The emergence of short-term rental accommodation

Until recently believed to be more of a niche market, short-term rental accommodation is emerging as a convenient and flexible alternative to traditional lets. Available for a period ranging from one week to six months, short-let properties are considered to be a hybrid of a hotel and conventional rental. They are generally available fully furnished and equipped, ready to move into, and offered with all utility bills included. Positioned as a home away from home, although considerably more affordable than a hotel, guests can expect to pay up to double the price of a regular long-term let.

The reasons why a growing number of visitors to London choose short-let accommodation above hotels are varied; holidaymakers seeking an authentic experience of living in London as a local, averse to the idea of being cooped up in a characterless hotel room; corporate professionals in London for a short-term project or those on temporary employment contracts; prospective buyers
trying out the experience of renting in a new area prior to purchase or those refurbishing their existing property; families of overseas students enrolled at London’s universities. They can choose from a fully-equipped studio in Canary Wharf at £90 +VAT per night or enjoy Georgian grandeur in the heart of fashionable Mayfair at a more princely sum of £495 + VAT per night.

In London, and indeed in major cities across the globe, the concept of a ‘sharing economy’ has been shaped by websites that allow just about anybody to let their homes with the click of a button. The peak summer months in London draw tourists from all over the world and homeowners looking for quick income are taking advantage of this by choosing to let their otherwise vacant homes while on holiday abroad; some even using the tidy income to pay for their own holiday! The prospect is alluring; there is no capital investment and notwithstanding the fact that you will have a total stranger inhabiting your home, it presents itself as an attractive option but it can be incredibly risky and your property could get damaged with no redress.

Another factor driving short lets is how cost-conscious organisations are. Many companies are adopting a more flexible business model that requires short-term relocation of their talent base across the globe to fulfil ad-hoc project requirements, particularly in the case of tech companies or talent exchange programmes, and are choosing the serviced apartments to reduce reliance on overpriced hotels. The film-making and medical tourism industries have also fuelled the rise of short lets.

For landlords, the prospect of a short let is a double-edged sword: potentially higher rental income counterbalanced by higher void periods. Some are reluctant to commit to a longer traditional rental period, while some may see that often-vacant pied-à-terre as a profitable short-term rental option. From a landlord’s perspective and for those curious about this lucrative yet challenging market, it becomes imperative that they engage the services of a professional lettings agency with an understanding of the sector, as opposed to listing the property themselves on various portals and incurring the substantial risks which we will highlight.

Ensuring high quality short-let guests is a big challenge. Be aware of unruly guests who can potentially turn your house into a disaster zone resulting in complaints from neighbours. There is a disturbing trend of short- let properties particularly in prime central London being occupied by unruly guests provoking desperate complaints of anti-social behaviour from miserable neighbours. They can hardly be blamed for being uncomfortable at the prospect of having a complete stranger as their next door neighbour for a short period. The councils of Westminster and Kensington are said to be investigating several thousand complaints against unwanted visitors.

It is essential that landlords adhere to local authority guidelines on short letting; there are strict regulations on rental periods below a certain duration. For instance, a rental period of less than three months is considered illegal in Westminster and is a grey area for several London councils. Many councils now require a licence to be in place so you should check before considering renting out your property as your letting agent is not responsible for ensuring this.

Quite extraordinarily, it has recently emerged that renting a mortgaged home on a website such as Airbnb could put your mortgage at risk, or even worse, could result in repossession of the home in breach of the mortgage terms and conditions. The Council of Mortgage Lenders (CML) has urged Airbnb users to seek prior consent of their mortgage lenders as it is very likely that the fine-print of their mortgage agreement will prohibit owner-occupiers from subletting their property. Invalidating the terms of the mortgage agreement can run the risk of the lender demanding a full repayment, albeit as the most extreme outcome. It is more likely that lenders will charge a fixed fee in lieu of consent for subletting; some lenders will seek to increase the mortgage rate.

ARLA, the Association of Residential Letting Agents, has also issued advice to landlords evaluating the risks of a short-term let, advising them to check with their mortgage provider and
recommending they use an ARLA-member agent to ensure they are complying with the law.

Our short lets department exists mainly to look after our corporate clients who prefer to book a serviced apartment on a short-term basis, rather than stay in an equivalent London hotel. Our short lets department does not only vet the guests we bring in, but takes care of end-to-end rental management. Such is the popularity with business travellers; we have witnessed a 10.7% increase in demand year-on-year. The majority of our short lets are for one to two weeks and these are generally for properties located in Zone 1, central London.

The short lets business experiences seasonal variations; the peak summer months from May to September are our busiest months, with rentals achieving almost double that of a long-let (one year or more). At other times, you can expect an occupancy rate of 85-90 per cent but this very much depends on the location and standard of the property being offered.

As founding members of ARLA since 1981 and with extensive experience of the London lettings sector for nearly 60 years, we are well placed to help if you are thinking about renting out your London property on a short-let basis. Contact our Short Lets team for further details on 020 7433 6677.