UK Landlord Forum / Life

As a newish landlord (this is not my job), I have just found out I have a possibly major problem, and would be grateful for any salient advice.

FACTS:
I own a mortgage-free 3-storey 4-bedroom freehold house in London which I have let out to 3 tenants via an AST (12 months, no Break Clause; each is listed on the contract) for the past 2 years via a local Letting Agent.
They have been unproblematic (until now); kept the property in good condition (even minorly improved it in some areas); always paid rent on time; never caused problems or nuisance; never even asked for any repairs.
They renewed their Tenancy a week ago and I intend this to be the last year of rental.
I hope to get planning permission over the coming year to start major construction works on it in a year's time. I need the rental income to help fund the future build.
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I have just discovered to my horror (initially online, and then via a visit to the inside of the building) that the tenants have turned the entire building into a series of Airbnb lets - with 6 rooms (including the 2 living rooms) listed at the property.
Upon further research I found that they are also doing this at almost 40 other listings across 6 other properties – some of which, including mine, they have listed on Booking.com & other sites.
This is contrary to the terms of my contract with them, which forbids subletting (as well as use of the living rooms as bedrooms).
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Deeply worryingly, their subletting also potentially invalidates my landlords insurance (which I just renewed and paid for in full up-front), which is invalid with change of tenant circumstances, & any loss or damage caused by non-tenants.
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(1) INSURERS:
I want to tell them immediately and discuss this with them, thought fear that they will regard this as void; refuse to alter the contract; refuse to repay any portion relating to the remaining term.
--Is there any way in which Insurance Policies in such instances can be honoured, e.g. though amendment? I worry that they may agree to an amendment yet later claim that the Policy was automatically invalidated when the tenants started renting out.
--Is there any insurer out there who would insure this situation?
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(2) ENDING THE TENANCY:
(a) My initial instinct is to talk to the tenants and get them to stop, but that might not work – and they clearly have a large number of upcoming bookings which they would probably want to try and honour – motivating their resistance.
Despite having suffered broken trust, I'd be amenable to them staying if they desist, though I'd clearly need to more actively monitor the property, and would probably be best getting them out ASAP.
My concern about the Airbnb discovery rests with the invalidation of insurance and any potential illegality, rather than increased wear & tear on a property that I hope to eventually gut.
The Letting Agent says they cannot amend the contract in any way that will allow subletting.
(b) From my understanding I cannot serve the Tenants a Section21 notice until 2 months before the end of their AST – almost 10 months away. There is no Break Clause.
(c) From my understanding I could theoretically serve them a Section8 notice – on discretionary rather than mandatory grounds (#12) –– but because there are no rent arrears, this would not be likely to succeed, and be a waste of time and money, going to court & hiring a solicitor.
I have heard and read this depressing (and seemingly illogical) advice from several people, including the National Landlords Association helpline earlier today.
Everyone seems to be in agreement to avoid Section8 if at all possible
So, scarily, it seems I am all out of options and cannot get the property insurable – unless we come to a Mutual Agreement of some sort, which I've read is usually triggered by Tenant request; best executed by deed; and difficult to achieve.
The Letting Agent says my only option is a good solicitor.
--Does anyone have any good advice on how to remedy this situation?

(3) LICENSING:
I have been reading around the topic since this arose and discovered another horror fact: that the local council designated a selective licensing zone 18 months ago  – and my house falls just within the zone, and should be licensed, even though my tenant arrangement would not ordinarily be subject to the HMO licensing covered by broader UK legislation.
There seems no way round this other than to confess my idiocy in not knowing, and hope we can come to some agreement – which could entail large repayment of rent to them, and worse (though I do wonder how I would and could have known without reading the entire council's website – and why the Letting Agent didn't know).
I'm scared (a) of possible punitive measures for something I had no idea about, and (b) that any remedies to the property that the council might require (e.g. it has basic carbon monoxide detector and battery smoke alarms, not interlinked electrical ones; no fire-escape signage or lighting) will be inordinately expensive for the brief period of further time that I hope will lapse before we start building works.
--Does anyone have any good advice on how to remedy this situation, and pitfalls I should avoid?
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Sorry for such a long post; I'm just trying to provide the detail helpful readers might ask for.
Any helpful advice would be very gratefully received.

Thank you.

(& thank you for this EXCELLENT website - which has provided me with hours-worth of invaluable research)

I know how useless they are from a customer point of view but have you tried to get in contact with airbnb for advice.  This isn't the first time this has happened

One issue is that you don't want to seem to get these people out.  If it were me and I wanted them out I'd be tempted to book a room and act in such a way that any other guests there would leave, leave bad reviews etc and I wouldn't leave on checkout day.

I agree that you should contact AirnB and see what they advise.
You have proof these tenants are doing what they do with other properties - I simply would not want these people in my property. Yes, you need rental income but these people coule potentially cost you a lot more money in the long run. I would cut my losses now and try to start again with better tenants.
It seems you can't avoid using a solicitor, I'm afraid. They would have to be specialists in property and litigation They have breached a condition of the contract by subletting so that could be a start and then with the licensing situation, you need to try to limit the inevitable fines if at all possible sadly so putting off tackling that issue alone will not help.