The Global Rise of Short-Term Rentals

The short-term rental revolution has reshaped property markets worldwide. Airbnb, Vrbo, and similar platforms created new revenue streams for landlords and made short-stay accommodation mainstream. Investors in cities like Dubai and New York have used short-lets to boost yields, while even homeowners have capitalised on demand from tourists and business travellers.

In London, however, the picture is more complex—especially in the most prestigious neighbourhoods. In boroughs like Westminster and Kensington & Chelsea, where many of the capital’s mansion blocks and luxury developments sit, freeholders and management companies have long resisted the short-let model. Their concern is simple: constant tenant turnover can undermine security, create wear and tear, and disrupt the quiet enjoyment of long-term residents.

As a result, many leases across Prime Central London (PCL) include explicit bans on letting for periods shorter than six months. For buyers, particularly international investors accustomed to more flexible regimes abroad, these restrictions can come as an unwelcome surprise. And for lenders, they raise important questions about value, demand, and marketability.

Why Lenders Pay Attention to Lease Clauses

Mortgage providers in the UK are bound not only by their own risk appetites but also by regulatory obligations. Surveyors instructed to value PCL flats must report material lease restrictions, and lenders cannot simply ignore them.

From the lender’s perspective, short-let restrictions matter for three key reasons:

• Marketability at Resale – A property that cannot be let short-term may appeal to a narrower pool of future buyers. This reduces liquidity, which lenders view as a risk if they ever need to repossess and sell.

• Rental Income Calculations – Even when buyers intend to live in the property, lenders consider investment potential as part of their assessment. If income is capped at long-term AST rates, lenders may reduce loan-to-value ratios.

• Valuation Caution – Surveyors often apply conservative assumptions when restrictions are in place, leading to down-valuations. This can leave buyers scrambling to fill funding gaps.

In practice, this means that even wealthy buyers with no intention of letting short-term can find finance complicated simply because of what is written in the lease.

Borrower Scenarios: How Restrictions Play Out

To understand the impact of these clauses, it helps to consider different types of PCL buyers.

1. The International Investor

An overseas buyer acquires a £5 million flat in Knightsbridge, expecting to let it on Airbnb when not in use. When they discover the lease prohibits lets under six months, their yield projections collapse. The lender, assessing affordability based on lower AST rental income, reduces the maximum loan available. The investor must either inject more cash or rethink the purchase.

2. The UK Resident Buyer

A London professional buys a £3 million flat in Belgravia for personal use. They never planned to let it. Yet when the lender reviews the lease, the short-let restriction is flagged. The bank questions whether this might affect resale value. Finance is delayed as additional valuations are sought, and the buyer faces the risk of missing exchange deadlines.

3. The Family Office Purchaser

A family office secures a portfolio of PCL properties, some with restrictions and some without. While the restrictions matter less for their long-term wealth preservation strategy, mainstream lenders still push back. Ultimately, the family turns to private banks, who are more focused on global assets than lease covenants.

These examples show that short-let clauses do not only affect “investors chasing yield.” They can complicate finance for almost any buyer profile.

Airbnb Bans and the International Disconnect

One of the biggest sources of friction arises with international buyers. In Dubai or Miami, short-term lets are encouraged by regulators and developers alike, forming part of the investment proposition. Buyers moving from those markets to London expect the same.

When told that most Belgravia mansion blocks prohibit Airbnb, they often struggle to understand why—and assume the restriction will be irrelevant to lenders. Yet, as we explored in our blog on foreign national mortgages, UK lenders adopt a stricter approach. Without local credit history or income, overseas borrowers already face hurdles; lease restrictions add one more obstacle that must be addressed upfront.

Lender Segmentation: Who Will and Won’t Lend

Attitudes to short-let restrictions vary across the lending spectrum:

• Mainstream Banks: Typically cautious. Many will decline outright if the lease contains restrictive clauses, fearing marketability issues.

• Specialist Lenders: More pragmatic, especially when the borrower’s profile is strong. They may lend but reduce LTVs.

• Private Banks: Often the most flexible. For clients with significant wealth and broader relationship potential, private banks may view restrictions as immaterial, focusing instead on the client’s global balance sheet.

This mirrors the themes we highlighted in our blog on private client finance. For HNW and UHNW borrowers, the key is knowing which lenders to approach and how to position the case.

The Role of Bridging Finance

In off-market or time-sensitive purchases, lease restrictions can create delays while lenders deliberate. In such cases, bridging finance often becomes the solution. Buyers can complete quickly using a bridge, then refinance into longer-term debt once the right lender is found.

We explained the importance of sequencing in our article on bridging to mortgage strategies. For properties with restrictive leases, this approach is particularly valuable. It provides breathing space while preserving the deal.

Of course, bridging is not without risk. Without a credible exit, borrowers can find themselves stuck in costly short-term debt. This is why planning the refinance pathway early is essential.

Scenario: A Belgravia Transaction

A recent example illustrates how complex these deals can be. A client agreed to purchase a £7 million apartment in Belgravia. The lease explicitly banned lets under 90 days.

The client, an international buyer, initially intended to fund the deal with a mainstream bank. However, the lease clause led to repeated valuation queries and delays. With exchange looming, Willow arranged a £4 million bridging facility within two weeks, enabling completion.

Post-completion, we introduced the client to a private bank, which assessed the buyer’s broader wealth profile and agreed a long-term facility. The exit from bridging to term finance was executed seamlessly, but only because the strategy had been mapped in advance.

Wider Market Trends in 2025

As of 2025, scrutiny of lease clauses is increasing. With regulators tightening oversight of mortgage underwriting and surveyors under pressure to flag risks, lenders are becoming more conservative.

At the same time, local councils in Westminster and Kensington & Chelsea are actively policing short-lets, adding fines for breaches. This makes lenders even less willing to overlook restrictive covenants.

Yet demand for Prime Central London remains strong. As we reported in our August 2025 PCL market update, international capital continues to flow, particularly at the super-prime level. The challenge for buyers is less about market appetite and more about aligning finance with legal realities.

How Willow Can Help

At Willow Private Finance, we help clients navigate the lease restrictions that can derail otherwise straightforward purchases. Our support includes:

• Reviewing leases with solicitors before an offer is finalised to anticipate finance obstacles.

• Matching clients to lenders who understand the nuances of PCL and take a pragmatic approach to restrictions.

• Structuring bridge-to-term strategies when timelines are tight, ensuring exits are secure.

• Supporting international buyers in presenting global wealth profiles to private banks.

• Coordinating with valuers and legal teams so lease restrictions are addressed before they trigger down-valuations.

Our goal is to transform restrictive clauses from deal-breakers into challenges that can be managed with the right structure and lender relationships.

📞 Want Help Navigating Today’s Market?

Book a free strategy call with one of our mortgage specialists.

We’ll help you find the smartest way forward—whatever rates do next.