Airbnb is one of Silicon Valley’s tech darlings, a so called “unicorn” (a start-up with a $1 billion plus valuation) which arranges for short term accommodation in over 57,000 cities world wide, has more than 500,000 rental bookings each night, and does all this while not owning a single piece of property.  As at 30 June 2016 it had completed 80 million bookings.

Given the ease of signing up for Airbnb and hosting a visitor, it is easy to see why tenants in rental accommodation would want to subsidize their own rent, for example to make use of a spare bedroom, or to have their place utilized while on holiday. This is particularly so where a tenant is paying top dollar for prime real estate in a major capital city such as Sydney or Melbourne.

However sensible the financial motivation is in listing a spare bedroom on Airbnb, the language of residential tenancy agreements almost always forbids sub-leasing of the property without the permission of the landlord. For example clause 32.1 of the Standard Form Residential Tenancy Agreement states:

the tenant may, with the landlord’s written permission … sublet the residential premises.

Given complaints reported in the media about Airbnb properties being reportedly used for drug use, orgies and by escorts, landlords are understandably hesitant to give consent to the use of their property in such a way.

One landlord in St Kilda, Victoria, discovered that a tenant had been listing a spare room and the whole property on Airbnb. The landlord sought to terminate the lease on the basis that the tenant was making an unauthorised sub-lease without the landlord’s consent in breach of the lease.

At first instance, VCAT determined that the tenant’s listing of the spare room and whole property, and hosting of guests, was not a breach of the lease warranting termination but rather was merely the grant of a licence by the tenant to their guests.

The landlord appealed to the Supreme Court of Victoria which, in the decision of Swan v Uecker, overturned the VCAT decision and found the landlord was entitled to terminate the lease.

It was agreed between the parties that:

  1. Part of and the whole of the property was made available on Airbnb by the tenants at various times; and
  2. The landlord did not consent to the listing of the property by the tenant on Airbnb or use of the property in this way.

The agreement between the tenants and their guests, which used the standard Airbnb terms and conditions, specifically described the listing as being for merely a licence for the guests to occupy the property for the booked period, as distinct from a sub-lease (for which consent of the landlord would be required).  It was this description relied upon by VCAT in reaching it’s decision.

The Supreme Court considered the caselaw relating to the characterisation of such an arrangement as a licence as distinct from a sub-lease and applied the test in Radaich v Smith as cited in the NSW decision of Lewis v Bell where Mahoney JA said that the test is one of exclusive possession. That is, the Court needed to decide if a guest was entitled to possession of the room or property during the booked period to the exclusion of all others.

The Supreme Court found:

it was the possession—exclusive possession—that would be expected of residential accommodation generally. In the present circumstances, it is no different from the nature of the occupancy—the exclusive possession—granted to the tenants,

…the Airbnb Agreement for occupation of the whole of the Apartment is properly to be characterised as a lease between the Respondents, the tenants, and the Airbnb guests for the period of occupation agreed between them. (Emphasis added).

While the Supreme Court considered in detail precise questions put by the parties arising from the VCAT decision, the essence of the decision is captured in the above quote, which confirms that tenants under residential tenancy agreement risk termination of their lease if they are caught listing even a room of a property on Airbnb or an equivalent site without the landlord’s written permission.

Australian renters for now, have the door locked to legitimately participating in the so-called sharing economy via Airbnb without involving their landlord or amending the lease prior to moving in so that such sub-letting would not require the landlord’s consent.