Slumlords Sublet by the Room – But You Should Think Twice

By Sharon Fox-Slater on 21 Nov 2013
1 Comment

Given the potential profits, some property owners are tempted to rent their house by the room, but this strategy can be a legal and logistical minefield.

The situation is particularly alarming if you find your tenant is a potential ‘slumlord’, secretly subletting individual rooms for profit.

The ‘rooming house’ concept has become increasingly common in recent years.

In Melbourne, for example, one slumlord made $685 a week profit on a four-bedroom property in Reservoir that he rented for $300 a week. The property was home to four adults and six children, with each adult paying $230-260 a week.

The lounge had been converted to a bedroom, so there were no communal areas other than the kitchen and bathroom. But, by illegal rooming house standards, that home wasn’t considered to be crowded at all.

“Legitimate property owners who are considering leasing by the room need to check both council and state laws.”

In Perth last year, 29 people were found living in one two bedroom house. And, in Canberra, one slumlord lived in Macquarie alongside 19 others – all sharing a single bathroom.

Be alert for any warning signs that could suggest the need for further investigation, such as:

• Mattresses in living areas – or stacked in garages and sheds.
• Unusually high rates of wear and tear.
• Plugs leading to an excess of power boards.
• Tenants reluctant to agree to inspections or requiring very long notice.
• A single individual applying to rent a large home.
• Signs that more cars have been parked at the property than expected – for example damage to lawns.
• Too many toothbrushes in the bathroom – check inside the cupboards, not just on the counter.

Interested in Letting by the Room?

Legitimate property owners who are considering leasing by the room need to check both council and state laws to see if their property is suitable – often the laws relating to boarding houses apply.

Converting existing homes to legally-compliant boarding houses often requires significant investment, including upgrades to fire safety equipment.

Most property managers are reluctant to handle properties leased by the room. And those who do manage such properties can charge substantially higher fees, so you may need to manage the property and tenants yourself.

You also need to check with your insurer as subletting is usually excluded from standard policies, so you are likely to need a different type of cover.

About the Author

Sharon Fox-Slater is the Executive General Manager of RentCover, a division of EBM Insurance Brokers which insures 120,000 investment properties around Australia. With 20 years’ experience in landlord insurance, Sharon’s top priority is customer service and positive customer comments are her biggest marker of success. Despite leaving school at 15, Sharon has forged a ground-breaking career – she was the first woman to become a Fellow of the National Insurance Brokers Association. Sharon was recently honoured to have been included in Insurance Business magazine’s Elite Brokers 2013 list.

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  1. Alfred said...

    In WA rooming houses with six or less unrelated occupants are not regulated at all and most operators (owners and tenants) use this loophole to operate completely off the radar in the cash economy.

    I have seen suburban homes with room numbers on the internal doors, bar fridge and TV in all rooms and as long as you don’t go over six people its completely legal in this lowlife state. Many slumlords are now moving over here for our slack laws.

    March 31, 2014 @ 10:00 pm

    Reply

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