In suburbs across every Australian capital city, and in almost every major holiday destination along the East Coast, you can find a short-term rental property listed through Airbnb.

Most of these short-term rentals are being listed by the property owner, either an investor or owner-occupier, but increasingly tenants are illegally subletting a room or the whole property, unbeknown to the owner.

Typically, tenants sublet without a second thought to the possible issues or risks. The temptation to earn extra cash from listing a spare room or handing the keys over to holiday-makers to cover the rent whilst the tenant is out of town, is all too great.

The issues with illegal subletting

A recent example highlights some of the main issues with illegal subletting.

I was contacted by the owner of an inner-city apartment that overlooked Sydney Harbour – a popular location for tourists when the owner discovered her unit was being sublet on Airbnb. She lives in the building next door and the neighbouring apartment to the sublet informed her that unknown people were coming and going from the apartment. The lease only listed one occupant.

She approached me, and I raised the matter with the tenant, who denied it. Once I carried out a routine inspection at short notice it was apparent there were two additional people living in the property: the number of toothbrushes and the amount of laundry, dirty dishes and garbage were tell-tale signs.

After the tenant attempted to convince the owner that they were friends staying from overseas, I informed the tenant that he was in breach of his tenancy agreement for the following reasons:

  • Exceeded the number of people residing on the premises.
  • Failed to advise the owner or agent of his intention to sublease.
  • Failed to seek permission from the owner.
  • Noise complaints from neighbouring occupants.
  • Issuing security keys and passes to a security building without authorisation.
  • Not having applicable insurance to cover any issues in relation to subletting.

In this instance, the threat of tribunal, eviction and a bad tenancy record on the tenancy database was enough for the tenant to get rid of his short-term tenants and remove the listing from Airbnb.

But what happens when something goes wrong? Who is responsible for wear and tear or damage caused by the short-term tenant? Will your insurance cover injury or damage?

The risks of illegal subletting for property owners

There are risks involved every time you hand over the keys of your property to a stranger, and the risks only increase when you’re unaware of it happening.

The most common risks of illegal subletting are:

Property damage

With people regularly through your door, the risk of property damage is unavoidable.

Whether it’s an out-of-control party, unruly guests, large groups or groups with (active and creative) kids, it’s not unusual for sublet properties to have broken appliances, holes in walls, stains and marks, and additional wear and tear.

Security

Keys being copied and given to short-term tenants increases the risk of unknown people having unlimited and unvetted access to building amenities which can create fear and concern for residents, and potentially violate public health and safety.

Bylaw breaches

Rules on short-term rentals differ between states and councils. It’s likely that your tenant won’t know the laws and could inadvertently land you in hot water.

For instance, North Sydney Council recently introduced laws banning Airbnb-type accommodation arrangements from residential-only zones. Whereas, the City of Sydney ruled in favour of owners deciding whether short-term rentals should be allowed in their apartment blocks.

And last year the NSW Civil Administration Tribunal (NCAT) ruled that bylaws, in-line with the local council, were second to the strata law principle that they cannot “prohibit or restrict” the operation of a lot.

Disruption

Ongoing short-term sublets lead to more people coming and going, which can severely disrupt a neighbourhood, especially in apartment blocks.

Disruption such as increased noise and commotion, extra waste, limited car parking, and misuse of common spaces can all add stress and uncertainty to residents.

Costly consequences

Although there are protections-of-sorts for property owners who choose to host paying guests in their home, the protections for property owners whose tenants illegally sublet can sometimes fall into a grey area.

One way to protect yourself against damage caused by illegal subletting is to have Landlord and Content insurance in place. When making an insurance claim against damage caused by an illegal sublet, it’s also important that you can prove you didn’t know about it nor did your tenant request permission.

Whether you list and sublet your own property through Airbnb or suspect your tenant of doing so without your permission, enlisting the expertise of a property manager who understands the landlord-tenancy laws and the effective processes helps to get the best outcome for you.

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