What are Holiday Home Occupancy Restrictions? - Holiday Cottage Mortgages (2024)

If you own and operate a holiday let property, you must consider holiday home occupancy restrictions. There are three main areas that give rise to holiday occupancy restrictions. These encompass HMRC and its guidelines on what constitutes a holiday let, lenders who stipulate certain restrictions on use if you have a mortgage, and locations that have holiday letting restriction rules in place.

HMRC guidelines

To qualify as a furnished holiday let property, you must adhere to guidelines set by HMRC. While you can stay in your holiday home every so often, your usage should be monitored; it should not exceed the amount allowed by HRMC’s furnished holiday let rules.

HMRC’s published guidelines include a number of occupancy conditions, all of which must be met.

Firstly, to qualify as a furnished holiday let, ‘your property must be available for letting as furnished holiday accommodation letting for at least 210 days in the year’, according to HRMC.

Furnished holiday let rules also dictate that ‘you must let the property commercially as furnished holiday accommodation to the public for at least 105 days in the year’.

Holiday home owners also have to consider the pattern of occupation. While you can rent out your property for a longer term (defined as 31 days or more), there are limits. For example, the total of your longer lettings cannot exceed 155 days in the year.

The full details of the holiday occupancy rules can be found on HMRC’s website.

Holiday Let Mortgage

Lenders will stipulate occupancy restrictions on the use of your property if you have a mortgage. If you have a normal mortgage or buy to let mortgage, you’re not permitted to rent out your home as a holiday let. If you’re planning to holiday let, you’ll probably require a holiday let mortgage.

You need to let your mortgage lender know if you switch your property from buy to let to holiday let. It’s likely that you’ll have to remortgage; buy to let mortgage contracts do not usually permit you to let the property for short periods.

Location

Before you buy a holiday home, it’s worth double checking that there aren’t any restriction rules in place. In certain locations there are usage restrictions that limit or prevent holiday lettings.

In the popular tourist town of St Ives, Cornwall, the rules state that new build residential properties can only be bought for ‘full residential use’. This restriction on second home ownerships means that if you buy a property in the area, you have to live in it full time and cannot let it out to holiday makers.

Another example is London, where there’s a 90-day limit for renting out your home on Airbnb. The accommodation website has a ban in place so that London hosts cannot let their home to holiday makers for more than 90 days in a year, without seeking official consent from the council.

You might also find that restrictions have been placed on a property by the local authority. In the Cotswolds, there are a number of holiday developments that, according to the Cotswold District Council, ‘are subject to restricted occupancy conditions’ which means that ‘they can only be used at certain times of the year or for certain reasons.’

Legal

Often overlooked until too late in the legal process, some leases, and the occasionalfreehold deed, contain a small, fairly innocent looking clause like these:

“Not to use the Demised Premises nor permit the same to be used for any purpose whatsoever other than as a private apartment or dwelling house in the occupation of one family only and in particular not to carry on or permit or suffer to be carried on in or from the Demised Premises any trade business or profession”“Not to use or permit the property to be used except as a private dwelling and garage for the occupation of only one family or unit at a time and no trade or business shall be carried on therein”

The clauses have two key parts to them:

1. Only to be used as a private residence; and
2. Not to be used for business purposes.

I think it’s fair to say that when such wording was devised, holiday letting was not mainstream like it is today and so its interpretation can cause some degree of confusion, or worse, can totally de-rail a deal at the final stages.

Your solicitor will have to give an opinion to the lender on this type of wording and confirm to them that, in their opinion, holiday letting is an allowable activity. Our guidance is to try and clear off this point as soon as possible in the process to avoid any disappointment (and sunk costs) downstream.

HCM have a great deal of experience in handling these sorts of situations and we have saved many deals from collapse by working with solicitors and lenders to agree a way forward and navigate around the clauses. To find out more, get in touch!

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