Airbnb arrangement found to breach lease

By Tim Elliott • In Litigation, Property LawComments Off on Airbnb arrangement found to breach lease

Introduction:

The matter of Catherine Swan v Uecker [2016] VSC 313, discussed, inter alia, whether the Respondents had granted a lease or a licence to third parties by renting out the Applicant’s apartment through the AirBnB platform during her tenancy as a tenant of the apartment..

In this case, the Applicant was seeking for leave to appeal the Victorian Civil and Administrative Tribunal’s (“VCAT”) decision which was found in favour of the tenant. The Victorian Supreme Court was asked to determine whether the AirBnB agreement itself constituted a lease or a licence.

Facts:

The Applicant (“Landlord”) owned an apartment located in Fitzroy Street in Melbourne (“the Apartment”). The Respondents were the tenants in the Apartment for a term from 20 August 2015 to 19 August 2016 (“the Lease”). Subsequently, the Respondents made the apartment available to guests through AirBnB. Guests were able to have the whole apartment available to them or just one bedroom. However, this appeal was only concerned with guests having use of the whole apartment.

Initially, the Applicant sought an order for possession in VCAT claiming that the Respondents had sublet the Apartment contrary to the terms of the Lease. However, VCAT dismissed the application and said the Respondents merely granted a licence to AirBnB guests, not a lease, thus the Respondents had not sublet the Apartment to third parties.

In the Supreme Court, the Applicant relied on three grounds of appeal. These grounds of appeal focussed on the seminal issue of whether VCAT had rightly decided that the Respondents had exclusive possession of the Apartment despite having AirBnB guests staying. Justice Croft of the Victorian Supreme Court accepted the Applicant’s submissions and held that VCAT committed a vitiating error of law.

Decision:

Justice Croft emphasised that this decision was not a determination of whether AirBnB arrangements were illegal. Rather, the decision was concerned with whether the Respondents’ reliance on the AirBnB agreement to rent out the Apartment to the third parties constituted a granting of a lease or a licence to the third parties.

Based on the Respondents’ oral submissions, VCAT held that the Respondents were able to access the Apartment during each AirBnB stay. This was critical to VCAT’s decision that AirBnB guests did not have exclusive possession of the Apartment and that, as a consequence, there had been no sub-lease of the Apartment by the Respondents. However, Justice Croft overturned this decision stating there was no evidence to support VCAT’s finding that the Respondents were able to access the Apartment during each AirBnB stay.

Further, Justice Croft found that the fact that the Respondents could require a guest to leave if the guest had overstayed was irrelevant to the determination of the legal relationship between the Respondents and the guests. In other words, the fact that the Respondents could remove an overstaying guest is a right that the Respondents would have regardless of whether the relationship between the Respondents and their guests was a lease or a licence.

Lastly, Justice Croft held that it was not relevant to consider whether the Apartment was the Respondents’ principal place of residence in determining whether the Respondents had exclusive possession of the Apartment.

His Honour emphasised the importance of considering the public interest. This decision would prevent the tenants sub-letting the premises to the third parties without the Landlord’s consent.

Discussion:

The Supreme Court of Victoria decision has very important ramifications for the renting industry, especially as AirBnB is a fast-growing online listing platform. The AirBnB agreement itself might not provide a safeguard to the tenant like the present case.

As a tenant of a particular lease agreement, it is imperative for you to tread carefully to avoid any disputes between you and the Landlord if you are using AirBnB listings platform.

Bell Legal Group Partner Tim Elliott has a wealth of experience in all aspects of dispute resolution and civil litigation. Should you require advice in this area of law or regarding any commercial dispute, including advice regarding insolvent entities, contact Tim Elliott today on (07) 55973366 or via email  telliott@belllegal.com.au.

Rob Ffrench of Bell Legal Group has 35 years of experience in commercial, contract and insurance law. Rob has a wealth of understanding in acting for landlords and tenants, business structuring and strategic planning and can assist you or your company in these areas. Rob may be contacted on (07) 5597 3366 or via email rffrench@belllegal.com.au.

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