A lease, or not a lease: that is the question

‘Whether an apartment for a night, a castle for a week, or a villa for a month’ …

Airbnb is an online marketplace that lists short-term accommodation around the world.

But is Airbnb actually legal in Victoria? As Airbnb’s terms of service (Terms) state, ‘Hosts alone are responsible for identifying, understanding, and complying with all laws, rules and regulations that apply to their Listings and [hosting]’.

Owners corporations’ rules

Interestingly, strata laws do not permit owners corporations to prevent lot owners from letting their lots, including on short-term bases.^[1]

In 2015, VCAT dismissed an owners corporation’s attempt to enforce a rule restricting short-term letting.^[2]The rule, prohibiting lot owners from letting their residential lots for fewer than 30 days at a time, was found to have been invalidly made. On appeal,^[3] the Supreme Court of Victoria affirmed this decision and confirmed that no legislation conferred power on owners corporations to ban the short-term letting of ‘apartments’.

Council by-laws

Local councils also have their own rules regarding short-term renting. As local laws cannot contradict state laws, until state governments clarify the rules, there will be differing restrictions on short-term rentals depending on each council’s zoning regulations.

State legislation

The Residential Tenancies Act 1997 (Vic) does not permit residential tenants to sublet rented premises without the landlord’s consent.

And therein lies the question: does the relationship between tenants hosting Airbnb premises and Airbnb guests create a sublease or a mere licence?

The primary distinguishing factor between a lease and a licence is exclusive possession, that is, leases provide tenants with a right to exclude others.

However, ‘there are cases in which it is not clear from the terms of the grant … what it is that is being granted’ eg rights to possession, occupancy or use.^[4]

This is where consideration of the parties’ intentions comes in.

In a recent Victorian case,^[5]the tenants argued that clause 13 of Airbnb’s Terms was evidence of the intention of both themselves and their guests to license the premises.

The clause states: ‘Guests agree that a confirmed Booking is merely a license [sic] granted by the Host to the Guest to enter and use the Listing for the limited duration … in accordance with the Guest’s agreement with the Host’.

Taking into account surrounding circumstances, the Supreme Court found that the Airbnb guests were granted rights of exclusive possession and occupation.

This, therefore, meant that the Airbnb hosts had sublet the premises, contrary to their lease agreement.

Conclusion

Prospective Airbnb hosts should be conscious of the legal issues surrounding short-term rentals. We advise that hosts seek legal advice, rather than just ‘sleep on it’.

^[1] NSW Fair Trading, ‘Strata Living: Get involved’, 28.
^[2] Owners Corporation PS501391P v Balcombe (Owners Corporations) [2015] VCAT 956.
^[3] Owners Corporation PS 501391P v Balcombe [2016] VSC 384.
^[4] Lewis v Bell (1985) 1 NSWLR 731 at 734 – 735.
^[5] Swan v Uecker [2016] VSC 313.