In our previous article “Holiday Lettings Unlawful in Some Residential Areas”(link below), we discussed the case of Dobrohotoff v Bennic  where a neighbour was frustrated by a nearby home being leased for wild parties including hens’ and bucks’ nights. Since then there have been developments in this interesting area of law.
First, there is the recent decision of Swan v Uecker  that gave possession of tenanted premises to the landlord because the tenant’s subletting on AirBnB was a breach of the lease.
Second, the NSW Government Legislative Committee on Environment and Planning has tabled its report on short-term holiday letting (link below).
The case of Swan v Uecker  VSC 313 ended with the landlord Catherine Swan getting back possession of her two bedroom apartment in Fitzroy Street, St Kilda. The tenants were using AirBnB to sublet the apartment (both a spare room and the whole apartment). However, the residential tenancy agreement between the landlord and tenant ("the lease") did not allow subletting.
The Victorian Civil Administrative Tribunal (VCAT) first heard the case and determined that the AirBnB guests were just licensees rather than sublessees. This did not breach the lease.
The Supreme Court of Victoria disagreed. The judge said that the AirBnB guests were given exclusive possession of the apartment during their stay and the arrangement was therefore a sublease rather than a mere license to use the apartment.
There were three questions of law on appeal:
Question 1: Did the tenants have access to the premises during guest stays?
The Judge said that the tenant’s access to the premises was irrelevant in determining whether it was a lease or a licence. "The effect of the agreement meant the guest enjoyed exclusive possession of the apartment during the stay."
Question 2: Could the tenants request the guests to leave if they had overstayed?
The Judge stated that this question did not determine exclusive possession as a landlord can request a tenant to leave if they have overstayed.
Question 3: When determining whether a person has exclusive possession of a premises, is it relevant to consider whether the premises is a person’s principal place of residence?
The Judge determined that whether the tenants used the apartment as their principal place of residence was not relevant in determining whether the guests had exclusive possession during their stay.
The court stressed that this case did not decide the legality of the terms in AirBnB's agreements. It only determined whether, in this specific set of circumstances, the tenant had breached the terms of their lease by subletting the apartment.
New South Wales Inquiry – Regulation of Short Term Letting in NSW
The New South Wales Legislative Committee’s inquiry recommended, among other changes, a change to planning laws to permit short-term rentals as well as implementing a government mandated compliance system for short-term rentals.
What should you do?
Landlords in NSW generally use the standard Residential Tenancy Agreement (RTA) supplied by Fair Trading. The Standard RTA provides that a tenant can only sublet the premises with the landlord's written permission. The landlord can refuse permission to sublet the whole of the premises, and need not be reasonable. However a landlord must not unreasonably refuse transfer or subletting of part of the premises. This requirement exists because the NSW Residential Tenancies Act states that a landlord must not unreasonably withhold consent if it results only in an additional tenant under the Agreement, or a partial subletting. The standard RTA and the legislation both state that “overcrowding” is a reasonable basis for refusal.
What can landlords do?
It seems that landlords in NSW have limited means to stop AirBnB sublettings of part of leased premises.
If landlords want to stop AirBnB lettings, they could:
Add a condition to the standard RTA, to provide that sub-letting is not permitted to short term occupants for tourism or commercial purposes; and
Specify the number of occupants of the property so that subletting to additional guests would breach the RTA, giving landlords the ability to refuse consent on those grounds.
Landlords might also include a condition that the landlord will consent to AirBnB subletting if the tenant pays a proportion of any AirBnB rents to the landlord. This might be challenged if it breaches the prohibition on the landlord charging anything more than the reasonable expenses of giving permission to sublet.
Landlords of strata apartments could look at the strata by-laws, some of which prevent short term lettings and tourist accommodation.
Contact Peter McNamara or Majella Haywood for questions about your commercial and residential leases.
“Holiday Lettings Unlawful in Some Residential Areas”
Swan v Uecker 
Adequacy of the regulation of short-term holiday letting in New South Wales