Increased tourism is resulting in many people choosing to lease their holiday house – especially short-term. Like all commercial undertakings, renting out your residence also involves thinking about legal matters. This article outlines those legal issues prospective landlords need to consider.
1. Local Council
Before property owners can lease their holiday house, they need all requisite development approvals or consent from their local council. In particular, an owner needs to know whether their local council permits short-term rentals. For example, the City of Sydney requires any property owner wishing to rent out their property short-term to have prior council approval. Some unscrupulous landlords are willing to rent typically sub-standard property to more people than the dwelling can in fact sustain, creating a risk to public safety. The Council’s stance also has judicial authority. In 2013, the Land and Environment Court held that to be within the law, landlords needed council consent before they could rent their property short term.
2. Holiday Rental Agreement
You will need a comprehensively written holiday rental agreement that contains the following:
- Who the tenant is and how many people will be staying;
- How many people the property can accommodate;
- How much rent tenants must pay; and
- Dates the tenants will occupy the property together with check-in and check-out times.
Although this may seem unusual, the agreement should list the premises’ address. An actual address can minimise the potential for disagreement about the exact property a tenant agrees to rent.
Also, the agreement should provide the lessor’s terms and conditions for guests. For example, as a landlord, you will need a policy on pets, possibly small children and whether you require a deposit in advance. Your terms and conditions should list all prohibited activities such as parties as well as your policies when a guest changes their booking or cancels. For example, outline if and when a guest can cancel their booking and any implications for payment. Be sure to include when you, the lessor, can cancel a reservation. For example, if the roof sustains damage in a storm. It is also prudent that the agreement requires tenants to provide a bond. It should nominate the amount of the bond and when and for what you can use it.
3. Agency Agreement
If you intend to allow an agent or organisation to manage your property, you will need a written agency agreement. The agreement should include details about the agent’s commission and how the parties distribute costs. The agreement also needs to be sufficiently comprehensive to allow the agent to manage the property according to your wishes. Ensure you then outline all your conditions for guests.
The agreement should specify rent as well as whether guests need to pay a deposit or provide a bond. Also, it should have policies about cancelling and changing bookings.
If you intend to rent your holiday house short-term, you may also require a different kind of home insurance. With the success of accommodation sharing platforms like Airbnb, many insurance companies now offer products tailored for short-term rentals – adequate insurance can help protect your asset.
You also need to comply with all your tax obligations when leasing your holiday house. The Australian Taxation Office is increasingly focusing on ensuring that taxpayers do not profit from the ‘share economy’ – for example, renting a room on Airbnb – without paying income tax.
Also, a person who rents their holiday house or has it available for rent can claim proportionate expenses for the property. If the owner stays in the house or allows their friends and family to stay there at no charge or for a reduced fee, they must apportion these expenses.
If you have any questions or need any assistance with leasing your holiday house, get in touch with our leasing lawyers on 1300 544 755.