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With the state government about to “do an Uber” on short-term and holiday letting, apartment owners need to get their act together if they don’t want to be swamped by frolicking families, bucks night parties and footy fans on a weekend spree.
A couple of weeks ago, a NSW Legislative Assembly committee held hearings into legislation governing short-term and holiday letting in NSW.
Seeking a legal structure for allowing but controlling short-term letting is a response to its upsurge, led by the monolithic online holiday let agency Airbnb.
Make no mistake, this government likes “sharing economy” entities such as Airbnb and Uber, the latter already having been given a free kick to take on the taxi industry.
Next up for sharing without caring could be your apartment block where your neighbours may soon find it legal to let out their units for a few days at a time, often for more than they can get from a permanent tenant for a whole week.
It’s impossible to predict what specific form the changes will take, but variations on the proposal by City of Sydney Council seem a likely outcome.
If I’m reading it correctly, CoS proposes only requiring change of use to holiday lets to be registered as a complying development – with no need for formal approval – while limiting the number of days a year that a property can be let on a short-term basis.
However, apartment blocks that didn’t want short-term lets could still ban them through their by-laws. “If made exempt development, an owner’s corporation are not prevented from establishing by laws that could further manage this activity,” say City of Sydney in their submission to the inquiry.
That, however, is open to interpretation.
“The Strata Schemes Management Act 1996 provides that no by-law is capable of operating to prohibit or restrict a dealing with a lot (section 49),” says the official submission from the Premier’s Office. “This means that an owners’ corporation cannot seek to restrict a lot owner from offering short-term accommodation in the owner’s lot.”
But not everyone agrees. Leading strata lawyer Suzy Broome of Sachs Gerace Broome says: “Our view is that … a by-law in a residential strata scheme that requires tenants to be subject to a residential lease of no less than three months is binding and enforceable.”
Dr Cathy Sherry, senior lecturer in law at the University of New South Wales, is not so sure: “If I were being cautious, I would say that by-laws banning short-term letting are invalid. That said, I completely understand why buildings want to do it.”
The practical reality is that Owners Corps can and do restrict short-term lets, provided the building is already zoned residential. But if you don’t already have a by-law restricting short-term lets, you need to get one in while you can.
Most apartments in NSW are owned by investors but, thanks to apathy and proxy farming, a minority of owner-occupiers can pass by-laws without too much trouble.
However, if even 25 percent of the owners in your block are attracted by the juicy bait of extra income, they will be able to block new by-laws.
That same 75 percent threshold will prevent greedy investors from erasing existing by-laws that get between them and their pot of gold.
Whatever changes the government eventually makes, they are unlikely to remove the right of strata owners to create by-laws and run their buildings the way they want.
But if you don’t want short-term lets in your building, you need to act now.
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
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The way this issue/suggestion has been explained to me by a prominent strata lawyer is that the flip-side of this is that 75% of owners can vote at a general meeting to introduce a by-law which will open the doors to Airbnb and their ilk.
Where I live, this would happen in a flash and it is effectively saying that owners can vote to overturn the zoning on a property so that instead of it being a residential building it becomes a quasi hotel overnight.
I bought an apartment in a building zoned permanent residential occupation only. Where can one buy an apartment in NSW and be sure that in a week or a month or a year’s time it won’t turn into a hotel, with all the expense but minus the infrastructure?
Where’s our community gone?
The fact that the City of Sydney wants to limit the number of days one can short-term let is recognition in itself that short-term lets are fundamentally different to permanent residency. And so, who is going to ‘police’ the maximum number of days regime? Certainly not the City of Sydney!
Lost for more words.
So if three owners in a block of 4 want to prevent short term lets we will be unable to do so using a bylaw?
My Strata has a simple By Law – “Any lease of a lot within the Strata shall be subject to a minimum term of 3 months.”
Is lease the same as rental and does the above cover AirBnB?
Our building in Melbourne added a minimum 3 month rental rule five or six years ago. It mostly worked for a while, but currently VCAT seem to be saying that OCs cannot stop an owner doing whatever he wants.
In the case of tenants going airbnb then it is a bit easier. Most leases say no sub-letting and agents can terminate leases of tenants sub-letting.
I would love to enforce the rule, but at the moment it seems impossible.
The Age is reporting today that VCAT has ruled that airbnb is not assigning or subletting, and that tenants cannot be evicted for using airbnb.
There is a suggestion to use other (unnamed) clauses in the residential tenancy act.
Looks like another “wise” VCAT decision!
CBD3000
The reason behind VCAT taking this action, like it has before in these situations, is driven by section 140 of the VIC OC Act 2006 which states that rules are to be of no effect if the rule discriminates (in the broadest sense of the word) against any owner.
Essentially if the Owner wants to short term lease their unit you cannot ban them from doing so just because you or the rest of the OC don’t want them to.
This rule is designed to void any rules which target certain owners and is there for a very good reason. However this has had a flow on effect with the rise of the sharing economy.
Many rules banning AirBnB or other short term leases I have witnessed enter VCAT recently have been defeated using Section 140.
I also wouldn’t be surprised if minimum term lease rules were also defeated by it.
I take a fairly pragmatic view of the sharing economy and its effect on Strata; I believe if you stand steadfast against the progress of this economy into your buildings I believe it will simply be a matter of time before it steamrolls over you for better or for worse.
The majority of desirable destinations for very short term leases are obvious, inner city complexes with proximity to nightlife, events etc… I cannot believe that an owner would move permanently into one of these complexes solely for the peace and quiet they provide. Surely you too occupy your unit for the same reasons these people want to, so some disturbance is unfortunately to be expected. The majority of short term tenants are also not there to disturb you – they need a place to stay like any tenant.
Because of the lack of enforceability of banning rules dues to section 140 perhaps consider:
- Informing other owners of the impacts their short term leasing can have on their neighbours, the security of the building etc…
- Encourage Owners to disclose the intent to short term lease their unit or in very least share/record information about specific tenants (in the case of common property or building damage).
- Agreeing on a set of OC wide rules/behaviours any short term tenants need to follow that can be provided to them so that they understand not to treat your complex like a hotel.
- Speak to various experts and even the short term leasing companies themselves (AirBNB has proven open to discussion in the past) to get their perspectives and make yours known.
- Discuss potential rules than can be enforced and/or action that can be taken when things go wrong with your OC Manager or a legal professional.
We regularly live side by side with long term tenants – there is no reason that we cannot live side by side with short term tenants.
Some food for thought at least.
Decipher,
Am I foolish in believing that the whole point of an Owners Corporation is to run the building according to the wishes of the majority of members.
Are you suggesting that I could set up a sawmill in my apartment and ignore the wishes of everyone else in the building??
If owners are going to be supported by VCAT in breaking rules made by the OC, then what is the point of the existence of rules? Before anyone buys an apartment, they get a copy of the rules, if they don’t like the rules then they should buy somewhere else! Simple!
Other reasons in most residential buildings ( Class 2 ) Rather than short-term accommodation ( Class 3) are that the building has lower safety requirements than Class 3.
In Class 2 the Building Code of Australia allows independent smoke detectors and smoke doors to apartments. For a Class 3 building smoke detectors have to be hard wired into the building system (burning your toast could be a $3000+ charge from the fire brigade) and apartments have to have fire rated doors.
Obviously (to me at least) short term rentals are non compliant with the BCA and owners should, if they allow short term rentals, have to comply with Class 3 standards.
Like you Jimmy, we choose to live in the CBD for the convenience of being close to everything. Noisy parties are a long way back in my life-span! Our building has many owner occupiers and tenants are mainly head down bum up hard working Asian students who cause very few problems.
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