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Supreme Court Victoria: Tenants Airbnb-ing = breach of lease

Discussion in 'General Property Chat' started by KateAshmor, 10th Jun, 2016.

  1. KateAshmor

    KateAshmor Victorian conveyancing lawyer Business Member

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    The Supreme Court of Victoria has just handed down a landmark judgment, finding that tenants under a Residential Tenancies Lease who list a property on Airbnb are breaching their lease and may be evicted by their landlord. This overturns a recent VCAT decision.

    Here is the judgment: Swan v Uecker [2016] VSC 313 (10 June 2016)

    Paragraph 75 of the judgment finds that when tenants Airbnb a property, this amounts to exclusive possession for the Airbnb'er, which is a sub-lease and not a licence (VCAT had found it to be a licence).

    Subleasing a property without the landlord's consent is a breach of the Residential Tenancies Act and it can lead to the tenant being evicted pursuant to the Act.

    This is a landmark decision in Victoria and a victory for landlords.
     
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  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    Saw that morning, and thank goodness that there is some sense in the justice system.
     
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  3. Xenia

    Xenia Adelaide Property Manager Business Member

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    How does that help landlords?

    My question would be, if an eviction occurs through a breach of lease like subleasing to A BnB, can a landlord then persue lease break costs including vacancies through insurance????

    terminating the lease just because may not always be a financially viable descision and some landlords would not be able to hold the reletting and lease break costs if their insurance policy is void.

    Can someone from ebm please comment on this?
     
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  4. melbournian

    melbournian Well-Known Member

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    fallout for these would be lesser Airbnb Places in victoria that are done by tenants. i personally know a lot of ppl who do this. The only ones who can airbnb subject to the owners corp allowing it are the owners.
     
  5. HUGH72

    HUGH72 Well-Known Member

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    Good result, I was hoping the original VCAT decision would be over turned.
     
  6. larrylarry

    larrylarry Well-Known Member

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    It was handed down today. I'm sure AirBnB lawyers, insurers, agents and landlords are looking at these with interest.

    Last paragraph is instructive in my view, "Secondly, the context provided by the terms of the particular apartment lease are important. Although this apartment lease is a residential lease, many commercial leases restrict the tenant from sub-leasing, assigning the lease, granting any licence to occupy all or part of the leased premises or otherwise parting with possession without the landlord’s prior consent. Broad terms such as this would prevent, for example, sub-letting or licensing without the landlord’s consent and would avoid the need—as in the present case—to characterise the nature of the same arrangement like the AirBnB arrangement for occupation of the whole of the leased premises as a sub-lease or a licence."

    Consent or lack of it.
     
    Last edited: 10th Jun, 2016
  7. magma

    magma Active Member

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    Can anyone link me to a thread about Airbnb, the search function can't seem to pickup anything. I've got a a CBD serviced apartment I'm thinking of converting to Airbnb.
     
  8. thatbum

    thatbum Well-Known Member

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    I'm actually quite surprised it went that way, and personally I think some of the reasoning is pretty unusual.

    I wonder if the tenancy union might appeal it higher.
     
  9. TheGreenLeaf

    TheGreenLeaf Well-Known Member

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    If my tenants are sub-leasing through AirBnB, at least they should have enough money to pay my rent...
     
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  10. D.T.

    D.T. Adelaide Property Manager Business Member

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    We've raised it with EBM before. Insurance void in this situation.
     
  11. Xenia

    Xenia Adelaide Property Manager Business Member

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    Ok but why?

    Why can't you do a claim against the tenant. The tenancy would just be a normal residential lease which is insurable. The tenant is still responsible for the lease and has a bond against it. If that tenant defaults, why can't rent defaults be claimed?

    The landlord had no idea what the tenant is using the property for nor did the agent.
    This puts a landlord completely at the effect of a tenant relies on the tenant doing the right thing which goes against what the purpose of insurance is.
     
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  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Landlord could attempt to recover any loss from the tenant - but this is a different matter to whether insurance covers you or not.
     
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  13. larrylarry

    larrylarry Well-Known Member

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    A policy decision as opposed to rights of landlord v tenants.
     
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  14. Xenia

    Xenia Adelaide Property Manager Business Member

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    I have no experience with air Bnb, I have not encountered this as a PM so trying to get my head around it.

    So a property is leased, rent is paid on time and routine inspections show that the property is clean and tidy - all good.

    Most tenants are not home during routine inspections so we have no way of knowing who is living there. The tenant that signed the lease communicates with our office for maintenance and pays rent.

    Lease is renewed, all good...

    6 months later tenant informs us of a break lease so we readvertise, take property back and source new tenant - this is a common property management procedure.

    The property required cleaning and some maintenance, a few scratches in walls, gardening etc... Very normal end lease stuff which exhausted the bond.

    We claim bond and get it - just another routine pm procedure.

    We lodge an insurance claim for loss of rent since it's a break lease.

    Then we get knocked back because the insurance found some evidence that the property was subleased on air BnB without anyone's knowledge?

    What is it that actually makes the claim void? The advertisement? What does insurance look for to void the claim?

    Should property managers be looking on Airbnb regularly to see if any of our properties are being advertised on there?
     
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  15. albanga

    albanga Well-Known Member

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    Just another money making opportunity for landlords and insurance companies.

    Rental agreement - Allows property to be subleased for AirBNB, additional cost of $20 per week for this privilege (which depending on location would be well worth it).

    Insurance - Would you like the option to be covered under subleasing? Cool that wil be an additional $100 premium.

    Win/Win for everyone. Insurance companies make more money, landlord makes more money and tenant who subleases makes more money.
    My mate lives in Sydney, travels a bit for work and subleases a bit. Reckon he makes $10,000 a year. Think he wouldn't happily pay increased rent if this got cracked down on but an extra $1000 per year made it legal?
     
  16. York

    York Finance Broker Business Member

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    Probably because the terms of the policy stipulate that the cover is for the landlord being insured in the event of damage/loss, provided that the lease is a standard landlord-tenant lease. As soon as that connection is broken with sub-leasing, the policy is void because the terms have been breached.
     
  17. Xenia

    Xenia Adelaide Property Manager Business Member

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    But it's been breached by the tenant not the landlord.
     
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  18. Xenia

    Xenia Adelaide Property Manager Business Member

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    It makes perfect sense and it's obvious that if a landlord uses their property for Airbnb that it won't be covered under a normal landlord policy but I can't get my head around an insurance policy being void when a landlord entered into a standard lease in good faith and the tenant has done the wrong thing behind his back and ends up voiding the landlords policy.

    Why???
     
  19. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You would have to review the policy carefully to see if this is the case - it may not be if the landlord is unaware of the tenant renting out to someone else.
     
  20. Xenia

    Xenia Adelaide Property Manager Business Member

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    I would be surprised if a policy allows a landlord to be totally at the effect of dishonest tenant behaviour.

    That's why I'm questioning it here and trying to get answers.

    Some comments from insurance brokers could be useful.