Navigating Legal Issues for Short-Term Rentals

The popularity of short-term lets in England and Wales has soared, providing travellers with convenient lodging and property owners with an opportunity to generate income. However, entering this market requires understanding the legal landscape to avoid potential pitfalls. Here’s a closer look at some key legal issues that hosts in England and Wales might encounter.

1. Planning Permission

One of the primary legal considerations for short-term lets in England and Wales is planning permission. In some cases, especially if a property is being rented out frequently, local authorities may classify it as a change of use from a residential property to commercial use. In London, for instance, properties cannot be rented out for more than 90 nights a year without planning permission. Hosts should check with their local authority to understand specific requirements.

2. Lease and Freeholder Restrictions

Property owners must review their lease agreements if they own leasehold property, as many leases contain clauses restricting subletting. Additionally, freeholders may have specific rules about letting properties on a short-term basis. Violating these terms could lead to legal disputes or even potentially forfeiture of the lease, making it crucial to obtain consent when necessary.

3. Health and Safety Standards

Safety regulations are another important legal consideration. Hosts must ensure their properties comply with health and safety standards, including fire safety regulations. This may include installing smoke alarms, fire extinguishers and ensuring gas and electrical equipment are safe and certified. Non-compliance can not only endanger guests but also result in severe penalties for hosts.

4. Tax Implications

While the additional income from short-term lets can be appealing, it also carries tax implications. Hosts must declare rental income to HMRC and may be liable for income tax depending on their circumstances. Some hosts might qualify for the Rent-a-Room Scheme, offering a tax-free allowance, but it’s vital to understand these specifics or consult a tax professional if you don’t.

5. Insurance Considerations

Standard homeowner’s insurance policies often do not cover short-term rentals, posing a potential risk for property owners. Hosts should explore specialist insurance policies that protect against guest-related damages, liability issues and loss of income due to cancellations. This ensures comprehensive coverage and peace of mind.

6. Local Authority Restrictions

Local authorities in some areas have enacted laws specifically targeting short-term lets, often to address housing shortages or community concerns. These can include limits on how often properties can be rented out or additional registration requirements. Staying informed about local regulations will help avoid unexpected legal challenges

7. Lender’s requirements

If you have a mortgage, bear in mind that the lender’s consent is likely to be required to let your property on a short term basis and many lenders will require that the property needs to be let on an assured shorthold tenancy (AST)

8. AST distinction

If the letting term of the property is less than six months it cannot be an AST under the terms of the Housing Act. This means that the protections in terms of eviction are substantially weakened which could lead to extensive (and expensive) litigation to recover your property if the tenant refuses to leave.

In conclusion, while short-term lets in England and Wales can offer lucrative opportunities, they come with a web of legal responsibilities. Being proactive in understanding and complying with local laws, obtaining necessary consents (if required) and ensuring all safety and insurance measures are in place can help hosts manage their properties successfully and legally. Always consider seeking legal advice to navigate these complexities effectively especially in view of the fact that we understand that the government is about to introduce a raft of changes and so anyone considering this field should seek up-to-date advice and information from this firm.

This blog was prepared by Alexander JLO’s senior partner Peter Johnson on the 17th February 2025 and is correct at the time of going to press. Peter Johnson is the Senior Partner of Alexander JLO. He has over 40 years’ experience in the areas of Family Law, Company & Commercial, IT & Intellectual Property, Landlord and Tenant Law,  Employment Law and Litigation working as a Senior Solicitor.

Peter’s profile on the independent Review Solicitor website can be viewed here.