Why renting on Airbnb could be a risky business

Renting out a room or your whole home through Airbnb may seem like a neat way of making some cash, but there are several potential pitfalls. We run through some of the contracts that you could be contravening.

Airbnb rental and your mortgage

If you’re renting out your home via Airbnb you’re quite likely to be breaching the terms of your mortgage.

A Guardian Money investigation earlier this year scanned the small print of mortgage contracts from the major lenders and found clauses preventing the letting of the property without prior consent. Even if you do seek permission from your mortgage provider, they are likely to turn you down, or impose a fee or an increased rate. Renting out a room rather than a whole property is likely to be less problematic, although lenders still expect permission to be sought, and some may still impose a fee.

Is your mortgage lender likely to find out if you’re Airbnb-ing your property on the sly? It’s possibly quite unlikely, although if it does come to their attention then the repercussions could be really serious: anything from a rate increase or fee, all the way through to recalling the mortgage and demanding immediate repayment.

Airbnb rental and your home insurance

You could be in a sticky situation in terms of your home insurance, too. Most home insurance policies state that only the policyholder and their immediate family should be living in the property, so if you rent out a room to strangers you’re generally falling foul of this term.

If you rent out your whole property via Airbnb then you may think that landlord insurance is more appropriate, but there’s a problem here too: landlord insurance is designed for long-term lets, so insurers will usually require a tenancy agreement to be in place.

This means that the best approach is probably to speak to your home insurance provider to see if they will amend your policy to take your Airbnb guests into account, although bear in mind that this may mean an increase in premium. Alternatively, some insurers are offering policies that cater specifically to Airbnb hosts, so it may be worth looking into getting one of these.

Airbnb rental and your lease

If you own a leasehold property, which is a common ownership structure for flats, then you should check the terms of your lease agreement carefully.

The Upper Tribunal (Lands Chamber) has recently ruled that homeowners whose leases state their properties can be used as a ‘private residence only’ cannot rent out their homes short-term.

The ruling was made after a woman renting her north London flat via sites including Airbnb was taken to court by her freeholder. The court found against the host, saying that granting very short-term lettings breached the clause that owners shouldn’t use their property as anything but a private residence.

This ruling is likely to affect those who rent out their whole property rather than hosts who rent out rooms while they’re also living there.

Again, the consequences for being caught out could be serious: you could face costly legal proceedings and even be forced to forfeit your lease.

Do you think these are serious concerns for Airbnb renters or not worth worrying about? Tell us in the comments.

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