Victorian Courts considered the legal implications of AirBnB from a couple of different perspectives recently.
To Sub-let or not to Sub-let
In a decision (Swan V Uecker (2016) VSC 313) that attracted media interest the Victorian Supreme Court held that the landlord was entitled to terminate the lease given the tenant had sub-let the property without consent using AirBnB.
The matter was first heard at the Victorian Civil and Adminstrative Tribunal (“VCAT”). The landlord had served a Notice to Vacate on the tenants as the tenants were renting out one or both of the apartment’s two bedrooms on AirBnB. The tenants argued that they had not sub-let the property and were not in breach of the lease. VCAT held that the tenant was not in breach of the lease and therefore the landlord was not entitled to terminate the tenant’s lease. The decision turned on VCAT’s finding that a short term stay using AirBnB did not offer the guest “exclusive possession” which is a key requirement for a lease to exist.
The landlord challenged VCAT’s decision and lodged an appeal with the Victorian Supreme Court. The Landlord argued that her apartment was illegally sublet through the Airbnb website and that VCAT made “errors of law” by failing to take into account a separate Airbnb listing for the apartment that gave guests access to the entire property, rather than a single bedroom, while the tenants were overseas. By affording a guest exclusive use of entire apartment this amounted to exclusive possession. This meant that the property had been sub-let without the landlord’s consent which in turn meant that the tenant had breached the lease and could be evicted.
It is important to remain aware of the limits of this decision. It does not apply to renting individual rooms as this would not amount to exclusive possession or therefore a sub-lease. It would also be technically quite simple to limit the guest’s rights to something less than exclusive possession of an entire property therefore avoid the finding that a sub-lease had been created.
The real solution for landlords may be to insert a special condition in their residential leases making it clear that any form of short term or non-exclusive licence will require the landlord’s consent.
Other Issues
In 2015 VCAT found that an owners corporation was not able to enact a rule to prevent apartments within the building being licenced using AirBnB. This issue has apparently been appealed to the Supreme Court for review.
Other issues that may come into the spotlight include:
• Insurance – household policies may not cover short term leasing arrangements;
• Rooming House laws – a residential property rented by the room many not comply with relevant planning requirements.
In time we expect that these issues and more relating to the new sharing economy will be resolved by the courts and / or new legislation.
In the interim, we encourage clients who are renting residential properties to ensure that their properties are not listed on AirBnB by including appropriate special conditions in their leases until and unless they have explored all of the implications.