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AIRBNB – LEASE OR LICENCE?

Does an AirBnb arrangement create a lease or licence?

Due to the advent of online letting platforms such as AirBnb, short-term rentals have become increasingly popular. However, these kinds of arrangements present many legal ramifications.  The case of Swan v Uecker [2016] VSC 313 is a recent example of how AirBnb can create confusion about whether such arrangements can be classified as a lease or licence.

The Facts:

A landlord leased a two bedroom apartment to a tenant under a lease. The terms of the Lease permitted subleasing but required the consent of the landlord. . However, without consultation with the landlord, the tenant entered into what they classified as “licences” with Airbnb guests. These “licences” allowed AirBnb guests to stay in the apartment for between three and five days and occupy the entire apartment without the tenant being present. As part of the arrangement, all of the bookings were made online, the guests agreed to leave at the end of their stay and the premises were said to be the tenant’s principal place of residence.
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Case Update – Prior landlords potentially liable for past GST

MBI PROPERTIES PTY LTD V COMMISSIONER OF TAXATION [2013] FCAFC 112

Federal Court of Australia

The Australia Taxation Office (“ATO”) has appealed to the High Court the decision in the case of MBI Properties Pty Ltd v Commissioner of Taxation. If the High Court is to grant the appeal, GST liability could potentially transfer from the current landlord to the landlord at the time the lease was contracted. The Federal Court holds the view that the landlord who contracted the lease, should be liable for the GST, irrespective of the land being sold.

Currently, the ATO would pursue the current landlord for all GST owing on rent despite the GST being formed through rent paid before the purchase. The ATO has stated that it will continue to follow the current process until the outcome of the High Court case is finalised.

Should the Federal Court’s decision be upheld, landlords who have paid GST after purchasing a premises with an existing lease, may be entitled to a refund of the GST paid.
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Calling upon a bank guarantee – not as simple as you think

The decision in Universal Publishers Pty Ltd v Australia Executor Trustees Limited [2013] NSWSC2021 suggests that the ability of a landlord to call upon a bank guarantee for the purpose of reinstating and remediating the premises depends upon the terms of the lease.

If the lease provides that the landlord can call upon the bank guarantee for an actual breach of the lease or an actual default by the tenant, however the landlord cannot call upon the bank guarantee where there is only claimed or alleged breach or default by the tenant.

If there is a dispute as to the breach or default, the landlord may be liable for damages to the tenant if they call upon the bank guarantee and the tenant is found not to have been in breach or default.

Whether you are a landlord or tenant you should seek the advice of a commercial lawyer before entering into a lease. Our commercial lawyers at Matthews Folbigg can provide comprehensive advice and assist in lease negotiations and preparation.
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