The growth of platforms such as Airbnb, Vrbo and Booking.com has made short-term residential letting a mainstream investment strategy in the UK. Serviced accommodation — properties let on a nightly or weekly basis, typically furnished and managed — can generate gross yields significantly above conventional buy-to-let, particularly in high-demand tourist and city-centre locations.
But short-term letting sits at the intersection of planning law, leasehold restrictions, local licensing regulations and lender criteria in a way that creates significant legal risk for investors who do not complete adequate due diligence before acquiring. This guide explains the four key legal and regulatory areas that short-term let investors must assess before committing to a purchase.
Planning Permission: When Is It Required?
Residential property in England is classified as Use Class C3 (dwellinghouses). Short-term letting — where the property is let to a succession of different occupiers on a nightly or short-term basis — has historically occupied an uncertain position in the planning system. In 2024, the government created a new Use Class C5 (short-term lets) to bring greater regulatory clarity to this market.
Under the new framework, which has been introduced alongside a new permitted development right:
- Existing dwellings that are used as short-term lets may change to the new C5 use class via a permitted development right — without requiring a full planning application — subject to prior approval in certain circumstances.
- Local authorities may remove this permitted development right by making an Article 4 Direction, requiring properties to obtain full planning permission before operating as short-term lets.
- Properties already exclusively used as short-term lets will be in C5 use.
The practical position in 2026 varies considerably by location. Several London boroughs and popular tourist destinations have already introduced, or are in the process of introducing, Article 4 Directions to control the proliferation of short-term lets. Investors acquiring property for SA use in these areas need to either obtain C5 planning permission before commencing lettings, or confirm that the property already has an established lawful use as a short-term let.
Outside Article 4 areas, the permitted development right provides a cleaner route — but it is accompanied by a prior approval process that includes assessment of the local housing impact, and local authorities retain some scope to refuse. Investors should check the position with the relevant local authority before relying on permitted development rights in this context.
The 90-Day Rule in London
Since 2017, residential properties in London have been subject to a statutory limit of 90 days per calendar year for short-term letting, unless the owner has obtained full planning permission. This restriction applies to entire dwellings — individual room lets within an owner-occupied property are treated differently. It is enforced by London borough councils and breaches can result in enforcement action and significant fines.
For investors acquiring property in London for SA use, the 90-day limit is a fundamental commercial constraint. A property that can only be let as a short-term let for 90 days per year is not a viable full-time SA investment without planning permission for C5 use. The acquisition decision must therefore be based either on an accepted planning permission for full short-term letting, or on a business model that combines SA income for 90 days with a conventional letting or other use for the remainder.
Similar restrictions have been introduced or proposed in several other UK cities and tourist areas, though the detail varies. Investors should research the specific local authority position for any target acquisition area before assuming the 90-day rule is limited to London.
Leasehold Restrictions: The Most Common Deal-Breaker
For leasehold properties — the majority of urban flats that are natural candidates for SA investment — leasehold restrictions on subletting and use are the most frequently encountered obstacle to a short-term letting strategy.
Many residential leases contain provisions that:
- Require the landlord’s consent to sublet — most leases allow subletting with consent, but the terms on which consent is granted and any conditions attached can affect the SA model.
- Require the property to be let on assured shorthold tenancy terms only — excluding nightly or weekly lettings that are not ASTs.
- Prohibit short-term lettings expressly — an increasing number of newer leases in purpose-built residential blocks contain express prohibitions on Airbnb-style lettings or lettings of less than a specified minimum term (commonly three or six months).
- Restrict use to occupation as a single private residence only — which can be interpreted to prohibit letting to a succession of different short-term guests.
A lease with a prohibition on short-term letting is a genuine obstacle to an SA strategy. Unlike a planning issue, which can sometimes be regularised retrospectively, a lease covenant breach gives the freeholder a right to seek injunctive relief and potentially forfeit the lease in the most serious cases. Investors must read the lease — and not just the title register — before assuming a property is suitable for SA use.
Mortgage Lender Restrictions
Most standard buy-to-let mortgage products do not permit the property to be used for short-term commercial lettings. The mortgage terms and conditions typically specify that the property must be let on assured shorthold tenancy terms of at least six months, and short-term letting is a breach of the mortgage conditions.
Specialist SA or holiday let mortgage products are available from a smaller pool of lenders, and they typically carry different criteria and pricing from standard BTL products. Investors planning an SA strategy funded by mortgage finance need to either use a specialist SA mortgage from the outset or confirm with their lender that the intended use is acceptable under their specific product terms.
Where a property is acquired on a standard BTL mortgage and subsequently used for short-term letting without the lender’s consent, this constitutes a breach of the mortgage conditions and can, in principle, trigger the lender’s right to demand repayment. This risk is real and should not be dismissed on the basis that lenders rarely enforce — the consequences of enforcement are severe.
Local Licensing Schemes
Some local authorities have introduced, or are consulting on, licensing schemes that apply to short-term let properties. These schemes are distinct from planning requirements and are intended to ensure that SA properties meet minimum standards of safety and management. Edinburgh, for example, introduced a short-term let licensing scheme from 2023 that requires all short-term let properties to hold a licence.
Investors operating SA properties in licensing areas must comply with the relevant scheme, which typically requires a property safety assessment, confirmation of building and contents insurance, and registration of the property. Operating without a licence where one is required can result in civil penalties and a prohibition notice preventing short-term letting.
What to Check Before Acquiring an SA Property
The due diligence checklist for a short-term let acquisition should cover:
- Planning — has C5 use been established, is there an Article 4 Direction, and does the 90-day rule apply?
- Lease — are there any restrictions on subletting or short-term letting? Is consent required and on what terms?
- Mortgage — is the intended lending product compatible with SA use?
- Local authority — is a short-term let licence required, and what are the compliance requirements?
- Freeholders and management companies — where a leasehold property is in a managed development, what are the managing agent’s rules on short-term occupancy?
Bidq reviews leasehold restrictions, planning position and use constraints to help SA investors assess whether their strategy is legally workable before they commit. Learn more about Bidq’s legal pack review service.