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Risk associated with renting a room without a agreement - Airbnb, Short term rental and Insurance.

Renting out rooms in your house

We often come across questions from house owners or lessee that - is it a good idea to rent out a unoccupied room in the house ?

The answer to this question is quite tricky, as a house owner or lessee you need to be aware of the potential risk associated with such short term leasing arrangements.

Firstly, the most important thing for such arrangement is that all terms regarding such rental arrangement must be documented in writing. The person letting the room should understand and be able to distinguish between lease and a licence arrangement.

The major difference between a lease and licence is - exclusivity, in a lease, the tenants have the right to exclusively occupy the premises without interruption from outsiders including the landlord, this is different to a licence arrangement in which the owner has some control (Example - Hotel, Dormitory). There are several more differences.

When Things Go Wrong (Squatter)

There are situation in which you can come across hostile tenants, tenants who are damaging your property or tenants have stopped paying rental and bills. In such situations the tenant who has taken the room becomes a "Squatter", if an agreement is in place then things are lot more simpler as the eviction terms are stipulated in your agreement.

If an agreement is not present then you as a landlord will need to establish in the tribunal that the tenant has breached the agreed terms and thus must be evicted as per the law, this often becomes a lengthy and costly procedure and often you will have to accommodate squatter until the tribunal issues an eviction order.

Risk With Airbnb

Although it can be lucrative but parties need to conduct proper due-diligence when offering a room for rental with Airbnb sort of arrangements, it becomes an issue when a host damages your property and your insurer has denied your claim as your actions or the host has done something which has breached the contractual terms of the insurer.

In a leases situation, if you are hosting the room on Airbnb without the consent of the landlord or the council has not approved your house for such short term rental, then you can be personally liable in the event that the host has caused damage to the property, the landlord receives a hefty fine from the council or worst a legal action can be taken against you for breach of lease agreement by the landlord and you could be perused for consequential losses.

Tenants Right

The tenants in Victoria have several rights under the Residential Tenancy Act including but not limited to -

  • A tenancy agreement must be in prescribed form

  • A person must not refuse to let a premises on the grounds that the tenant intends to live in the premises with a child

  • A person must not demand or accept a bond of more than one month's rent if weekly rent is $350 or less

  • If a tenant pays a bond the landlord must, before commencement of occupation, give the tenant two signed copies of a Condition Report

  • A landlord must not require a tenant to pay rent more than one month in advance

  • A landlord must not require a tenant to pay rent more than two weeks in advance if rent is payable each week

  • Where rent is not paid in person and the tenant does not request a receipt, the landlord must retain records of all payments for 12 months

  • Landlord must not seek over-payment for utility charge

  • A rooming house owner must not increase room capacity without the required notice and consent

  • A rooming house owner must give the proposed resident a notice of residency right before occupation

If you have been affected by any of the above arrangements then feel free to give us a call.


ZMK Lawyers,

Lvl 13, 227 Collins St, Melbourne, 3000

Phone: 0449 860 517

Disclaimer: The reader acknowledges that the information made available is for educational purposes only as well as to give you general information and a general understanding of the law, it is not to provide legal advice.

By reading our blog, “tweets” and monthly legal articles you understand that there is no client relationship created between you and ZMK Lawyers.

ZMK Lawyers legal blog, “tweets” and monthly legal articles is not legal advice. You should not act upon this information without seeking advice from a lawyer/solicitor.

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