CLOS­ING THE AIRBNB LOOP­HOLE

Lisa Jemme­son

Elite Property Manager - - Contents - LISA JEMME­SON is a Se­nior As­so­ciate with Jemme­son & Fisher. For more in­for­ma­tion visit jem­fish.com.au.

BACK­GROUND

The land­lord rented her two-bed­room St Kilda apart­ment in Au­gust 2015. The par­ties en­tered into a stan­dard form Res­i­den­tial Ten­ancy Agree­ment for a pe­riod of 12 months. Dur­ing the cur­rency of the lease, the land­lord be­came aware that the ten­ants were sub­let­ting the prop­erty through a short-term rental site, Airbnb. The land­lord is­sued a ter­mi­na­tion no­tice. The mat­ter re­mained in dis­pute, and the land­lord made an ap­pli­ca­tion to the Vic­to­rian Civil and Ad­min­is­tra­tive Tri­bunal (‘Tri­bunal’) for an or­der of ter­mi­na­tion, pur­port­ing that the ten­ants breached the lease by sub­let­ting the prop­erty. The ten­ants con­ceded that the prop­erty was listed on Airbnb but dis­puted that the list­ing on the web­site and oc­cu­pa­tion by guests breached the Res­i­den­tial Ten­ancy Agree­ment. The ten­ants were rep­re­sented by the Ten­ants’ Union of Vic­to­ria.

WHAT IS AIRBNB?

Airbnb is a web­site that fa­cil­i­tates short­term stays of prop­er­ties and rooms. The web­site boasts over two mil­lion list­ings world­wide and op­er­ates in 191 coun­tries. The site is pop­u­lar be­cause it is easy to use and of­fers ‘hosts’ the abil­ity to pur­chase in­sur­ance to cover dam­age to the prop­erty, and also a li­a­bil­ity in­sur­ance if an oc­cu­pier was in­jured on site. All money is col­lected by the web­site, and the host is charged ap­prox­i­mately three per cent of the cost of the book­ing.

FIND­INGS AT FIRST IN­STANCE

When the mat­ter went be­fore the Tri­bunal at first in­stance, the Mem­ber dis­missed the land­lord’s ap­pli­ca­tion for ter­mi­na­tion on the ba­sis that the ten­ant was not ‘sub­let­ting’ the prop­erty. In the rea­sons for the de­ci­sion, the Mem­ber stated that “Airbnb is to the res­i­den­tial ten­ancy mar­ket what Uber is to the taxi in­dus­try – un­reg­u­lated and con­tro­ver­sial.” There was a find­ing that “the use by the ten­ants of the rented premises as an Airbnb amounts to a li­cence and not a sub­let­ting; as such the land­lord is not en­ti­tled to a pos­ses­sion or­der.”

WHAT IS THE DIF­FER­ENCE BE­TWEEN A LEASE AND A LI­CENCE?

This ques­tion goes to what we ‘give’ some­one for value in re­spect to land. The ul­ti­mate ‘giver’ is the Crown – ei­ther the Com­mon­wealth or State Crown. They pos­sess the ul­ti­mate ti­tle which al­lows them to make laws re­gard­ing land, in­clud­ing laws about ten­ancy.

The Crown may ‘give’ a fee sim­ple in­ter­est in land, or own­er­ship in land. This own­er­ship al­lows a landowner the right to con­trol who oc­cu­pies and goes upon the land. This own­er­ship is sub­or­di­nate to the Crown. There­fore, the Crown can still re­serve rights as to min­er­als and can

com­pul­so­rily ac­quire the land. A land­lord has own­er­ship in the land.

The land­lord can ‘give’ a ten­ant a lease­hold in­ter­est in the land. The Res­i­den­tial Ten­ancy Agree­ment trans­fers from the land­lord to the ten­ant the ex­clu­sive right to oc­cupy the land. The ten­ants may ex­er­cise this right against the world at large, in­clud­ing the land­lord; the ex­cep­tion to this rule is in re­gard to the Crown and a mort­gagee in pos­ses­sion with or­ders of the Supreme Court.

The next in­ter­est in the land in the hi­er­ar­chy is a li­cence. A li­cence is a con­tract that ‘gives’ some­one the right to go onto the land; how­ever, it does not give ex­clu­sive pos­ses­sion, which is the right to oc­cu­pa­tion against the world at large.

The case there­fore was that the ten­ant was sub­let­ting the prop­erty, which was a breach of the lease. The find­ing in the Tri­bunal was that a sub­let­ting did not oc­cur when the ten­ant listed the prop­erty on Airbnb be­cause there was not a dis­po­si­tion of a lease­hold in­ter­est. Rather, there was just a li­cence to oc­cupy and sub­let­ting re­quires a lease, not a li­cence.

GROUNDS OF AP­PEAL

There were three grounds of ap­peal against this find­ing:

“Was there any ev­i­dence or other ma­te­rial be­fore the Tri­bunal to sup­port the find­ing that the ten­ants were able to ac­cess the rented premises dur­ing each Airbnb stay?”

“When de­ter­min­ing whether a per­son has ex­clu­sive pos­ses­sion of a premises, is it rel­e­vant to con­sider whether that per­son can be made to leave the premises if they stay longer than the pe­riod that has been agreed for them to stay?”

“When de­ter­min­ing whether a per­son has ex­clu­sive pos­ses­sion of a premises, is it rel­e­vant to con­sider whether the premises is a per­son’s prin­ci­pal place of res­i­dence?”

DE­CI­SION IN THE SUPREME COURT

The land­lord con­tended that the Tri­bunal made vi­ti­at­ing er­rors in re­spect to three ques­tions at law, one of which was re­gard­ing the find­ing that Airbnb guests were not given ex­clu­sive pos­ses­sion. The Supreme Court found that “the Airbnb Agree­ment for the oc­cu­pa­tion of the whole of the apart­ment is prop­erly to be char­ac­terised as a lease be­tween the re­spon­dents, the ten­ants and the Airbnb guests for the pe­riod of oc­cu­pa­tion agreed be­tween them. It fol­lows that their en­ter­ing into this agree­ment is, hav­ing re­gard to their own ten­ancy of the apart­ment, a sub-lease.” Con­se­quently, the ten­ants were found to be in breach of the pro­vi­sions of their lease, which did not per­mit sub­let­ting with­out the writ­ten au­tho­ri­sa­tion from the land­lord or the land­lord’s agent.

WHAT DOES THIS MEAN FOR PROP­ERTY MAN­AGERS?

As it stands, a prop­erty man­ager can rea­son­ably as­sert to a ten­ant that the list­ing of the en­tire prop­erty on Airbnb would con­tra­vene the lease, although Jus­tice Clyde Croft did cau­tion that this case should not be seen as a judge­ment on all short-term oper­a­tors. In ad­di­tion, sub­let­ting is a pol­icy ex­clu­sion in most land­lord pro­tec­tion in­sur­ance poli­cies; unau­tho­rised sub­let­ting could void the pol­icy. If the prop­erty man­ager was aware of this fact and did not take ac­tion to ter­mi­nate the lease, they could be found to be in breach of con­tract with the land­lord and likely a tor­tious ac­tion could be com­menced against the agency.

THE TEN­ANTS CON­CEDED THAT THE PROP­ERTY WAS LISTED ON AIRBNB BUT DIS­PUTED THAT THE LIST­ING AND OC­CU­PA­TION BY GUESTS BREACHED THE RES­I­DEN­TIAL TEN­ANCY AGREE­MENT.

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.