Landlords: Can Victorian Tenants Use Your Property As An AirBnB?

In June 2016, the Supreme Court of Victoria ruled in a landlord’s favour in an unprecedented case. It found that tenants had breached their agreement by using the property as an AirBnB, as this constituted a sub-lease. This is something expressly prohibited in the tenancy agreement without the landlord’s consent.

After the Victorian Civil and Administrative Tribunal (VCAT) had initially ruled in favour of the tenants, calling the AirBnB arrangement a licensing issue, this was big news for everyone who owns rental property in Melbourne. But where does the law stand now? And how can landlords make sure these issues don’t arise in their own properties?

The law surrounding sub-leasing

At the moment, the law surrounding sub-leasing is clear. As Consumer Affairs Victoria outlines, “a tenant must get written permission from the landlord before sub-letting”.

“If a tenant sub-lets the property without doing so, the landlord can serve them with a 14-day notice to vacate (end the tenancy and leave the property).”

However, unless the landlord has a good reason not to give permission, they must approve of the head tenant’s request to do this. Either party can take the issue to VCAT if they think someone is acting unjustly. But as we saw in the AirBnB case, even then the Supreme Court can overrule this.

The best solution for landlords is to clearly stipulate the conditions around sub-leasing in the tenancy agreement – perhaps directly addressing AirBnB and whether it counts as a sub-lease for the tenants. The Supreme Court did note that its ruling in June “is not intended… to be used in any later consideration of the court’s reasons”, so may not be reliable as a precedent.

How to manage difficulties with sub-leasing legislation

At the time of writing, the law was yet to be adjusted to accommodate AirBnB arrangements into the Residential Tenancies Act. This means the onus is on landlords to make sure their agreements are clear and the consequences made plain to their tenants, lest they end up in a prolonged dispute at VCAT.

Tenants using your property as an AirBnB is a convoluted issue – and one perhaps better handled by a property manager.

The clear alternative here is to use the services of a property manager. At Nelson Alexander, our team can conduct a property appraisal and give you advice on not just best practice for managing tenants, but also maximising the returns on your investment property.

Legislation and wording around sub-leasing and AirBnBs is just one of many complicated issues that landlords face on a daily basis. Get in touch to find out if our professionals can take this off your hands.