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Fair Trading has pulled the rug from under by-laws designed to restrict Airbnb and other short-term letting agencies in residential-only apartment blocks – only your local council can enforce restrictions.
All by-laws restricting Airbnb and other short-stay letting in residential-only apartment blocks are invalid, according to NSW Fair Trading.
Only weeks before the discussion paper on new holiday letting legislation is released, Fair Trading has modified its Strata Living handbook to warn strata committees and owners corporations that they can’t pass by-laws restricting holiday lets.
“Strata laws prevent an owners corporation restricting an owner from letting their lot, including short-term letting,” says a recent amendment to Strata Living. “The only way short-term letting can be restricted is by council planning regulations.”
And that, says a government spokesperson, means by-laws telling owners that they must abide by local council zoning restrictions are invalid as only local councils can enforce their zoning.
By-laws supporting local zoning have been used by some strata schemes as a way around the restrictions on by-laws directly banning short-term letting.
However, a spokesperson for Innovation and Better Regulation Minister Matthew Kean, who has responsibility for Fair Trading, this week confirmed that they are invalid.
“The local council ‘owns’ the zoning regulation,” the spokesperson told Fairfax Media. “Only they can enforce it.”
“Section 139 (2) of the Strata Schemes Management Act 2015 states that no by-law can prohibit or restrict the devolution of a lot or a transfer, lease, mortgage or other dealing relating to a lot,” the Fair Trading spokesperson said.
“Legislative regulations, including council regulations, can only be enforced by and at the discretion of the relevant authority, or delegated authority, tribunal or court, as identified in their governing legislation,” they added.
Airbnb said it welcomed any such moves that protected the rights of people to share their own homes.
“It would be unfair to discriminate against apartment dwellers, and prevent them from participating in the sharing economy in the same way house dwellers can,” Head of Public Policy ANZ at Airbnb Brent Thomas said.
However, this ruling has raised concerns among strata owners, amid reports that in the Sydney areas where short-term letting is most prevalent, local council reports vary from none in a year to 10 a month, and that’s in adjoining areas.
And with the discussion paper yet to be delivered and the responses then having to be turned into a Bill to be debated and voted on in Parliament, it could be next year before any new laws are enacted.
Until then, says the Ministry, owners can only pursue illegal short-term lets through their local council.
“The government needs to plug this loophole with a temporary regulation or we will see a summer of chaos in Sydney apartment blocks,” says the Owners Corporation Network, the peak body for strata owners. “Local council engagement with this is patchy, to say the least, and it will be at least a year before we see new legislation.”
A spokesperson for City of Sydney Council – where residential letting is defined as three months or more – denied that they have backed off from pursuing illegal holiday lets but said they had very few complaints, two of which were currently being actively pursued.
“The City of Sydney reviews all complaints about illegal activity to determine what compliance action is needed. Priority is given to breaches that involve health or fire safety concerns,” said the spokesperson.
“The City carefully addresses all reports about short-term letting but has received complaints from only a small number of people.”
By contrast, Waverley Council – which covers Bondi Beach – is averaging about 100 complaints of illegal holiday letting a year.
“Where Council receives complaints that relate to the illegal use of a premises for short term letting (including via Airbnb), council officers undertake an investigation that usually involves an inspection and making contact with the owner of the premises,” a Waverley spokesperson said.
“Where it can be determined that premises are being used illegally for short term lodging, a notice and order may be served on the owner to cease this use,” they added.
The council spokesperson noted that complaints received relating to all forms of illegal short-term accommodation (not only Airbnb) would average approximately 10 per month.
In neighbouring Randwick, however, there has been no council action against illegal short-term or holiday letting over the past summer.
“Council investigates all allegations of unauthorised use of premises, and has received a number of enquiries as to how Council views the use of residential premises for the provision of accommodation advertised on Airbnb and similar online platforms in the past nine months, but has not had cause to take any regulatory action in this regard,” a council spokesperson said.
“We don’t have statistics on the number of notices issued as these are grouped with all notices issued under the category ‘development without consent’.”
A spokesperson for Woollahra Council said they had only had a handful of complaints in the past nine months but two of the properties concerned were now applying for official bed and breakfast permits.
They said the complaints tended to be specific, such as late-night noise or misuse of waste bins, rather than alleged breaches of residential zoning.
North Sydney council defines short-term letting as a commercial enterprise and therefore it’s not permitted in residential-only blocks. A spokesperson said they have dealt with “only” 20 complaints in the past year.
“In response to customer requests relating to short-term letting, Mosman Council resolved to only investigate matters where there is a risk to safety,” says a council spokesperson. “Council has also written to the State Government, with a request to consider changes to the legislation.”
The governments’ discussion paper on holiday letting legislation is expected to be issued within the next week or so. Meanwhile owners corporations have been advised to get legal advice on their by-laws.
“Owners corporations and/or lot owners should seek independent legal advice about the validity and applicability of current or proposed by-laws,” said the government spokesperson.
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 local council ‘owns’ the zoning regulation”
Gee, that’s pretty much what you shot me down for saying on this site abut 5 months ago! You said the councils said they didn’t want to do the regulation… to which I replied that it didn’t matter. It is their job! They already regulate B&B’s, hotels hostels etc short term. It is obvious that they should be the ones to regulate Airbnb.
Stats mangers are not equipped or willing to police Airbnb or other short term rentals that might come along. It’s just a very bad idea!
Until the question is judicially considered by a Court, Fair Trading’s ‘advice’ is merely its opinion.
Even if Fair Trading is correct in that that owners can only pursue illegal short-term lets through council, Councils hesitate to get involved and are under no legal obligation to act. Leaving impacted strata owners without any legal or practical remedy.
Yet again more misinformation from the Ministerial spokespeople on this topic. It is completely incorrect to say that only local councils can enforce planning laws that restrict short term letting. Section 123 of the Environmental Planning and Assessment Act allows any person – that includes an Owners Corp – to restrain a breach of that Act. This is not about enforcing by laws in the Tribunal, but enforcing development consent conditions. This is how Bridgeport was effective in the Land and Environment Court – they enforced their development consent.
@JimmyT said:
For the record, I asked the Ministry twice to check if this was true. I told them what I was going to write and that I really didn’t want to get it wrong. I asked them what the point was of getting independent advice if the ruling was that you couldn’t have a by-law. What they wrote back was what I published.
Could they have got it so spectacularly wrong? Wouldn’t be the first time.
By the way the Attorney-General’s office (who look after NCAT) refused to confirm or deny as they will not offer legal advice.
It is disappointing that this type of (mis)information is released by Government agencies.
As another contributor (apickles) said, s123 of the E P & A Act specifically says anyone can bring proceedings for a breach of that Act, whether or not their rights are infringed by the breach. This section is pretty common knowledge. I can think of one relevant case – Dobrohotoff v Bennic, from Gosford – where one neighbour did exactly that – they successfully took L & E Court action for the other person renting their place out for short term accommodation, without permission.
The purpose of a by-law saying something similar is that it allows owners corporation to take NCAT action for a breach, rather than the more costly L & E Court action.
Further – standard by-law 18 in Schedule 3 to the 2016 Regulation (by-laws for new schemes), says:
18 Compliance with planning and other requirements(1) The owner or occupier of a lot must ensure that the lot is not used for any purpose that is prohibited by law.
(2) The owner or occupier of a lot must ensure that the lot is not occupied by more persons than are allowed by law to occupy the lot.
This shows the Government DOES want owners corporations to be able to take NCAT action for planning breaches.
There are other errors in what the OFT representative said. It is true that a by-law cannot outright ban leases of less than 3 months, but most short term letting by-laws are smart enough not to approach it that way. An OC can ban the type of use to which a lot is put, and this approach has been upheld by the Supreme Court in cases like Salerno (smoking) and Hamlena Pty Ltd v Sydney Endoscopy Centre Pty Ltd (medical uses). The Court said that whilst such a by-law might reduce the pool of potential lessees and purchasers, it does not offend the prohibition on by-laws that restrict leasing and transfer.
The exception is where an owner obtains development approval for that use, as the DA trumps the by-law (this is s28 of the EP&A Act and clause 1.9A in most Local Environmental Plans).
If a by-law can ban those uses, it can ban commercial uses such as Airbnb (with the same exception).
What confuses me is….who ‘owns’ and ‘administers’ the SSMA 2015 legislation ? If it is indeed OFT, then they should have the final say about what by-laws can or can’t state.
I am not talking about disputes between parties, but about what the legislation means/doesn’t mean….surely someone knows !
Though you do hear it said that different NCAT adjudicators can reach totally different/opposing rulings (which people can then appeal).
So, everyone goes round ‘n round in circles…
Pielover, the Courts and Tribunals determine what the legislation means, not the OFT.
The problem is in the use of the term ‘invalid’. A by-law that is invalid effectively does not exist. It could be invalid because proper process was not followed – the vote was counted incorrectly, or proper notice of meeting was not given, or something similar.
The only other basis on which Fair Trading could declare the by-law ‘invalid’ would be if there was a reason that it could not be considered in a matter before the tribunal. The tribunal would then be entitled to act as if the by-law did not exist. This can happen if the by-law addresses something that is outside the authority of the Owners Corporation – a by-law that pretends to restrict owners from parking their vehicles in the street, for instance.
So the question in this case really is “Can the Owners Corporation pass, and attempt to enforce, a by-law that requires compliance with laws or regulation of another authority”? and I doubt that the answer to that would be anything other then Yes.
Is it necessary? Perhaps not, considering that compliance with those other rules is required in any case. But that doesn’t make it invalid.
I can’t think of any other reason (other than the technical invalidity, mentioned above) that would entitle the tribunal to ignore a by-law.
Perhaps there is a feeling that the tribunal could not issue an order or impose a penalty if an application was successful. The only basis for that presumption seems to be that the enforcement of the actual regulation lies with another authority – the local Council. But there are many places in law where enforcement action can be undertaken by more than one agency, so that seems an unlikely basis for their position.
It may be quite proper to suggest that the problem of short term letting is best addressed by direct appeal to the local Council by individual owners. If that is so, then a by-law that empowers the Owners Corporation to do the same thing on behalf of all owners must be perfectly valid.
But if the process was proper and the action lies within the authority of the Owners Corporation then the by-law is valid. Whether or not it is enforceable in practice is a different story, and that can usually only be determined by testing it in the legal system.
I have a unit in an older block in Sydney which is largely owner occupied. My unit is rented out. The strata committee is proposing by-laws which in effect would prevent short term letting (ie less than 3 months).
I am not aware of there having been any short term letting or, if there has been, there haven’t been any problems.
I object to the restrictions on owner’s rights & the potential impact on value. I also object to the idea that the strata would have the right to review any proposed short term arrangement.
What is the latest state of play on the validity of proposed by laws of this type?
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