How to minimise the risks of short-term renting

Renting outside the formality and security of a six- or 12-month lease might seem stressful, but for many Australians, it’s a reality.

Short-term renting or subleasing can appeal to renters who are between homes, moving to a new city or trying out a new area.

Arrangements vary from house-sitting while home owners are on holidays to taking over a room temporarily vacated by a tenant for an extended period of time.

Some prefer the shorter commitment and greater freedom to move than you get with a traditional lease.

For others, it’s the consequence of circumstance – they may lack rental history, or it could be the cheapest option for them.

Melbourne-based filmmaker Francisco Flood, 26, rents a room in a house vacated by the tenant, who is overseas. It’s the eighth property he’s called home in the past three years.

“At first it was going to be four months, but then she asked if I wanted to stay for seven months,” he said.

Flood said he rents short-term because he doesn’t have the money, nor consistent enough work, to commit to a long-term rental.

“I’m happy to go on the lease somewhere, but not having work means you can’t take a lease and not know if you can pay for it,” he said.

The arrangement does offer benefits, according to Flood. “You get a good sense of different people and different areas,” he said. “It’s easy to find a sublet. I’ve never had any panic looking.”

Rooms often come fully furnished, meaning it’s only a matter of bringing clothes and other essentials. “I don’t travel heavy,” he said.

More flexibility, less stability

Some prefer the flexibility of short-term renting, but for others the uncertainty and informality of the living situation can be stressful and cause further problems.

Short-term renters seldom formalise the arrangement with a tenancy agreement, so tenants can find themselves with gaps in their rental history that raise red flags with agents when applying for a lease, potentially worsening the problem.

Ray White business development executive Daniel Piredda said property managers often questioned gaps in rental histories which might point to subletting.

“It raises property managers’ suspicions,” he said. “For a tenant that could be difficult; it may be part of why he continues to sublet because you can’t get out of that cycle.”

While some tenants choose to rent short-term because it can be more affordable, NSW Tenants’ Union senior policy officer Leo Patterson Ross said it was unlikely that homes on short-term letting platforms such as Airbnb – which typically target holidaymakers – would be cheaper than a traditional rental property.

“I would think that, for most people, they would prefer the stability, and that some people who are doing this are doing this because the housing system is broken, not as much a choice,” he said.

What’s the legal situation?

In all states and territories, tenants must have permission from the landlord to sublease the property, but permission can’t be unreasonably refused.

Unlike in a co-tenancy, a sub-tenant’s name may not appear on the lease. However, in a sub-tenancy, the head tenant takes on the full legal responsibility of a landlord.

Patterson Ross said the laws around subletting were “fuzzy” at best.

“From a housing perspective you don’t have the same protections,” he said. “But most of the risk sits with the host, particularly tenants who are doing it.”

Many rental agreements have clauses to stop tenants subletting rooms. “A lot of agents have started putting in particular clauses about no Airbnb use,” Patterson Ross said.

Although subletting is legal, tenants were often unwilling to speak to landlords about it and landlords were unlikely to be happy for tenants to sublet, according to Pirreda.

“Tenants just don’t feel comfortable with having that conversation,” he said. “For the owners, it’s more about the apprehension they have for not knowing who’s in the property.”

Piredda said many tenants sublet rooms and properties without letting landlords know, and often owners did not find out.

“It’s more common in an inner city market where there could be a high turnover of tenants,” he said.

The reshuffling of tenants over a handshake could cause problems when the bond needs to be settled, according to Piredda.

“The party that sublets may not be able to receive the bond refund because it’s not lodged under their name,” he said. “The landlord may have issues with claiming bond for the same reason.”

But, he said, the selection criteria for subletting tenants should be the same as for any other.

“What’s their character like, what do they do for employment, can they afford to live here?”

What to consider when subletting

• Subletting renters do not build rental histories, which can raise red flags when applying for a lease.
• The short-term nature of subletting requires minimal furniture and possessions to minimise moving costs, but in most situations, furniture will be provided.
• Establish the time period for which you’ll sublet at the outset to provide certainty and the ability to arrange your next home in advance.
• Summer and winter holiday periods are likely times when people will go away and sublets will be available.
• Laws differ between states and territories. Check the relevant legislation in your state:
  • NSW: Fair Trading
  • VIC: Consumer Affairs
  • QLD: Residential Tenancies Authority
  • SA:  Consumer and Business Services
  • WA: Consumer Protection
  • TAS: Consumer, Building and Occupational Services
  • ACT: ACT Revenue Office
  • NT: Consumer Affairs