This website is for use by legal professionals (lawyers and law practices) only. If the information is used incorrectly, you could risk losing money or your legal rights. If you are a member of the public looking for free advice about your legal problems please visit legalaid.vic.gov.au, or contact our Legal Help advice line on 1300 792 387, Monday to Friday from 8 am to 6 pm. 

If you decide to use or rely on the information or make decisions based on the information in this website (which VLA does not recommend) VLA is not liable to you or any third party in any way for any loss, damage, costs or expenses you or they may suffer or incur as a result.

Co-rental, sub-rental or licence?

Information to help work out what kind of tenancy agreement is involved in a share house situation.

The entire Residential Tenancies Act 1997 is written as though there was one rental provider (formerly landlord) and one renter. The legal relationship is between the rental provider and renter/s named on the rental agreement. Co-tenants are indivisible.

It is difficult to distinguish a co-rental from a sub-rental (sub-letting) or a licence. This is because the Act still relies on the word 'let' (Victoria stands alone in this reliance). A rental agreement is defined as where premises are 'let'. This in turn relies on a High Court decision, which says that the test to decide if an agreement is a lease or a licence, must begin by asking if the person has been granted exclusive possession. The words used in the document are not determinative. It may be necessary to look at the surrounding circumstances.

Note; Despite the new terminology from tenancy agreement to residential rental agreement, which commenced on 29 March 2021, the word 'let' is still used.

See Radaich v Smith [1959] HCA 45; (1959) 101 CLR 209 (7 September 1959).

The distinction is difficult to determine.

More information

Legislation

Residential Tenancies Act 1997 (Vic)

  • s. 3(1)—defines a residential rental agreement as an agreement, whether or not in writing and whether express or implied, under which a person lets [emphasis added] premises as a residence...

See Residential Tenancies Act 1997 (Vic)(opens in a new window)

Reference

Case law

Radaich v Smith [1959] HCA 45; (1959) 101 CLR 209 (7 September 1959)

This case concerns a person using premises as a milk bar in Mosman. The argument was about whether the agreement was a lease or licence. Entitlement to use the premises was created by a deed. The deed used words of licence and licensee, but the court found that this was not determinative. This was an appeal from the Supreme Court of NSW where it was held that the deed created a mere licence not a lease.

The court looked at the words used in the instrument creating the deed to see what the substance and effect of the agreement was and found that it was to create exclusive possession. The difference between a licence and a tenancy, is that an interest passes in the land in a lease but not with a licence, which is determined by whether he tenant has exclusive possession. The court did refer to a House of Lords case where exceptions to this rule were mentioned such as where the agreement was: induced by 'ties of kinship', by friendship or generosity.

See Radaich v Smith [1959] HCA 45; (1959) 101 CLR 209 (7 September 1959).

Swan v Uecker [2016] VSC 313 (10 June 2016)

This case is an appeal from a VCAT decision about whether a tenant assigned or sublet without their landlord's consent by allowing AirBNB guests to stay on the premises.

The applicant owner of a St Kilda property which she leased to the respondents. The respondents granted leases to AirBNB guests. The applicant/owner took the matter to VCAT claiming that the tenants had sublet the property without permission. VCAT had dismissed the application saying that the tenants had granted licences only.

The appeal was allowed because the court found that the tribunal had taken into consideration that the tenants retained the rental premises as their principal residence, which was not relevant to whether the guests had exclusive possession, and also the fact that the tenants could make overstaying guests leave, and that the Tribunal erred in finding that the tenants could access the premises during an AirBNB stay, without having any evidence of this.

At 30 the case discusses the test to be applied to determine whether a lease or licence has been created. Where it is inconclusive whether a party has the right to exclude others, including the lessor from the premises by looking at the whole agreement, then it may be necessary to see what is granted by looking at other aspects of the transaction. If a grant does not use terms of 'possession then it may be necessary to the rights conferred by the agreement, such as the right to occupy, to carry on business or as in the present case, a right to use the premises either generally or in a particular way. In deciding whether a right to exclusive possession has been granted, courts look at the nature of the rights granted and the intention of the parties.

The court found that the AirBNB agreement to occupy an entire property was a lease and so the tenants had sub-let their property, therefore the notice to vacate was valid and an application for possession order should be granted.

See Swan v Uecker [2016] VSC 313 (10 June 2016).

The Age

See The Age (10 June 2016)—Airbnb: St Kilda landlord succeeds in kicking out tenants over home-sharing agreement.

Residential tenancies

This specialist training for Legal Help staff, delivered in August 2018 by VLA's Damian Stock, Managing Lawyer, Economic and Social Rights program and Patrick Noyelle, Lawyer at legal Help, answers the most commonly asked questions that Legal Help encounter, including: the process for eviction, how to challenge a notice to vacate, rent arrears and setting up payment plans, and co-rental issues.

See Residential tenancies.

Acknowledgement

Thanks to VLA's Damian Stock, Managing Lawyer in the Economic and Social Rights program (as he then was), for information on this page.

Updated