Property 101: Airbnb guests breached tenants lease of property

Property 101: Airbnb guests breached tenants lease of property
Property 101: Airbnb guests breached tenants lease of property

In June 2016 the Supreme Court of Victoria handed down its decision in the case of Swan v Uecker [2016] VSC 313.

The case is heralded as a victory for landlords after the Supreme Court held that, by allowing Airbnb guests short-term use of their rented apartment, the tenants had breached their lease by sub-letting the property.

The Landlord (Swan) leased her apartment to the Tenants (Uecker and Greaves) pursuant to a residential tenancies agreement (lease).

During the course of the lease the Landlord became aware that the Tenants were making the apartment available to guests via the Airbnb website.

The Landlord had not consented to the use of the property in that way.

The Landlord subsequently sought an order for possession from the Victorian Civil and Administrative Tribunal (VCAT) on the basis that the Tenants breached their lease by sub-letting the property, without the Landlord’s consent, when making it available to Airbnb guests. VCAT dismissed the application.

The VCAT decision held that, despite offering the property to Airbnb guests, the Airbnb Agreement between the Airbnb guests and the Tenants as hosts did not entitle Airbnb guests to exclusive possession of the property and granted a mere licence to occupy. 

On this basis, the Tenants “had not sub-let their tenancy agreement” with the Landlord. The Landlord appealed to the Supreme Court.

The Supreme Court held that the Airbnb Agreement between Uecker and Greaves and the Airbnb guests was characterised as a lease, rather than a mere licence.

Accordingly, the arrangement to allow Airbnb guests to occupy the property constituted a sub-lease and consequently the Tenants were in breach of their lease.

The case garnered a significant amount of public attention as Australian legislation grapples with the rise of the sharing economy such as Airbnb and Uber. The Judge also noted that, despite the public attention:

“This is not a case on the merits of Airbnb arrangements. Neither is it a case on whether or not Airbnb arrangements might be said to be ‘illegal’ – either in some particular or some general, non-legal, sense. Rather it is a case, on appeal, which raises for determination – directly or indirectly – the legal character of this particular Airbnb arrangement and any consequences this characterisation may have in the context of the terms of the lease of the apartment concerned.”

This decision was followed up by the subsequent Supreme Court decision in Owners Corporation PS 501391P v Balcombe [2016] VSC 384 where the court held that Owners Corporations could not make rules to ban landlords from renting their properties using the Airbnb website.

The article first appeared on TressCox Lawyer's website.

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