This article discussing short term letting in NSW Strata Schemes has been supplied and written by Allison Benson, Kerin Benson Lawyers.
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The NSW State government is in the midst of a review of the state’s laws relating to short term letting. Until the NSW government passes new legislation in this area, there are various pieces of legislation relevant to the question of short term letting including the Strata Schemes Management Act 2015 (the Act) and planning legislation that must be considered.
Few Cases Have Dealt With By-laws Prohibiting Short Term Letting in NSW
To date there have been very few cases in the NSW Civil & Administrative Tribunal (NCAT) that dealt with by-laws prohibiting short term letting and the few cases prior to July 2017 have not been directly on point. On 6 July 2017, the NCAT handed down its decision in Estens v Owners Corporation SP11825  NSWCATCD 63 (Estens) and this blog explores that decision.
The application in Estens was brought by a new lot owner who sought orders invaliding a by-law on the basis that the owners corporation did not have the power to make a by-law prohibiting short term letting. The by-law in question had been passed by the owners corporation in February 2017. Out of five lots, four lots were eligible to vote. Three lots voted in favour of the by-law motion with Ms Estens voting against the by-law. Ms Estens had previously rented her lot through AirBnB as short term accommodation.
The NCAT reviewed section 139 of the Act and considered whether the limits imposed by section 139(2) on by-laws restricting “the devolution of a lot or a transfer, lease mortgage or other dealing” with a lot restricted the ability of the owners corporation to pass a by-law restricting short term letting.
The NCAT was satisfied that an AirBnB tenancy was sufficient to constitute a lease as opposed to a licence as it had a specific commencement date and term and provided for exclusive use of the lot. It was also noted that it “is likely that a licence would also be covered in the use of the word devolution”.
On this basis the by-law prohibiting short term letting was found to restrict the devolution of a lot and was found to be invalid.
Are By-laws Prohibiting Short Term Letting in NSW Prohibited?
On its face, the decision in Estens prohibits by-laws prohibiting short term letting. The decision did not however consider relevant planning legislation. In many Local Environmental Plans (LEPs) there is a clause stating that the terms of the LEP override any dealings or agreements (this includes by-laws). If for example, the LEP prohibited short term accommodation for the relevant owners corporation it is arguable that the by-law was not restricting the devolution of a lot as the use was not available. This is an argument that will be undoubtedly be fleshed out in future cases. It is not known whether Estens is being appealed.
This post appears in Strata News #163
This article first appeared on the Thoughts from a strata lawyer website.
Please note: This is not legal advice. You should seek legal advice particular to your situation.