In brief

Whilst many seek innovative opportunities to make a little extra cash on the side, opportunistic rental tenants may no longer be able to make their properties available on Airbnb without prior agent and landlord consent.

Following the Victorian Civil and Administrative Tribunal’s (VCAT) decision made in May 2016, involving tenants who made their rental property available for hire on Airbnb, the Supreme Court of Victoria has overturned VCAT’s decision in relation to the characterisation of the occupation of an Airbnb guest.

What you need to know

  • Tenants should seek landlord’s consent before renting properties out for short term stays; and
  • To avoid any uncertainty, landlords and managing agents should consider inserting new special conditions in their residential tenancy agreements, prohibiting renting their properties out for short term stays.

Background

In an earlier article, we reported VCAT’s decision in Swan v Uecker (Residential Tenancies) [2016] VCAT 483, whereby it was held that renting out a property on Airbnb is not a lease or sublease, but a licence.

The facts of the case were as follows.

  • The landlord and tenants entered into a 12-month residential tenancy agreement on 21 August 2015, for a property in Fitzroy Street, St Kilda.
  • The landlord discovered that the tenants had been using Airbnb to rent out a room in the property, without her consent.
  • As a result, on 12 January 2016, the landlord served a Notice to Vacate on the tenants with a termination date of 2 February 2016.
  • The tenants refused to vacate the property, which led to the landlord applying to VCAT for a possession order.

VCAT’s decision

VCAT was satisfied that the Airbnb guests did not have exclusive possession of the property and, therefore, held that the nature of the relationship between the tenants and the Airbnb guest was not a sublease but a licence, and the landlord’s Notice to Vacate was held to be invalid.

The matters VCAT took into account in making its decision included, among other things, the ability of the tenant to make an overstaying Airbnb guest leave the property, the tenants’ retention of the property as their principal place of residence, and the ability of the tenants to access the property during an Airbnb stay.

The landlord appealed VCAT’s decision to the Supreme Court of Victoria.

Supreme Court’s decision

The Supreme Court overturned VCAT’s decision and found that the occupation of the rented premises by the Airbnb guest was a sublease, and as a result determined that the landlord’s Notice to Vacate was valid.

The Supreme Court found that VCAT took into account matters that were irrelevant to the question of whether the Airbnb guests were in exclusive possession during their stay. In this regards, the Supreme Court found that the tenants ability to make an overstaying Airbnb guest leave the property and retention of the property as their principal place of residence were both irrelevant.

The Supreme Court also found that there was no evidence or other material to support the findings by VCAT that the tenants were able to access the property during each Airbnb stay.

Conclusion

Tenants should seek their landlord’s consent prior to renting out properties for short term stays.

Landlord’s wanting to avoid any uncertainty should consider inserting broad prohibitions in the lease on subleasing, assigning, granting any licence to occupy all or part of the property without the landlord’s prior consent.

 

Case references:

Swan v Uecker (Residential Tenancies) [2016] VCAT 483 

Swan v Uecker [2016] VSC 313 

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