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Landlords beware: VCAT finds Airbnb a licence, not a sub-lease

Discussion in 'Legal Issues' started by KateAshmor, 2nd Apr, 2016.

  1. KateAshmor

    KateAshmor Victorian conveyancing lawyer Business Member

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    Landlords beware: you cannot evict tenants for improperly sub-letting a property if they Airbnb it.

    The Victorian Civil and Administrative Tribunal has found that advertising and hiring out a property on Airbnb is not a lease or sub-lease, but a licence. This is because there is no right for the Airbnber to have exclusive possession of the property: they only receive a limited licence to occupy under certain circumstances and for a limited period.

    Landlords and managing agents should include a specific special condition in residential tenancy agreements, prohibiting Airbnbing and deeming it a serious breach of the agreement.

    Landlords should rely on other sections in the RT Act for terminating a lease if a tenant is caught Airbnbing the property without prior consent from the landlord (which may void the landlord's insurance and the building insurance, but that's another subject for another post!).

    Here's the article from Domain: Airbnb win for renters as ruling leaves landlord out in the cold
     
    Last edited: 3rd Apr, 2016
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  2. Redwood

    Redwood Well-Known Member

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    Read this one with interest this morning. Will standard rental agreements be amended?

    Pretty scary thought to have your IP on AirBnb

    Cheers Ivan
     
  3. Scott No Mates

    Scott No Mates Well-Known Member

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    The subletting clause may need amending to cover parting with possession and licensing without owner's consent.
     
  4. thatbum

    thatbum Well-Known Member

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    Problem with this is that according to the decision, this could be considered a impingement on a tenant's quiet enjoyment of the property.

    I'm not that surprised about the decision tbh - I used to give legal advice along the same lines on the issue of sub-letting vs sub-licensing.
     
  5. Player

    Player Well-Known Member

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    Wow........oh, just WOW !!! :mad:

    Another nail in the coffin for residential investing. This collaborative economy future toward which we are heading will only see more of this. I have posted elsewhere on this very topic. So if it's not a sub-letting situation and merely licensing, then the tenant is running a business (whether occasional or frequent) and thereby voiding landlords cover anyway and probably council laws in some cases.

    By the time local and state government catch up with formalising a clear law and the insurer's catching up, we will need to put up with this nonsense. The sub-letting and "licensing" isn't common yet, but will become more prevalent as tenant's seek to subsidise their own rent or run a commercial concern "just to show their landlords who's in charge"

    There is a big difference between leasing out a room (or entire house) by the actual owner (having arranged for appropriate insurance) and gotten clearance from council by-laws and a tenant who thinks that they can do as they wish.

    Thanks for sharing Kate. This would occur far more frequently in inner city and CBD areas than many people think especially in houses where there are no neighbouring apartment owners to dob them in to body corp or building managers.

    The problem with these sites and this includes gumtree is that you don't have to be the owner to post a room share advert. I am looking at this type of accommodation letting on the Gold Coast where at least I own the properties as I have one tenant who think they are clever subletting without my knowledge. I've let it slide a couple of time, however they are about to be breached soon. I don't expect Qld QCAT to think it's anything serious to have unapproved occupants, however in the event of a serious claim the insurer's will find every escape they can. The RTA and each state's laws are so slack it's not funny.

    Did I say....oh Wow !!! :cool:

    ** Edit ** Found the post it was in a thread about Uber:

    Lessons to Learn: From Taxi Plates in the Uber world
     
    Last edited: 3rd Apr, 2016
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  6. thatbum

    thatbum Well-Known Member

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    Not necessarily. Depends on a few factors, like how often they do it for example. Remember there is such thing as hobby income even under ATO laws.

    That's actually the historical whole point of a tenancy - that a tenant essentially can do whatever they wish. Matters where the owner gets a say during the period of a tenancy are the minority.

    Personally, I don't see it as a big deal - apart from the insurance issues, which probably will get clarified or ironed out over time. At the end of the day, the tenant is still liable to the landlord for any breaches of the lease.

    And from every airbnb venue I've seen, they've been kept in immaculate condition.
     
  7. D.T.

    D.T. Adelaide Property Manager Business Member

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    Advice I received when I last lunched with EBM state manager was that this scenario would void your insurance. Be interesting to see where the ball lands now that there's a case result.
     
  8. Casteller

    Casteller Well-Known Member

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    Tenants illegally subletting flats are a major problem in Barcelona, the owners have been getting huge fines, but Airbnb only fined 30,000 euro. Authorities should go after Airbnb (who should be fined instead of the owners) and the tenants.
    Barcelona cracks down on illegal subletting through Airbnb
     
  9. Lil Skater

    Lil Skater Well-Known Member Business Member

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    Sometimes I hate VCAT. Drives me nuts and there's never a consistent decision, although part of me thinks this was the right one as the ad stated that the property was, in fact, their home.
     
  10. JDM

    JDM Well-Known Member

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    Not sure on the standard REIV tenancy agreement but this issue is easily fixed by restricting the tenant's right to sub-licence the property. If this is not covered at the moment I would not be surprised if they update it in the near future.
     
  11. thatbum

    thatbum Well-Known Member

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    I doubt this is an easy fix, because from the rationale of the case, as well as at common law, restrictions on sub-licensing are likely to be rendered void as breaching the tenant's quiet enjoyment of the premises.
     
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  12. wylie

    wylie Moderator Staff Member

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    I was told that as a landlord I have no basis to refuse a tenant who wants to sub-lease. I was told it is not a reason to issue a notice to quit.
     
  13. Player

    Player Well-Known Member

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    They still need permission as I understand it in the leases in most states, however usually in the next breath (the lease will state that) permission must not be unreasonably withheld.
    From Qld RTA...................A tenant cannot sub-let without written permission from the property owner/manager, who has the right to know and approve of all people living in their rental property. If the property owner/manager refuses permission, they must have a good reason. Although they do not have to give the tenant a reason for the refusal the tenant may be more likely to dispute the decision if a reason is not provided.

    From Qld RTA:

    What to do when...your tenant wants someone else to move in | Residential Tenancies Authority

    I have had tenants over the years on the odd occasion ask for another tenant/person to be added to the lease and most times I've allowed it as long as they checked out by way of refs and rental history and PM's report after meeting with them, however the short/medium stay sub-letting going on via gumtree, air bnb, et al concerns me as a landlord. The most prudent item is compromise or even non compliance of insurance policy claim.

    The tenant may be free to do as they wish in the property whilst they legally have tenure and of course the land lord can't control their guests, friends or visitors, however running a "sub-letting" or "licensing" business in a property that isn't owned by them doesn't sit well with me. I understand that VCAT decision went down to legal nomenclature and "wording" however when it affects the landlord's insurance, then call me a non accommodating and backward old fashioned prude, however the whole situation stinks as far as I'm concerned. It's my property at risk, not theirs.

    I expect in the years ahead, I will only keep houses that I can holiday let myself through stayz and so forth and only blocks of units where at least excessive activity can be monitored and reported to the property manager from other tenants. The rest will remain commercial and dividend paying stocks and some risky investments in start-ups which I find of interest and that have promise. Everything else that are single houses will be off loaded at the right time of the cycle for where they are situated.

    With the collaborative and sharing economy growing the sub-letting (under whatever name one calls it) will only continue in houses with many rooms where the tenant runs their own commercial concern and often times whilst the landlord is oblivious.

    To those civil libertarians who think I'm a greedy nasty landlord, the above is merely my 0.02 after having done this for over 35 years with at a quick guesstimate over circa 500 tenant years under my belt.
     
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  14. thatbum

    thatbum Well-Known Member

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    Does that mean once insurance companies evolve to cover this sort of scenario, you'll be okay with it?
     
  15. JDM

    JDM Well-Known Member

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    Do you know the name of the Airbnb case or have a link by any chance? I would be curious to read the judgement.
     
  16. thatbum

    thatbum Well-Known Member

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  17. JDM

    JDM Well-Known Member

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    Thanks. My understanding was that an express term of quiet enjoyment in a lease will override the common law covenant and can be modified (ie you can restrict the tenant granting an AirBnB style licence). With that said, I haven't looked into it for a long time so this may not be the case.
     
  18. thatbum

    thatbum Well-Known Member

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    Different states have different rules on what is allowed to be "contracted out" of the standard terms and provisions. But off the top of my head, its universal (in even the more laissez faire states) that you could never encroach into what was considered "quiet enjoyment" of the premises being leased.

    What exactly was quiet enjoyment was somewhat grey, and often misunderstood by lessors and PMs. A good rule of thumb was anything that was 'telling the tenant how to live', or even anything that restricted things beyond what an equivalent owner of a property would be able to do.
     
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