Non-residential tenants in a residential property - what to consider

Modified on Fri, 20 Sep at 8:02 AM

It is really important for an agent to be mindful that a property that is considered residential is not used for another purpose by a tenant (or owner in some instances).

An example of this is AirBnB. Tenants may want to let out the property when they head away or even rent out part of the property (a room etc) to generate income to assist them personally. You should always be very cautious and suggest that the owner seeks their own independent advice before entering into a tenancy of this nature.

Another common issue that arises is tenants who operate Home Day Care from the property. The notes below should assist with either of these scenarios and give you an understanding of questions to ask and information you could provide to your Clients.

Without offering legal advice, our understanding is that operating a business from a residential property could contradict what is outlined in the residential tenancy laws and ultimately how the relationship is formed between Landlord and Tenant. Essentially, the Tenant is wanting to use the property for a non-residential purpose and generate income from the property by way of advertising for short-term guests etc.

A couple of things to consider:

Does the owner's insurance allow for this type of business to operate and still have the adequate insurance cover (building, contents, public liability etc)?
Does the Local Authority allow for the property itself to be used for this type of business? For example, Gold Coast & Sunshine Coast councils cracked down on this a few years ago when AirBnB hit the market and went crazy - with neighbours making complaints about noise, people coming and going, general use of the property etc.
Who would be responsible as the Lessee in this situation?
Would a General Tenancy Agreement be something that could actually exist in this circumstance? Our understanding would be that it is more of a business / commercial type arrangement . If that is the case, is the property zoned / approved for such purpose?
If the owner was to feel comfortable with the proposed use of the property they then accept what the type of tenancy is. This then lends to the increased wear and tear of the property being increased to that of a normal residential tenancy

Be really careful with this situation. Our recommendation to the owner would be to avoid it and seek a normal residential tenancy.

Tenancy Laws are very prescriptive and as best as possible protects a property owner when it comes to a normal tenancy situation. Stepping outside of what would be considered a residential tenancy increases the risk for the property owner and investor not being adequately protected under the tenancy law.