This article discussing how NSW Owners Corporations are finally getting laws to restrict short-term letting has been provided by Tom Bacon, Strata Title Lawyers.
There is set to be an early Easter Egg coming for Owners Corporations that struggle with AirBnB and other short-term letting arrangements.
The NSW State Government has finally gazetted the new Section 137A Strata Schemes Management Act to commence on Good Friday (April 10, 2020).
The new Section 137A permits an Owners Corporation to pass by special resolution, a By-Law to prohibit a lot from being used for short-term rental accommodation if the lot is not the principal place of residence for the person that normally resides there.
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Under the definitions section, the fine print further explains that the threshold for ‘short-term letting’ is any duration for less than 90 days.
There is conjecture over the term ‘principal place of residence’ and there is sure to be some case law to come out of this, between owners and Owners Corporations. The NSW State Government has seen fit to not include a definition of this term, which is problematic.
To resolve this, we take the view of adopting the definition of ‘principal place of residence’ as used by the Australian Tax Office (ATO) which will provide Owners Corporations with a great measure of comfort as it provides an objective set of criteria for establishing a checklist for ‘principal place of residence.’
So, to give some hypothetical scenarios:
- Example A – Jenny owns an apartment in Crows Nest and resides there full time. She decides to travel to Europe and the UK for 8 weeks in July and August and lets her unit on Airbnb while she is away in order to earn some income and to offset her holiday expenses. Under the new Section 137A Strata Schemes Management Act 2015, Jenny will be able to do this lawfully, and her Owners Corporation will be unable to enforce any By-Law which restricts short-term letting, as this apartment is Jenny’s principal place of residence.
- Example B – Garth owns an investment unit in Bondi Junction through his self-managed Superannuation fund. His tenants have been paying $700 per week, but decide to move out. Garth decides to list the apartment for short-term stays at the rate of $225 per night to see if he can get a higher rental yield and a better return on his superannuation. Garth will be in breach of Section 137A Strata Schemes Management Act 2015 if the Owners Corporation has passed a By-Law to restrict short-term letting. Even if Garth has not yet had any guests stay in the apartment, he will still be in breach even just for advertising the property on a short-term platform.
With the COVID-19 Pandemic in full swing, prudent Owners Corporations will move quickly to adopt and register a compliant Short-Term Letting By-Law to ensure that only long-term residents can access the common property and the apartments in an effort to reduce the risks of community transmission and infection.
Strata Title Lawyers has a comprehensive Short-Term Letting By-Law ready to be purchased for a fixed fee of $300 (+GST). Order your By-Law today (with motion and explanatory note) by emailing [email protected] or by telephone 02 9091 8068.
Have a question about how NSW Owners Corporations are finally getting laws to restrict short-term letting or something to add to the article? Leave a comment below.
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This post appears in Strata News #337
Tom Bacon
Strata Title Lawyers
E: [email protected]
P: 03 8680 2471
Disclaimer: The information contained in this article is provided as personal information only. It is not intended to be legal advice and it should not be used as legal or professional advice. The information in this article should be relied upon – lot owners and owners corporations should seek legal advice for their specific circumstances.
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What if the building has a management rights contract in place and an owner who decides when his long term tenant moves out to join the holiday pool for short term stays surely this is legal under these new guide lines
Hi David
We have received this response from Tom Bacon:
Each building will be different, and there is no cookie-cutter answer for this. The Short-Term Letting By-Law might be appropriate for some buildings, and inappropriate for others. This is why the NSW State Government has not imposed this as a model By-Law on all schemes, but instead has simply permitted Owners Corporations to consider whether it should pass a By-Law by special resolution to restrict this form of letting.
Management Rights is no different. In fact they are the main perpetrators of unlawful short term stays.
As usual, the real answer is in what is NOT being said. That is that 95% of apartment buildings are built to class 2 specifications for Residential Use only. Most schemes with management rights already have a bylaw that states that the lots are to be used for Residential Use only – meaning that any non-residential use contravene the existing bylaws.
If in Qld, also refer to the definition of ‘occupier’ in the BCCM Act.
Short term stays are not occupiers and fall outside of all the bylaw provisions that pertain solely to ‘occupiers’ … Although ex-commissioner Irons will not draw your attention to this due to affiliations now obvious.
Just because the provisioning of short term accommodation in buildings zoned, built and approved as residential has been occurring for a decade or more by stealth …. Does not make it a lawful use.
“But officer, like many others, I speed on the highway every day ” …. “Really? Oh well, off you go and continue”
Clarity can be found in this debate under local planning laws and a buildings DA … as supported by the High Court of Australia decision in Pike v Tighe [2018] in regard to land use. Furthermore, the Privy Council [2017] decision on the meaning of ‘Residential Use’ provides further persuasive argument. Further still, the NSW Land and Environment Court [2012] decision re Graincorp.
The only thing that is ‘done and dusted’ is the flawed reliance of those in the legal fraternity on a 2013 case in the Victorian Supreme Court of Appeal … which when examined is insignificant as it relates to a very specific circumstance in a single building.
COVID19 will prove to be the correction the industry needed to put short let apartments back into the housing stock and investment owners who act quickly will realise permanent tenancies provide for a higher ROI, more consistent income and lower maintenance, running costs and depreciation.
Excuse me while I wipe away a tear for the Qld management rights industry operating quasi hotels in our homes in an ‘industry’ of buy, extend, sell, take value from the body corporate’s asset.
More care – Less take is required of these operators … Ever notice the harmonious and well run schemes under management rights only have permanent rentals. Coincidental?