Letting your flat through Airbnb is a potentially lucrative side hustle that’s very tempting for many property owners. However, if you are considering using your residential flat for holiday lets, there are several important factors to consider – especially for leaseholders.
To let your leasehold property through Airbnb, it’s crucial to check your lease agreement, mortgage terms, and insurance policy. Many insurers see short-term lets as high risk, rendering your policy invalid. In blocks of flats, this could impact the policy for the whole block.
So before you go ahead and start welcoming guests, read on for Glowsure’s essential guide. We’ll cover who you need to tell before subletting residential premises, what kind of specialist insurance you need to ensure you are protected and what might happen if you are found to be in breach of your policy.
For expert insurance advice you can trust, contact the experts at Glowsure today.
As a leaseholder, do I need to let anyone know if I am subletting my flat on Airbnb?
Before a leaseholder decides to list their property on Airbnb, they must inform:
- The freeholder/resident’s association/management company
- Their insurance provider and
- Their mortgage company
If they don’t, there can be serious consequences, which we’ll explore more in the following sections.
Check your leasehold property agreement
Leaseholders must check their agreement (the lease) carefully before subletting the property and get permission from the freeholder, managing agents, or resident’s association.
Most leases explicitly prohibit Airbnb lettings and any other type of holiday lets, with clauses along the lines of:
“…not to use the premises or permit them to be used for any illegal or immoral purpose or for any purpose whatsoever other than the occupier’s private residence.”
Some leases may state that a flat can only be used for residential purposes in a single-family occupation or prohibit short-term lets of less than six months.
If the leaseholder goes ahead anyway, it could lead to a breach notice demanding that Airbnb rentals cease. If the leaseholder doesn’t comply, they could be subject to legal action, potentially resulting in an injunction or even forfeiture of the lease. This means they could lose the right to live in the flat altogether. They couldn’t sell or transfer the leasehold interest, and essentially, their investment would be lost.
To avoid these potentially devastating consequences, review your lease carefully and seek the necessary permission beforehand. If you encounter resistance from the freeholder or other residents, you could suggest a trial period of, say, six months, after which it can be reviewed to give everyone a chance to voice concerns. It’s always best to be transparent to avoid legal issues and maintain good relationships.
Check your insurance policy
This is a biggie… Standard insurance policies for leasehold properties do not usually cover short-term holiday lets.
Insurers consider short-term rentals a higher risk than private residential property. In their eyes, homeowners are less likely to take risks than paying guests, and the potential lack of control over guests is more likely to lead to property damage and theft.
If a leaseholder doesn’t have the right cover, they leave themselves wide open to financial and legal risk. Even more crucially, it is likely to affect the cover of everyone else in a block of flats.
More on this to follow…
Check your mortgage terms
Informing your mortgage provider before listing your leasehold flat on Airbnb is important to avoid breaching your mortgage agreement. Like insurers, mortgage companies may restrict use to owner-occupation or long-term tenancies, and Airbnb rentals could be seen as a violation. Breaching the agreement could result in the lender demanding full repayment, increasing interest rates, or limiting future borrowing.
Do you need specialist insurance when letting out a flat on Airbnb?
If you’re thinking about letting your private flat out on Airbnb, you’ll probably need specialist insurance coverage. Regular home insurance often doesn’t cover the unique risks of short-term rentals.
Some insurers offer policies specifically designed for short-term rentals, like Airbnb. These policies cover things like property damage, public liability (in case a guest gets injured), theft, and loss of income should the property become uninhabitable.
What happens if you let your leasehold flat on Airbnb without the right insurance?
Letting your leasehold flat on Airbnb without the proper insurance can lead to serious consequences, and you leave yourself open to financial and legal risk. It’s crucial to understand how your current policy applies to short-term lets to avoid any nasty surprises.
Breach of policy
Listing your flat on Airbnb without informing your insurer could be considered a breach of policy. This means you might be violating the terms of your insurance contract, which can result in penalties or loss of coverage.
If you are not properly covered, it could affect your insurance premiums in the future, potentially leading to higher rates or difficulty obtaining coverage.
Even if your insurer allows short-term lets, be prepared for a potential increase in your insurance premiums. This is something to consider when calculating the profitability of letting your property on Airbnb.
Your policy could be voided
Failing to declare short-term rentals can void your insurance policy, meaning the insurance company will cancel the policy from the start as if it never existed. Not only does this mean they won’t pay any claim, but you will have to declare this on any future type of insurance, even your personal insurance.
Insurance claims could be rejected
Insurers can decline claims for things like damage and theft by guests if they discover undisclosed short-term lets. They could even deny claims for insured events that are caused by you personally.
Crucially, this might apply to all claims in a block of flats, not just those resulting from Airbnb guests, potentially affecting every flat in the building.
How does short-term letting affect block of flats insurance policies?
Short-term letting can shake things up when it comes to building insurance for blocks of flats. The building’s insurer needs to know about any short-term lets, and they could adjust the policy or premiums accordingly. Some insurers do allow for a small element of flexibility of ‘unknown short-term lettings’ within a block, but this isn’t guaranteed. Even if they do, it would only be for a small percentage, maybe 15%. In a block of 10 flats, this would only be 1.5 flats.
Shop around for a new insurance provider
Providing you have got prior written consent from the necessary parties, you can let your flat through Airbnb. If your current insurer does not cover short-term lets, it’s time to shop around for a new provider.
Some insurers will allow Airbnb properties and even offer specialist insurance products for holiday lets. While these policies are likely to have higher premiums, increased excesses, or specific conditions, they offer the property owner protection against the unique risks of holiday lets, like damage, theft, guest injuries, and potential loss of income, so they are well worth the extra cost.
Ensure your property is insured correctly with Glowsure
Ensuring your leasehold property is insured correctly is vital, especially if you are looking to use it for anything other than residential purposes. Team Glowsure has all the answers you need about insuring leasehold properties for Airbnb lets, so you can benefit from this lucrative revenue stream with confidence.
Contact us today to ask us about insurance for blocks of flats, and how to find the right cover for your Airbnb properties.
