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    The Implications of Airbnb on Subletting and Community Title by-laws

    Author //

    • Paul O'Dea Partner
      Phone: 61 7 3001 9243
      Email: p.odea@clarkekann.com.au

    In recent years the residential property market has witnessed a ‘boom’ in short-term leasing arrangements thanks to online platforms like Airbnb.

    However, the growing popularity of these platforms has raised some confusion surrounding the rights and obligations between tenants and landlords, and the powers of bodies corporate.

    The rights of tenants to sublet their residences on platforms like Airbnb and the rights of bodies corporate to enact by-laws which restrict owners’ ability to use these services have both been the subject of recent litigation. The outcomes of these cases provide important lessons for those looking to use these online platforms.

    Implications for Australian tenants and landlords who use or sublet on Airbnb

    Recent findings by the New Zealand Tenancy Tribunal have highlighted the relationship between subletting laws and platforms like Airbnb.

    Facts

    In the case of Sunrise Property Management and Services Ltd v Lee [2018 NZTT Manukau 4140080] the tenants of a residential premise in Auckland were renting out a room in the property through the online platform Airbnb between March and June 2018.

    Sunrise Property Management and Services (“Sunrise”), on the behalf of the landlords, bought a claim against the tenants in the Manukau Tenancy Tribunal in July 2018. They sought compensation and an order to terminate the tenancy.

    Decision

    In both Australia and New Zealand, a tenant cannot enter into a sublease without the written consent of the landlord.

    In Queensland, this is contained under section 238(2)(a) of the Residential Tenancies and Rooming Accommodation Act 2008 (“RTRA”) and further under clause 34 of the Residential Tenancies Authority’s ‘General Tenancy Agreement’ (Form 18a).

    The Tribunal held that Airbnb and similar platforms are distinct from a typical ‘lodger’ or ‘hotel guest’ arrangement and are instead a form of subletting as they granted exclusive possession of the property. By failing to seek the consent of the landlord prior to signing up to Airbnb, the tenants were in clear breach of the tenancy agreement and section 44 of New Zealand’s Residential Tenancies Act 1986.  

    It was immaterial that the tenants only sublet a room of the property, rather than the whole property. The definition of ‘premises’ under section 2 of the Residential Tenancies Act 1986 includes any part of the premises.

    The Tribunal also refused to order a termination of the tenancy on the basis that the tenants took immediate steps to comply with the breach notice from Sunrise and no evidence could be shown that the property continued to be sublet. 

    The landlords were awarded costs and compensation for mental and emotional distress, but were denied an account of profits as there was no evidence that there were any.

    Implications for Australian tenants and landlords

    While New Zealand decisions are not binding on Australian courts and tribunals, they are considered highly persuasive. Decisions like Sunrise Property Management and Services Ltd v Lee are often a good indicator of where our courts are heading.

    The use of Airbnb and similar platforms has, for the most part, been considered a form of subletting in Australia. The Victorian Supreme Court in Swan v Uecker [2016] VSC 313 held that an Airbnb arrangement contained the characteristics of exclusive possession such that it was deemed to be a sublease and not a license to the property.

    Likewise, Queensland’s tenancy laws are also similar to those of New Zealand, with section 238 of the Residential Tenancies and Rooming Accommodation Act 2008 (“RTRAA”) stating that;

    ‘(2) The tenant may transfer all or a part of the tenant’s interest under the agreement, or sublet the premises, only if—

    (a) the lessor agrees in writing to the transfer or subletting; or

    (b) the transfer or subletting is made under an order of a tribunal.’

    The term ‘premises’ is defined as including ‘a part of premises and land occupied with premises’. Subletting restrictions are therefore not confined to circumstances where the whole property is sublet, but will also individual rooms within a property.

    The finding of the New Zealand tribunal adds to what is a growing consensus that in most cases, Airbnb arrangements have the same qualities as a lease/sublease and are therefore subject to the same tenancy restrictions.

    Lessons for Landlords

    Landlords should consider including a clause in their leasing agreements which clarifies that sub-leasing includes other short-term leasing arrangements like Airbnb and similar platforms.

    Where a tenant has sublet whole or part of a property either by a ‘traditional’ subletting agreement or through more modern platforms like Airbnb, the landlord may be entitled to compensation or any profits that the tenant has derived from their breach, provided that there is evidence.

    It should also be noted that under the RTRAA tenants have a right to request a sublease from their landlord. When faced with such a request, landlords should bear in mind that if they wish to refuse their consent, they must provide a reasonable justification as to why.

    The Implications of Airbnb on Community Title Schemes and By-Laws

    Unlike landlords’ rights, bodies corporate cannot enact by-laws that restrict an owner’s ability to ‘deal’ with their property (e.g. sell, mortgaging, renting, etc.) or discriminate between types of occupier, particularly where a lot is being used for residential purposes. The recent QCAT appeal of Body Corporate for Hilton Park CTS 27490 v Colin Robertson demonstrates how these restrictions extend to protect short-term letting arrangements like Airbnb.

    The owners purchased a property under the Hilton Park Community Titles Scheme (“CMS”) in October 2016. The CMS was also registered under an ‘Accommodation Module’ (i.e. registered for predominately residential occupation and not for the carrying out of business or commercial enterprise). The owners later placed their property on ‘Stayz.com.au’ and engaged a property manager for holiday letting.

    By-law 12.1 of Hilton Park’s CMS required that the lots only used be for residential purposes and prohibits use for ‘commercial purposes’. In February 2017, the body corporate passed a motion extending the meaning of ‘commercial purpose’ to include letting for less than 6 months.

    The appeal turned upon the interpretation of section 180(3) of the Body Corporate and Community Management Act 1997 (“BCCMA”), which stipulates,

    ‘If a lot may be lawfully used for residential purposes, the by-laws cannot restrict the type of residential use.’

    The tribunal held that the phrase ‘type of residential use’ was interpreted to include both short-term and long term uses. As such, the body corporate’s attempt to prohibit short-term residential was invalid under section 180(3).

    QCAT held that where a lot is registered under an Accommodation Module, its use for a residential purpose, even for a profit, does not make it for ‘commercial purpose’. Hence, Hilton Park’s attempt to classify letting arrangements for less than 6 months as being for a ‘commercial purpose’ under its by-laws was also invalid.

    So where does this leave bodies corporate?

    Bodies corporate have limited avenues in preventing owners from undertaking short-term leasing arrangements like those used by Airbnb and similar platforms, particularly where the CMS is registered under an Accommodation Module. As mentioned above, the BCCMA has clear safeguards in place to protect property owners from the imposition of such restrictions.

    This reflects a body corporate’s core function; as the administration, management and upkeep of ‘common property’ (e.g. stairwells, elevators, pools, etc.) and not a regulator of how private owners put their lot to use (provided that it is broadly within the objective of the CMS and the BCCMA).

    Section 180(5) of the BCCMA also provides that a by-law must not discriminate between occupiers. It is therefore unlikely that a body corporate could enact a by-law that would prevent an occupier under a short-term lease from using common property.

    Even where a short-term occupier has breach a by-law (e.g. noise, parking, etc.), a body corporate still faces a complex and protracted process to hold the person/persons to account.

    The decision to issue a notice of breach must be passed by the body corporate at a general meeting and must be served on the person/s believed to have caused the breach. This raises clear issues for enforceability, as short-term occupiers often do not stay longer than a few days.

    For queries regarding community titles, subleasing and leasing arrangements, please contact Paul O’Dea in our Property & Projects Team.

    ClarkeKann is a commercial law firm with offices in Brisbane and Sydney. Our expertise covers commercial & corporate transactions, employment & IR, financial services, litigation, risk management and insolvency, property transactions and resources projects, across a range of industries. For a full list of our legal services, please visit our website at www.clarkekann.com.au. To update your contact details or unsubscribe to any of our publications, email us at ck@clarkekann.com.au

    This bulletin is produced as general information in summary for clients and subscribers and should not be relied upon as a substitute for detailed legal advice or as a basis for formulating business or other decisions. ClarkeKann asserts copyright over the contents of this document. This bulletin is produced by ClarkeKann. It is intended to provide general information in summary form on legal topics, current at the time of publication. The contents do not constitute legal advice and should not be relied upon as such. Formal legal advice should be sought in particular matters. Liability limited by a scheme approved under professional standards legislation. Privacy Policy
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