The rise of co-living is a revolutionary development in rental markets, offering a number of perks without the drawbacks of renting. Rather than just offering a place to live, it is a social movement based on a sense of community and collaboration.
But this innovative form of living poses a challenge to the current legal framework, which is more suited to student accommodation schemes and houses of multiple occupation. It is worth closely examining the legal considerations and challenges co-living developers and operators face and endeavour to understand how this revolution could change the property landscape.
Co-living has exposed shortcomings in the planning system. The Town and Country (Use Classes) Order of 1987 no longer appears fit for purpose. The key challenge is determining where co-living fits in the use class framework – it is a semi-dwelling, semi-hotel, semi-office and semi-community centre. The length of stay, extent to which units are self-contained and level of privacy or exclusive possession enjoyed are factors to be considered in any development. Planning permission for the first scheme by The Collective involved different use classes for different parts of the development.
Another uncertainty is the relationship between the individual and ‘landlord’. One has to consider whether an assured shorthold tenancy (AST) agreement or more bespoke permit agreement will apply; the former governs existing tenant/landlord relationships, while the latter is a permit similar to hotel occupancy. Something in between an AST and permit agreement may be more fitting.
A tenant in arrears is one of the biggest headaches for landlords. Can they rely on the Housing Act 1998 to serve notice on a tenant in arrears, especially if that tenant is a licensee under a permit agreement? Probably not. But with co-living gaining ground, this may be an area to look out for. Rigorous reference checks may keep this pain at bay until a more viable solution is found.
With most rental agreements fixed for 12 to 24 months but young professionals now moving jobs and homes frequently, the usual lease arrangements no longer make sense. Co-living solves this issue, so it is no surprise that the sector is rising globally. While the experiment is working well, there are plenty of obstacles for developers – land costs and unsupportive public policies to name just two. But as with other innovative concepts such as co-working and Airbnb, strong appetite should lead to long-term solutions to these obstacles and a thriving co-living sector.
Susanna Caulfield is a senior associate and Khadijeh Moghaddam is a trainee solicitor in the real estate group at Rosling King