Deregulation Act relaxes restrictions on short-term lets in London

4 June 2015

Since coming into force on 26 March, the Deregulation Act (the “Act”) has introduced several changes designed to free businesses from the burdens caused by regulations and existing laws.

Last week, on 26 May, further provisions of the Act came into force, including sections 44 and 45 which relax planning permission in London on short-term lets.

Home-owners in London can now rent out their properties for up to 90 days a calendar year without the need to apply for planning permission.

This is likely to be welcomed by those London home-owners who wish to make extra cash by renting out their homes while they are out of town for the weekend, or longer, such as over the summer holidays.

Previous Rules 1973 – 2015

Under the previous rules, renting out your London home would have constituted a “change of use” of the land, and therefore potentially affected local amenities and overcrowding.

London home-owners were accordingly required to apply to the Local Planning Authority (the “LPA”) for planning permission before letting out their homes.

A breach of planning permission (i.e. a failure to apply) could lead to a court order requiring the discontinuing of the letting of the property.

Property owners could also have faced a criminal conviction and a penalty fine determinable by the magistrates’ court who would have taken into account any financial benefit accruing from the breach (i.e. income from rent). 

Growing trends

The Act has already received real estate news coverage in April and May for simplifying the Tenancy Deposit Scheme for landlords.

This seems to follow a trend of legislation introduced by the previous Coalition government, and likely to be continued under the new Conservative government, of relaxing planning laws in an effort to stimulate the economy.

One sector of the economy we see unlikely to benefit from these changes is the hospitality sector, as traditional hotel chains increasingly lose market share to online marketplaces offering short-term lets in private homes. 

This appears to reflect the growing trend of holiday-makers who are increasingly seeking cheaper alternatives (i.e. privately rented accommodation) to traditional holiday accommodation, such as hotels.

AirBnb is one of the pioneering names in the online short-term letting marketplace, and boasts private listings in 33,000 cities in 192 countries. This is a website which was started by roommates in 2007, and this year was valued with a market capitalization of USD20 billion, putting it roughly equal to Marriott Hotels.

Of course, the opportunities offered by the short-term lettings market may not be welcomed by everyone. Home-owners or tenants who live in a block of flats may not wish to see short-term lettings bringing in new people potentially every week.

Please note: If you are a lease-holder, you will need to check the terms of your lease to confirm what consents you require (i.e. the landlord’s consent) before letting out your home.

Further information

Should you have any questions about the issues raised in this blog, please contact Mark Fallmann or a member of the real estate team.

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