When a company title member lets their unit to a tenant, there is no legal relationship between the tenant and the company. This means the company must rely on the tenant to enforce house rules on their tenant and means the company has no power to limit sub-letting or AirBnb run by the tenant. This is where a license to occupy may help.
The issue at hand
The company cannot enforce the constitution, because the tenant is not a shareholder. The company also cannot enforce the house rules, which usually derive their force from the constitution. The old practice of giving tenants a copy of the house rules in a screening interview, or asking them to sign them, will not always make them enforceable against a tenant.
A company which is unable to enforce its constitution or house rules against a tenant must look to the shareholder who has leased his or her home unit to a shareholder to protect the company’s interests. This can be difficult if the shareholder is an investor who is not engaged with the company on a regular basis.
How a license to occupy can help
Requiring that all tenants must enter into a license to occupy with the company as a term of their tenancy will create a legal relationship between tenants and the company and mean that the constitution and house rules can in effect be enforced against tenants.
Common terms that companies might consider to to include in a license to occupy would be the following:
- preventing tenants or licences from subletting the unit;
- requiring tenants and licensees to comply with the House Rules;
- restricting the number of visitors that tenants and licensees can bring to the unit;
- requiring the tenant or licensee to indemnify the company for loss caused by their negligence or misconduct;
- requiring the tenant to acknowledge that their tenancy or licence will end if they withdraw consent to the licence or lease;
- bring a tenancy to an end if the tenant breaches the licence to occupy.
Managing tenants is an important issue in many buildings, specifically relating to issues such as sub-letting and nuisance.
Call us on (02) 9199 8597 or email us for advice about managing tenants and drafting a license to occupy for all new tenants.
The information contained in this post is current at the date of editing – 27 February 2025.