The decision of Swan v Uecker  VSC 313 from the Supreme Court of Victoria should provide some comfort for landlords who do not want their residential properties being used for short-term stays. Short-term stay agreements such as AirBnB agreements will likely be characterised as a lease rather than a mere licence to occupy where the agreement is to occupy the whole of the property. Consequently such agreements may be a breach of the relevant lease clause prohibiting subletting without consent and also the relevant Residential Tenancies Act.
The applicant landlord owned an apartment in Victoria which she leased to the respondents. The tenants listed the apartment on AirBnB as being available for short term stays. The minimum stay was 3 nights and the maximum was 5 nights.
The AirBnB listings for the apartment offered two distinct occupancy options. The first involved making the entire apartment available for AirBnB guests while the second involved making only one bedroom available.
The landlord sought an order for possession in the Victorian Civil and Administrative Tribunal on the basis that the tenants had breach cl 54 of the lease which prohibited sub-letting of the apartment without written authorisation from the landlord (see Swan v Uecker (Residential Tenancies)  VCAT 483).
The Tribunal dismissed the landlord’s application on the basis that the tenants had only granted the AirBnB guests licences to occupy, but not leases. Consequently, the Tribunal found that the tenants had not sublet the apartment.
The Tribunal reached this conclusion because the AirBnB guests did not have exclusive possession of the premises (i.e. they could not eject all others, including the tenants). The Tribunal found that the guests did not exclusive possession due to:
(i) the express words contained in the Airbnb agreement that referred to the use of the premises by guests as a licence,
(iii) the tenants’ retention of the premises as their principal residence before, during and after each of the Airbnb guests and
(iv) the ability of the tenants to access the premises during each Airbnb stay and make a guest who overstayed leave the property.
The Tribunal consequently ordered that the landlord’s application for a possession order be struck out. In these proceedings, the landlord sought leave to appeal from the order and, if leave was granted, that the appeal be allowed.
On appeal, the landlord asserted that the Tribunal erred in respect of the following 3 questions of law:
- 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 premises, it is relevant to consider whether the premises are a person’s principal place of residence?
It was only the agreement for occupation of the entire apartment that was relevant for the purposes of the appeal.
Justice Croft held in favour of the landlord, determining that the AirBnB agreement was a lease and that the apartment had been impermissibly sublet. The appeal was allowed and the landlord’s possession order was granted.
The tenants had argued that the AirBnB occupancy was akin to that of a “lodger” or a hotel guest. Justice Croft however found that the occupancy was no different from the nature of the occupancy granted to the tenants under the lease from the landlord (i.e. the AirBnB guests had exclusive possession). Justice Croft noted that:
“[the tenants] by means of the AirBnB Agreement, effectively and practically passed that occupation, with all its qualities, to their AirBnB guests for the agreed period under the AirBnB Agreement” [para 46]
Justice Croft also agreed with the landlord that the Tribunal had erred in respect of the 3 questions of law.
Despite the court finding that the AirBnB agreement was a lease rather than a mere licence to occupy, the court limited the application of the decision to the facts of the particular case with Justice Croft noting that “this is not a case on the merits of AirBnB arrangements” . Justice Croft also did not make any determination about the legality of AirBnB arrangements. In light of the court’s comments and to avoid the risk of a short stay agreement being characterised as a mere licence to occupy, landlords should consider inserting a clause such as the following in their residential leases:
“the tenant must not sub-let the premises or assign the lease or grant any licence to occupy all or part of the premises or otherwise part with possession of the premises without the landlord’s prior written consent – such consent not to be unreasonably withheld.”.
Practitioners acting for landlords who are aware that their properties are being used for AirBnB type occupancies should:
- Examine the lease and the relevant Tenancies Act to determine whether the occupancy is a breach of the lease/ legislation (i.e. is the occupancy likely to be considered a lease requiring the tenant to obtain permission to sublet?). In Victoria, the relevant legislative provision is s 81 of the Residential Tenancies Act 1997.
- If so, furnish the tenants with a notice to vacate (see s 253 of the Residential Tenancies Act).
- If the tenant refuses to vacate, make an application to the relevant Tribunal (the Victorian Civil and Administrative Tribunal in Victoria) for an order for possession (see s 322 of the Residential Tenancies Act).