative accommodation in the first case (she had exercised the right to buy the year before her tenancy).
  4. The finding that the defendants were fully complicit in the fraud.
  5. The fundamental and serious nature of the fraud.
  6. The total lack of remorse.

The Court decides

Ultimately of course it is a question for the court and, regardless of public policy considerations, an order may be refused. After all, the judge will always have in mind Lord Green’s dicta in Cumming v Danson [1942] 2 All ER 653 at 655:

“…the duty of the judge is to take into account all relevant circumstances as they exist at the date of the hearing. That he must do in what I venture to call a broad, common-sense way as a man of the world, and come to his conclusion giving such weight as he thinks right to the various factors in the situation.”

In Southwark LBC v Erekin [2003] EWHC 1765 (Ch), for example, the defendant obtained housing from the council on the basis of a fraudulent application form, and was sentenced for that and other frauds to 18 months imprisonment. Laddie J dismissed the local authority’s appeal against the trial judge’s dismissal of the ground 5 possession claim.

He referred to HHJ Cotran’s reasoning in this way:

“11 The learned judge, having heard submissions from counsel, having read the evidence and having heard the cross-examination, came to the conclusion that the council had not discharged the onus upon it to show that a possession order in the particular circumstances of this case was justified. It is clear from the terms of his judgment, an agreed note of which has been provided to me today, that he considered this to be a very borderline matter. He refers to the authorities I have mentioned. He refers to the extensive fraud committed by the first respondent. He refers to the situation of the children, and the fact that they have been enjoying a stable home life in the property for the last five years. His judgment ends as follows:

“Having anxiously considered all the factors, I come to the conclusion that it would be unreasonable to make an order. The claimant’s claim is dismissed.””

Conclusion

The obtaining of a tenancy by means of a false statement is a criminal offence:

In a case concerning partial sub-letting and criminal activity, Poplar HARCA v Begum [2017] HLR 42 at para. 40, Turner J helpfully articulated the court’s approach to housing fraud:

“I would stress that it is not compassionate to allow profiteering fraudsters indefinitely to continue to occupy premises and thereby exclude from such accommodation more needy and deserving families.”

and whilst a sub-letting case such as Begum has a more obvious and calculable profiteering element than a ground 5/17 case, and is perhaps more likely to involve the defendant having alternative accommodation, these words are a cautionary warning to all those committing housing fraud.

Finally, in a results-driven world the trial last week represented the final case in the former officer “fall out”, with 3 tenants surrendering their tenancy in addition to the 2 possession orders referred to above. For 5 households the results of the fraud investigation will mean affordable, good quality homes.