Festival Letting is Leading Landlords to Pricey Problems
Tuesday, July 18th, 2017
on behalf of Warners Solicitors and Estate Agents
EDINBURGH homeowners and landlords looking to turn a quick profit through short term letting during the Festival are unknowingly putting themselves at risk of costly pitfalls, according to two leading property experts.
The proliferation of sub-letting, made easier than ever by the use of websites such as Airbnb, is a potentially lucrative option for property owners – average Airbnb rentals in Edinburgh during last year’s Festival reached £2,187/month compared to £986 for long term rent.
However, property owners are being warned short-term letting is a potential breach in a mortgage agreement, leaving them open to legal issues and risks.
Neil McInnes, Director with Edinburgh-based Umega Lettings, said: “Buy-to-let mortgages do not allow holiday letting as they require a Short Assured Tenancy, which is a minimum six months, to be in place.
“A special holiday-let mortgage is required and these are not offered by high-street lenders due to the increased risk and uncertainty of holiday lets. Holiday-let mortgages require larger deposits and will likely charge higher interest rates and fees to manage the increased risk.”
“A valuation letter from an ARLA accredited agent is also required, in order to grant the mortgage in the first place and breaching a contract by allowing short term letting will result in the mortgage lender forcing the owner to sell or ultimately repossessing the property.”
While the headline figures can look attractive, Umega Letting does not believe that holiday letting stacks up financially.
Neil added: “At first glance, income figures that show the average advertised Airbnb rental figure certainly look appealing to a landlord.
“However once you factor in the costs associated of holiday letting, such as booking fees, cleaning, council tax, gas, electricity, TV licensing and Wifi, and not forgetting the inconvenience of being on hand 24/7, owners would need to achieve 75 per cent occupancy compared to long-term letting.”
Another costly problem is possible damage to your property, or guests refusing to leave the property altogether.
Neil added: “With long-term letting, the legal obligations on the landlord are clearly laid out and the tenant is responsible as the resident of the property. However, the flip with visitors or guests in holiday accommodation is that they expect a higher level of service from their host and take less responsibility for the property as a result.
“In other words, you have people taking less care of the property as they are only in it for a limited time, compared to long-term tenants who want to enjoy comfortable surroundings and décor.
“Legislative changes coming into place in December this year will also have an affect on the way a landlord can end a tenancy. The “no-fault” ground for ending a tenancy will be removed so landlords can no longer end the tenancy after the initial term for no reason and ending a long-term tenancy to do a short-term holiday or festival let is not grounds for repossession of a property.”
David Marshall, Operations Director at Warners Solicitors & Estate Agents, said: “Sites like Airbnb have made the option of renting a property out as a Festival let more enticing to many homeowners, but it is certainly not something that people should enter into lightly.
“As the figures show, when you factor in some of the additional costs and the likely occupancy rates you will achieve, many landlords would be better off letting their property out through traditional methods.
“For regular homeowners who are thinking of moving out of their property for a short period to make it available for festival let, it’s vital that they check the terms of their mortgage to ensure that this is permitted.
“They would also have to consider the risks of renting their property out for a short period of time, and how easily they would be able to recover costs of any damage caused by tenants.”
Warners operates three property centres in Edinburgh and is one of the capital’s leading estate agents for property transactions.
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