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Redemption

How Airbnb can cause problems for lenders.

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by Sarah Cropper

Airbnb is one of the fastest growing brands in the world. Since it launched in 2007, more than 400million people have stayed in Airbnb accommodation while the company itself is valued at more than $31billion. And it is no surprise the brand has been such a huge hit. It offers home owners the chance to make good money from their properties, and gives travellers an alternative to hotels and B&Bs. Unfortunately though, not everyone who has an Airbnb property is doing things by the book, as Hope Capital recently discovered to their detriment.

“This particular case highlights the risks of working with a borrower who lets their property using Airbnb. Not only was the borrower breaching his loan terms, but due to the way in which Airbnb operates, it was impossible for us to access the property once we had brought receivers in.”

Sarah Cropper, Redemptions Manager

Hope Capital had originally agreed a 6 month loan with a borrower wanted to let a property on a 6 month Assured Shorthold Tenancy. The borrower then asked for an extension to the loan so that he could negotiate a lease extension with the freeholder of the property. This was also agreed, but Hope Capital had great difficulty arranging the interim report as the borrower was often out of the country. Once the interim report was finally completed, Hope Capital discovered that somebody was living in the property; the borrower said his son stayed there during his school holidays as he was at Boarding school in the US.

But three months later, when the loan was due for repayment, it had not been redeemed and the borrower had become very difficult to get hold of. He paid one month’s interest, and then after one month’s grace, Hope Capital had no choice but to instruct LPA receivers.
 
This is when Hope Capital discovered that it was not his son living in the property but that it was in fact being let on Airbnb, which was against the loan’s terms and conditions, as Sarah Cropper, Redemptions Manager at Hope Capital explains: “On arrival at the property, the LPA receivers could not gain access as there was a communal entrance. It was then they discovered that the property was being let on Airbnb.
 
“The property’s Airbnb ‘host’ who acts on behalf of the owner refused to give access to the LPA receivers and it soon became clear that the property had multiple bookings on Airbnb, the proceeds of which were going to the borrower.
“Not only that, but despite the LPA receivers being instructed, bookings were still being taken with people staying in the property on a night by night basis.”

As the borrower was in breach of his loan terms, Hope Capitals’ LPA receivers advised Airbnb that, due to their lack of cooperation, they would have to instruct lawyers to serve an injunction to gain access.
 
Eventually access was gained. Hope Capital arranged for an auction appraisal to be completed and the property was listed for auction.However, just before the auction date, the borrower organised a refinance with another lender and the loan was repaid. Ironically, a broker then approached Hope Capital to rebridge this same loan, not knowing the issues it caused, unsurprisingly Hope declined to progress with the loan.
 
Sarah concludes: “This particular case highlights the risks of working with a borrower who lets their property using Airbnb. Not only was the borrower breaching his loan terms, but due to the way in which Airbnb operates, it was impossible for us to access the property once we had brought receivers in.”

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Sarah Cropper

Sarah works closely with brokers and their clients to ensure the timely redemption of the loans they have taken out with Hope Capital, working closely with all parties to provide effective solutions even when the circumstances are not straight forward.

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