What is the 90-day rule in property?
If you’re thinking of renting out a property in London as a short term let, or already do so, you’ll need to know all about the 90-day rule.
Here, we explain the 90-day rule, why it was introduced, how it affects property owners, and what you need to be aware of in relation to planning, mortgages, and insurance.
- What is the 90-day rule?
- Why was the 90-day rule introduced?
- Does the 90-day rule only apply in London?
- What type of rentals does the 90-day rule apply to?
- Consequences of the 90-day rule
- How can landlords work around the 90-day rule?
- Arguments for the 90-day rule
- Arguments against the 90-day rule
- What type of mortgage do I need for a short-term let?
- Insurance and the 90-day rule
What is the 90-day rule?
The 90-day rule means that properties in Greater London can only be let out on a short-term basis for a maximum of 90 days per calendar year. This removes the risk of the property being used for short-term lettings on a permanent basis throughout the year, which law makers feel would have a negative impact on local communities.
The limit applies to 90 consecutive days or 90 days spread throughout the year.
It’s sometimes called the Airbnb 90-day rule because, in 2017, the company decided to automatically close bookings for any London property that had been rented out via its platform for the 90 days, unless the owner could prove they had the required planning permission.
But the law predates Airbnb’s restriction, which was a response to the Deregulation Act 2015, which brought in changes in 2015 to the Greater London Council (General Powers) Act 1973.
Why was the 90-day rule introduced?
The 90-day rule was introduced to legalise short-term letting in London and led to many homeowners using websites like Airbnb to rent out their home for short periods. Prior to 2015, property owners in London wishing to rent out their ‘whole home’ on a short-term basis needed to apply for planning permission for change of use. Failure to do so could have led to fines of up to £20,000.
This led to many homeowners using websites like Airbnb to rent out their home for short periods. Doing so was a breach of the law and subject to fines of £20,000.
In the words of the then Housing and Planning Minister Brandon Lewis, the change in the law was to allow Londoners “the same freedom and flexibility as the rest of the country to temporarily let their homes, without the disproportionate burden of requiring planning permission”.
It was also intended to boost London’s tourism industry and provide extra income to homeowners who wanted to let out their property while they weren’t there.
Does the 90-day rule only apply in London?
Yes, the 90-day rule currently only applies in London. However, Paris has a similar 120-day rule although it was brought in for different reasons.
New rules are also set to be imposed in Edinburgh that require all short-term lets that are not primarily used as homes to have planning permission.
What types of rentals does the 90-day rule apply to?
The 90-day rule applies to any short-term let where someone pays to stay in the property. This includes Airbnb lets, holiday lets, serviced accommodation, or someone renting out their home for visitors to, for example, go to sporting or cultural events like Wimbledon, football tournaments or concerts.
Consequences of the 90-day rule
The original aim of the 90-day rule was to allow people to rent out their London homes on a short-term basis without having to apply for planning permission.
However, according to the Greater London Authority (GLA) there are signs that short-term letting platforms are becoming increasingly commercialised, leading to concerns that removing housing supply from the market to offer it for short-term letting could be exacerbating London’s housing shortage.
In a report published in 2020, the GLA found that there was a fourfold increase in Airbnb listings in London between 2015 and 2019, including a 15-fold increase in outer London.
And while Airbnb caps bookings at 90 days, there are plenty of other rental platforms available that property owners could switch to if they wanted to flout the law and exceed the 90-day limit.
However, an earlier report, in December 2016, by the Institute for Public Research suggested short-term lets had little impact on London’s housing shortage.
How can landlords continue to let their property once they have exceeded the 90-day allowance?
If you are a landlord and you want to rent out a property that is not your main residence on a short-term basis in London, how can you maximise revenue while staying within the 90-day rule?
- Apply for a change of use: The only way you can legally let your property short-term for more than 90 days in a calendar year in London is to apply for planning permission for a change of use. There is no guarantee it will be granted.
- Let the property on different types of tenancy: Use a hybrid letting strategy by renting out on a short-term basis during the most lucrative periods (typically summer) and find tenants wishing to rent on a medium-term basis – three to eight months – for the rest of the year.
Read more: Guide to serviced accommodation
Arguments for the 90-day rule
The 90-day rule benefits homeowners who want to earn extra money by renting out their property on a short-term basis, either while they’re on holiday themselves, staying in a second home, or working away.
By removing the requirement for planning consent on short-term lets, it has opened up greater possibilities for homeowners and renters.
By capping the number of rental days at 90, it can be argued that local councils have greater control over what’s happening to the housing supply in their area. For other local residents, it means that there will not be a constant stream of people moving in and out all year round.
Arguments against the 90-day rule
Some people argue that homeowners should be allowed to rent out their property all year round as a short-term let, as long as their guests are respectful, comply with the law, and do not disturb the local community.
Of course, they may be able to do this if they can obtain the requisite planning consent.
There are also concerns that the deregulation of short-term letting in 2015 has led to a reduction in the supply of housing for long-term residents, although currently there is no firm evidence for this.
What type of mortgage do I need for a short-term let?
You must advise your mortgage lender if you are planning to rent out your property on a short-term basis.
If you are an owner-occupier and renting out for short periods when you are away, your mortgage lender may accommodate you on a standard mortgage.
But if you are renting out on a commercial basis, you will need a commercial mortgage (not a buy-to-let mortgage).
Insurance and the 90-day rule
There are different insurance options available depending on how you intend to rent the property out and whether you will be residing in it as well. Here we look at the different types of policies designed to cover different scenarios.
Standard home insurance
As an owner-occupier who rents out their home for a few weeks here and there, such as when away for holiday or work, you may be able to get a temporary add-on to your existing home insurance policy to cover short-stay lets.
You must speak to your insurer before you do this though, as they may object or choose to restrict the cover provided on your home insurance.
Holiday let insurance
If you are a landlord who does not live in the property and you want to rent it out for weekend breaks or short stays up to 90 days, you will need holiday let insurance or Airbnb insurance. This will not cover you for longer term rentals on an assured shorthold tenancy (AST).
Serviced accommodation insurance
Serviced accommodation is a type of furnished property rented out with additional services provided, such as housekeeping, cleaning, concierge etc. It can be rented out for one night or for longer periods.
Serviced accommodation insurance is designed specifically for this type of rental agreement, including:
- employers liability, which is a legal requirement if you employ anyone in relation to the property;
- optional extra for pet damage;
- business interruption, which covers loss of rent from confirmed bookings and your expected income based on booking history and seasonal fluctuations.
- theft and malicious damage by guest cover;
Our serviced accommodation policy will provide cover for both short-term lets and tenants on an AST within the same policy year. Your insurer will review the property use with you at renewal to ensure that you are still on the correct policy as it may be more cost efficient to move to a landlord policy if you are only going to be renting the property out on an AST going forward.
Read more: Is Airbnb classed as buy-to-let?
What insurance do you need when the property is not let out?
Alan Boswell Group’s short stay insurance can provide cover for times when the property isn’t let out, without needing to change the policy. Cover can normally be provided for periods between 30 and 45 days, depending on the insurer, and covers multiple occasions in a policy year.
If a property is empty for longer periods, unoccupied home insurance will be required.
Read more about which type of short-term let insurance is right for you.
Remember, that as with all policies involving rental properties, landlords must ensure that they fulfil all their legal obligations. Failure to do so can invalidate the insurance policy and result in claims being refused or delayed.
Please note that legislation does change, it is important for property owners to familiarise themselves with the rental rules in their area and, if in doubt, speak with a local landlord association or letting agent for further guidance.