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Which is the best – holiday let or assured shorthold tenancy?

holiday let

For anyone asking the question, ‘What is the best type of let – holiday or shorthold assured tenancy?’, the answer will depend on your business plan.

That is to say, you need to appreciate that while holiday lets may deliver a higher rent, there’s more work involved and you may not get rent around the year.

With the growing popularity of platforms such as Airbnb, then if you have a quality property in an area that is popular with tourists, then this may be a financially rewarding route to pursue.

Shorthold assured tenancy

For those who are interested in a shorthold assured tenancy, then you will need to find quality tenants to live in your property but there’s little to do other than answer tenant queries for maintenance problems and communicate well.

However, it’s important that you do not confuse the term holiday let with short let because there are legal implications – a short let can last for anything from a few nights and up to six months. A holiday let is for someone who is on holiday.

This is probably the best point to discuss the type of tenancy and what an assured shorthold tenancy is, under the Housing Act 1988. Essentially:

  • Your property will be let to an individual/s as private tenants
  • Your property will be used by your tenants as their main home
  • The rent will be less than £100,000 a year
  • As a landlord, you will not be deemed as being a resident landlord.

Should these points be met, then your property will be let under an assured shorthold tenancy (AST).

Basically, it’s not up to you or anyone else to define whether your let is an AST or a holiday let, in the eyes of the law if it meets these stipulations, then it is an assured shorthold tenancy.

Difference between an AST and a holiday let

The big difference between an AST and a holiday let is that those living in your property must be on holiday – and the person living in your property will have a main home elsewhere.

So, while AirBnB may describe the landlord as a ‘host’, and the tenants as ‘guests’, their legal rights are not affected.

Since these holiday let platforms are advertising on behalf of property owners to attract those wanting short lets or holiday accommodation, if the tenancy meets the legal stipulation for being an assured shorthold tenancy, then that’s what it is.

Also, if a holiday let appeals to you, then you need to consider:

  • There is no legal limit to how long a holiday let is
  • The tenant must be using it for holiday purposes
  • You still need to have a basic tenancy agreement in place with those occupying it. You can do this by letter, which will include a statement that your property is being let as a holiday let.
  • You will need to clearly state the start and end days of a holiday let.

There are obviously tax implications and since you will be running a business, you will need to declare all of your income from an assured shorthold tenancy and a holiday let.

However, there are tax rules over a furnished holiday letting so you cannot let the property for more than 31 continuous days to a tenant.

Legal standing between an AST and a holiday let

One of the big differences is the legal standing between an AST and a holiday let.

If the person or family does not leave your property when the holiday let ends – legally you do not have the right to start possession proceedings in court. However, you can apply for the tenant to be evicted using the court process.

This then leads us onto the benefits of having an assured shorthold tenancy since the landlord can seek possession without specific grounds for needing to do so.

Under the terms of the tenancy agreement, the tenant will have the right to remain in the property for a minimum of six months, unless you’ve agreed a shorter term, and some agreements will be for 12 months.

You’ll need to give two months’ notice in writing to the tenant saying you are seeking repossession and if the tenant doesn’t leave within this period, then you can begin court action.

Expenses between a holiday let or an AST

Among the expenses to consider between a holiday let or an AST is that of insurance.

Landlords with an AST property will need specific landlord insurance cover because normal household insurance will not suffice.

It’s also possible to get insurance for tenants not paying rent and you will need at least landlord insurance coverage for contents and buildings.

If you’re thinking of starting a holiday let business, then you will need holiday home insurance.

This will help protect against unfortunate mishaps that can occur, such as a guest breaking something accidentally in the property.

Insurance will also extend to the potentially serious damage that can be caused by flood or fire.

It’s also worth considering public liability insurance for holiday lets and also buildings insurance.

This insurance cost can be claimed against your tax – and the rules on the allowances you can claim also change so you should check what they are.

What is the best type of let

Essentially, if you want to know what is the best type of let – holiday or shorthold assured tenancy, then you need to sit down to see whether you have the time and commitment to run a holiday let, or have an agency do this on your behalf, as this can be a lucrative alternative to running an assured short tenancy. Only you can decide since this will be your business and there are pros and cons for both of them.

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