Restrictions on short term stay in residential schemes

By Vince Baudille, Adrian Rodrigues

05-2020

The rapid rise in popularity of owners of residential properties providing short-stay holiday letting (STHL) services through Airbnb and other online portals has created a host of new issues in residential schemes and particularly the rights of the owners corporation to regulate and control tenant actions. 

The conflict often arises in large apartment complexes between owners who 'host' short-term 'guests' on their properties and the long-term resident owners in the same building. Long-term residents have long expressed concerns of amenities use, noise and security associated with short-term guests. Furthermore, they argue that the frequency of guests increases the wear and tear of common amenities for example due to the damage caused by heavy suitcases – increasing the costs of annual maintenance fees. 

Owners corporation by-laws

Traditionally, the approach by owners corporations, who are responsible for managing block of residential property, was to implement by-laws which restricted and/or imposed penalties on owners who let their apartments to short-stay guests. 

However, recent tribunal and court decisions in New South Wales and Victoria have struck down by-laws which sought to ban or restrict short-stay guests on the basis that they exceed the powers of owners corporations.

In Owners Corporation PS 501391P v Balcombe, the Owners Corporation had sought to impose a by-law which prohibited owners from "using a lot or common property for any trade, profession or business", except where the business was leasing the lot to the same party for periods in excess of one month. In other words, it sought to ban STHLs while still allowing traditional, longer-term leases. 

The Victorian Supreme Court dismissed the Owners Corporation's appeal on the grounds that the Victorian legislation limited owners corporations to make rules "for the purpose of the control, management, administration, use or enjoyment of the common property or of a lot". However, a prohibition of businesses generally and specifically to short-term letting exceeded the scope of what was intended by Parliament in enacting the Owners Corporations Act 2006 (Vic).

A similar issue arose in the New South Wales tribunals in the case of Estens v Owners Corporation. The New South Wales Civil and Administrative Tribunal determined that a by-law prohibiting short term stays in units in the building breached section 139(2) of the Strata Schemes Management Act 2015 (NSW) (SSM Act) which requires that "no by-law is capable of operating to prohibit or restrict the devolution of a lot or a transfer, lease, mortgage or other dealing relating to the lot". The Tribunal formed the conclusion that Airbnb tenancy was a form of leasing and therefore a by-law restricting this was necessarily invalid. 

Legislative initiatives

New South Wales has introduced sweeping changes to the STHL industry with the introduction of the Fair Trading Amendment (Short-Term Rental Accommodation) Act 2018 (NSW) (FTA(STRA) Act) which was assented on 21 August 2018. The FTA(STRA) Act (which has not yet commenced) introduces three reforms: 

1. a mandatory code of conduct for STHL participants; 
2. extension of by-law making powers which enables owners' corporations to prohibit STHLs if the lot is not the principal place of residence of the owner; and 
3. amendments to State environmental planning laws which would require registration of owners who provide STHL. 

The effect of these amendments when operative is that owners corporations will be able to pass by-laws which specifically prohibit owners from operating STHLs in circumstances where the lot is not the owner's principal place of residence. This is intended to target owners who own and operate STHLs on multiple lots but excludes those who might wish to host guests in a spare room. 

In contrast, Victorian regulators have not taken the step to permit owners corporations to self-regulate STHL through by-laws. The Owners Corporations Amendments (Short-stay Accommodation) Act 2018 (Vic) merely establishes a complaints and dispute resolution procedure to report and resolve negative conduct by holiday makers. Negative conduct may include noise and behaviour complaints, safety and security concerns, obstruction of common property and damage to lots, common property or other structures. As it stands in Victoria, it would appear that by-laws which specifically prohibit STHL operations remain invalid. 

No legislative amendments have yet been proposed for Queensland and for now, the same prohibitions to such restrictive by-laws continue to stand.