In brief: A recent VCAT decision involving tenants who made their rental property available for hire on Airbnb, has important ramifications for landlords in Victoria.
What you need to know:
- Under the Residential Tenancies Act 1997 (Vic), landlords cannot evict tenants for improperly sub-leasing a property if they use Airbnb to rent it out for short term stays.
- Landlords and managing agents should consider inserting new special conditions in their residential tenancy agreements, prohibiting renting the property out for short term stays.
- Landlords should rely on other sections in the Residential Tenancies Act 1997 (Vic) for terminating a lease if a tenant is caught renting the property out for short term stays without consent.
- Damages caused by the tenant renting out a property for short term stays might fall outside the scope of the landlord's insurance policy.
The Victorian Civil and Administrative Tribunal (VCAT) has found in the matter of Swan v Uecker (Residential Tenancies)  VCAT 483 that renting out a property on Airbnb is not a lease or sub-lease, but a licence.
The landlord and tenants entered into a 12 month residential tenancy agreement on 21 August 2015 for an apartment in Fitzroy Street, St Kilda (Premises). On 12 January 2016, the landlord served a Notice to Vacate on the tenants with a termination date of 2 February 2016. The reason provided in the Notice to Vacate stated:
"You have assigned or sublet part or all of the Premises without my permission or purported to.
Residents in the building have confirmed that you are using Airbnb to rent out a room of the apartment without prior consent of the Landlord.
I have checked Airbnb website and have confirmed that this is the case.
The Landlord requires you to vacate the Premises on or before 2 February 2016".
On 1 February 2016, the landlord applied to VCAT for a possession order. The tenants opposed the landlord's application and submitted to VCAT that the Notice to Vacate was invalid because Airbnb is a licence and not a lease and as such there had been no assignment or sub-letting.
VCAT considered section 253 of the Residential Tenancies Act 1997 (Vic) which states:
Assignment of sub-letting without consent
- A landlord may give a tenant a notice to vacate rented premises if the tenant has assigned or sub-let their tenancy without the landlord's consent.
- The notice must specify a termination date that is not less than 14 days after the date on which the notice is given.
VCAT was satisfied that the landlord had not provided her consent to the use of the Premises for Airbnb and that no consent had ever been sought by the tenants.
However, the critical issue for VCAT was whether the Airbnb rental was a licence to occupy and use, all or part of, the rented Premises and was not an assignment or sublet of the tenancy agreement.
The tenants relied on the wording of the Airbnb agreement which used the word "licence". They also submitted that each Airbnb stay was no longer than five days, that the tenants retained the Premises as their principal residence at all relevant times, and that they had the right to revoke the licence and eject Airbnb guests who overstayed.
Ultimately, VCAT was satisfied that Airbnb guests did not have exclusive possession of the Premises and therefore, the nature of the legal relationship between the tenants and Airbnb guests was not a tenancy but a licence to occupy.
As a result, the landlord's Notice to Vacate was held to be invalid.
The Landlord is appealing VCAT's decision to the Supreme Court of Victoria. It is expected to be heard later this year.
Until then landlords and managing agents should be extremely cautious when renting out residential premises.
Tenants should also tread carefully if renting out properties for short term stays as the law in this area is far from settled.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.