Tenants, landlords and subletting on Airbnb: what are your rights?

Property management

According to many sources Airbnb apartment rentals are being listed at an increasing rate as some tenants realise profits from subletting. While generally Airbnb guests will be harmless and respectful of the property they lease, the entire process still comes with risks attached – and at the end of the day, the act of a tenant leasing out your property without your consent can feel disrespectful at best. If you don’t want your tenants subletting your property through Airbnb, there are some steps you may be able to take.

As a landlord, you are responsible for what happens on your property. If a tenant is renting through Airbnb, are they being responsible, too, or are they taking advantage of an opportunity to profit from their rental? In some cases, tenants in smaller houses or apartments will rent to larger groups of people to get more rent. In other cases, they may not abide by local council regulations or even pay the insurance offered by Airbnb. You simply cannot know how responsible a tenant will be and may be taking a risk by allowing them to sublet through Airbnb.

Why renters are subletting on Airbnb

It can be tempting to sublet on Airbnb when a tenant can rent their apartment and get surprising returns:

  • An apartment in Melbourne can rent for anywhere between $50 and over $300 a night for a single guest
  • A single bedroom can rent for $14 to over $100 per night and the tenant can stay in the apartment if they have a spare bedroom
  • A luxury apartment can rent for $400 or more per night

These are prices for apartments or a bedroom in a Melbourne apartment. Homes and apartments in popular tourist destinations can be sublet for much more. In Byron Bay, a 2-bedroom home near the beach rents for nearly $200 a night, and many Byron properties on Airbnb rent for even more than that.

Some tenants sublet without notifying their landlord in advance. Others make arrangements with their landlords and share the profits with them. Those who don’t notify their landlords are not necessarily in breach of the law unless the local laws specify “permanent residency,” but other problems can arise. Not all Airbnb guests are considerate and some can do a lot of damage to a property or pack too many people into an apartment, raising maintenance costs.

When landlords discover their tenants are subletting through Airbnb or another service for tourists, they are often shocked. They assume the tenant is occupying the apartment or house and in some cases discover the tenant is subletting on a semi-permanent or permanent basis and making money from their rental while the landlord has increased maintenance costs and may not be able to get insurance compensation for damage done to the property.

Is subletting an Airbnb illegal?

The first thing to do is to find out if subletting your apartment through Airbnb is legal in your area. Regulations differ and where there may be no regulations in one area, another area may have regulations against it. They may have “permanent residency” laws in place which makes subletting illegal.

As increasing numbers of renters are discovering subletting on Airbnb, real estate agents and landlords are fighting back by restricting tenants from subletting, according to an article on ABC News. Why would they do this? For one thing, subletting can void an insurance policy, since most insurance policies cover tenants only. There have been cases of Airbnb guests destroying or damaging property and sometimes causing trouble with neighbours.

When an insurance company finds out the property was sublet by a tenant even for a short period of time, they refuse to honour the insurance policy. They can do this because subletting is considered running a bed and breakfast or a hotel and this won’t be covered under an insurance policy designed for tenants. Tenants may feel like they’re covered, as when you list a property on Airbnb you are automatically covered by Airbnb’s Host Protection Insurance, however, some Airbnb hosts have had problems claiming insurance for damage done by guests – so you can’t be sure that it will cover everything.

On forums and even within the Airbnb Online Community, you will see plenty of posts by hosts complaining about not being able to get compensation or even a response from Airbnb when things go wrong.

In another case, a tenant was subletting their apartment on a permanent basis. The tenant was making thousands of dollars per month on the rental payments. In another case, a landlord discovered his rental property in Byron Bay was being sublet on Airbnb. He was concerned that it raised “liability issues and increased maintenance costs.” He could do nothing about it until the lease expired, but when it did, he was determined to put a clause in the lease forbidding subletting through Airbnb or another tourist rental service.

How can you prevent your tenants from listing your property on Airbnb?

Some real estate agents and landlords are calling Airbnb sublets a “cancer” that is growing at an exponential rate as tenants discover they can pay their monthly rent in a short amount of time and make a profit after that. Many landlords are starting to take steps to prevent tenants from listing on Airbnb.

As mentioned above, one landlord couldn’t amend his lease agreement until after it expired. A simple clause in a lease can do the trick. It’s best to make the clause state that subletting is not allowed, because mentioning Airbnb by name may not be enough for a tenant to not sublet. They may go through a service like Stayz or another international service.

Secondly, a landlord can take a closer look at local zoning laws. In many areas, short-term holiday rentals are regulated. Other councils permit holiday rentals, but the owner or occupier must first get planning approval.

In one case reported by Legal Vision, a landlord discovered their tenant was subletting through Airbnb and initiated legal proceedings against the tenant. The Victorian Civil and Administrative Tribunal (VCAT) ruled that the tenants granted a licence rather than leases to their Airbnb guests. The case went before the Supreme Court and the court overturned the decision, stating that the tenants were subleasing the property rather than licensing it.

Other regulatory issues may cover health and safety regulations; fire and disability access regulations; and the requirement for public liability insurance. If the tenant has taken out Airbnb’s insurance, which covers damage and personal injury, public liability insurance may not be an issue. However, if they pack too many people in a home or apartment by installing bunk beds, they may be in breach of health and safety regulations. If a disabled person rents the unit or home and they haven’t taken steps to give them safe access to the building (such as a wheelchair ramp), they may be in breach of disability access requirements.

Ultimately, the least expensive way to prevent tenants from listing your property on Airbnb is to add a clause to the lease agreement forbidding them to sublet the building. You don’t want to go through lengthy and expensive tribunal and court expenses. If the tenant is in breach of local regulations, you may be held responsible even if you live in another state and aren’t aware the tenant has been using Airbnb to cover their rent and more. You may be able to reverse the decision, but reversing it will involve expensive legal defence fees.

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