Airbnb is still figuring out its legal position as the latest Airbnb matter heard in the Victorian Civil and Administrative Tribunal (VCAT) ruled that a landlord could not evict her tenants for listing the apartment on Airbnb.

Landlord Catherine Swan noticed that her apartment had been listed on the website by tenants Barbara Uecker and Michael Greaves without her permission. Swan served the pair a notice in January asking them to vacate for breaching their tenancy agreement by renting out their second bedroom without her consent. Swan applied to VCAT for a possession order in early February. In March, the matter was heard in front of tribunal member Kylea Campana who decided that Swan could not evict Uecker and Greaves.

Licence or Sub-Lease

The matter hinged upon whether renting the room through Airbnb was considered a licence or a sub-lease. Uecker and Greaves relied on the Airbnb terms which state that “this is an occupancy agreement as a license to occupy premises”, with the guest described as a ‘licensee’. In order for Swan to be successful in her claim, she needed to show that the Airbnb arrangement was a sub-lease, which under s 81 of the Residential Tenancies Act (RTA) is not permitted without the landlord’s written consent.

Why Was it Considered a Licence?

In addition to considering the express terms of the Airbnb agreement which described the arrangement as a licence, Campana also considered the definitions of ‘licence’ and ‘sub-lease’ and the nature of the arrangement between the tenants and their Airbnb guests.

Definitions of ‘Licence’ and ‘Sub-Lease’

Where the person is given a right to occupy the bedroom, while sharing other parts of the residence with others, there is a presumption that it is a licence. In this type of arrangement, the licensor (i.e. tenant) retains control over the premises and the licensee is not given the exclusive right to use the place. This presumption is strengthened when the licensor (i.e tenant) is also occupying the premises.

In contrast to this, a sub-lease would mean that the sub-tenant has exclusive possession of the premises (either part or whole), with the right to exclude all others including the head-tenant.

It is important to note that if the question is addressed in court, courts will focus on the nature of the relationship and the intention of the parties rather than the terminology used. So in this situation, the fact that the Airbnb agreement used the word ‘licence’ did not alone determine the licence arrangement.

Airbnb Guests

To work out whether Airbnb guests had been granted exclusive possession such as to constitute a sub-lease, Campana looked at the details of their stay. Guests were given one bedroom to occupy and shared the other facilities in the apartment. Airbnb guests stayed short-term, and were under the terms of the Airbnb agreement including the departure and arrival times, payment platform, and their use of the premises. Tenants Uecker and Greaves retained access to the apartment before, during and after the guests’ stay and they also had the ability to ask a guest to leave if they overstayed.

In light of all of this, Campana found that there was no sub-lease and that the legal relationship between the tenants and the Airbnb guests was a licence to occupy. It was therefore not a breach of the RTA and Swan’s Notice to Vacate to her tenants was considered invalid.

What Does This Mean for Landlords?

The VCAT decision means that landlords should be careful about trying to evict tenants who list their properties on Airbnb, on the basis that they do not have permission to sub-lease. As the matter currently stands, you cannot rely on the provisions in the RTA which prohibit subletting without consent.

If landlords discover that their tenant is renting the premises to Airbnb guests without their consent and the landlord wishes to end their tenancy, they will need to rely on other provisions in the tenancy agreement or the RTA to terminate the lease.

Another option for landlords is to include a special condition in the tenancy agreement which explicitly prohibits posting the premises on Airbnb and outlining the consequences of breaching the condition.

Alternatively, if a landlord is happy for the premises to be placed on Airbnb by their tenant, they should make sure that the necessary council approval or insurance measures are in place.

Good News for Tenants

The VCAT decision has been considered good news for tenants wanting to earn some extra cash through Airbnb. Tenants are able to let others stay on the premises short-term and charge a fee, as long as it is not a sub-lease.

Despite this decision, tenants should still tread carefully in participating in Airbnb through their rental property. Airbnb is still a new concept in the legal space and the waters are still untested. Not only that but even if Airbnb-ing the premises is permitted from a licence/sub-lease perspective, it does not necessarily mean that all relevant areas of law are satisfied. Tenants should be aware of other legal considerations and requirements under the legislation and their tenancy agreement to avoid risk of eviction.

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Swan is now appealing this decision in the Supreme Court. The VCAT decision described by many as a landmark may be overturned and bring good news for landlords and disappointment for tenants. But watch this space – we will keep you updated as the matter progresses. 

What do you think? Tag us on Twitter @legalvision_au and let us know or get in touch with our startup lawyers on 1300 544 755.

Dhanu Eliezer

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