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Hold on to your sun-hats! The NSW strata tribunal has overturned a by-law that attempted to ban Airbnb-style holiday lets in a Sydney Eastern Suburbs apartment block.
In what’s thought to be the first case of its kind, the NSW Civil Administration Tribunal (NCAT) has ruled that strata owners can’t pass by-laws banning short-term lets, such as operated through online agencies like Airbnb.
According to this story in the Sydney Morning Herald (prompted by this post to the Flat Chat Forum by Flattchatter ‘Pielover’) a resident of a small block in Woollahra, who who claimed that last year she made $13,000 letting her unit on Airbnb, had challenged a by-law banning holiday lets.
She cited Section 139 of the Strata Schemes Management Act 2015, which says by-laws may not be “harsh, unconscionable or oppressive” and that they may not “prohibit or restrict … transfer, lease, mortgage or other dealing related to a lot.”
According to the NCAT ruling, that confirms a controversial opinion issued by the state government Fair Trading office earlier this year that even by-laws that sought to support local council zoning were invalid.
So where does that leave strata owners and tenants? Firstly, don’t panic or get overexcited: there is no precedent created by NCAT decisions at this level. And in a report done for this website, four out of six expert strata lawyers said the Fair Trading ruling was itself out of order.
But that doesn’t mean this case won’t have a knock-on effect. Potential ‘hosts’ who have been discouraged by similar by-laws, may now be tempted to try their luck.
And owners corporations may decide it’s not worth the time, money or emotional energy to pursue these cases when a positive result is far from guaranteed.
Meanwhile Macquarie St (and now one NCAT Member) says that, until such times as the law is changed, it’s local government who should be policing illegal short-term lets.
However, most NSW local councils simply don’t want to know. The exponential growth of illegal holiday letting, thanks to the internet, has caught them unprepared and under-resourced.
One council on Sydney’s North Shore has openly stated they will only pursue short-term letting breaches if public safety is at risk. Others, like City of Sydney, turn a blind eye to even the most obvious abuses.
So is it ‘game over’ for the anti-holiday letting lobby? Far from it.
NCAT rulings may not create precedents but appeal decisions, and those from higher courts do. Also, the specific by-law that was overturned (you can read it here) may have been fatally flawed.
Right now the NSW government is taking submissions from residents on new holiday letting laws, and has floated the idea that apartment owners should be given powers to decide whether or not they want holiday lets in their blocks.
Both NSW and Victoria have tried and failed to devise holiday letting legislation and are now trying to find a legal model that encourages genuine home-sharing while being careful not to turn residential apartment blocks into de facto hotels.
South Australia and Tasmania have been less hesitant, making it clear that their planning laws don’t exclude short-term rentals.
But it will be a year at least before new laws in the Eastern States come into force so we can expect a long, hot summer of by-law challenges and appeals as the breaches, rather than the beaches, occupy our thoughts.
A version of this story originally appeared in the Australian Financial Review, September 30, 2017.
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In a bizarre move, North Sydney Council has referred the STHL to the North Sydney Regional Organisation of Council’s (NSROC) for a ‘regional project’ meaning – legislative and policy work.
The timing couldn’t worse, NSROC has no Board yet(due to Council elections) and no special policy expertise on this topic. Why refer to NSCROC now – why hasn’t NSCROC been engaged on this issue over the past two years?
As someone said……everyone is ducking for cover.
Local Council know that STHL is having adverse impacts, why aren’t they on the media hook on this issue?
Does the recent ruling by the NSW Civil Administration Tribunal over residential-only zoning, saying that rules “cannot prohibit or restrict” the operation of a lot, mean that any business can be operated within a lot? Any business at all? Hourly lets, perhaps? Sewing factory? Fashion shop? Furniture manufacture? All very well for that lot, but what about the common area usage?
We thought we had bought into residential strata, when it seems we have unwittingly bought into commercial ventures. What does this change mean to our insurances, fire safety etc.? Increased levies to cope with the tighter requirements of commercial accommodation, at least.
I can see the failure of the strata system, when one can only be sure of uncertainty. We have been badly let down by “the system”, which does not recognise council zonings, or building residents’ decisions.
Your survey needs more options…
In my opinion an OC shouldn’t be able to dictate how a person uses their primary place of residence (renting out whilst home or on holidays, as was the person in this story).
However investments solely used for short term lets should definitely be able to be banned with a by-law. In fact I think they should be forced to undergo the same scrutiny (Zones, OHS compliance, insurance etc.) as any hotel or traditional B&B.
The issue of STRs has shot across to another threat.
It is clear that this is a Planning/Zoning matter, as confirmed by JimmyT’s contact in Macquarie Street and as per entries under “1st NCAT case for Airbnb by-laws under SSMA2015′.
There is now a Flat Chat questionnaire and one is being given ‘a choice’.
However long ago we were given a choice: we signed contracts to become homeowners of residential (strata) apartments. Nearly all of us, concurrently, signed with a financial institution, committing ourselves to a residential/homeowner mortgage. That’s when were exercised our ‘choice’ and locked ourselves in.
It is interesting too that in newspaper articles comments are sought from Strata Lawyer/spokesperson for the Owners Corporation Network (OCN). He wants to see Parliament now give those in strata ‘a choice’ of whether their building should continue to function as a residential strata scheme, i.e. housing, or retrospectively now operate as an unlicensed, unregulated hotel.
The OCN’s recommendation to Parliament about ‘choice’ and ‘by laws’ makes no mention of the need and considerable/prohibitive cost to upgrade building infrastructure for commercial use. Nor is there any reference to the Land and Environment Court’s repeated judgements that mixing STRs with permanent residents is “fundamentally incompatible”. Tellingly, the OCN’s recommendation to Parliament is not that which was arrived at and sent to their Board by their Sub-Committee on short-term rentals.
The goal set for the OCN’s Sub-Committee was to present a policy “to support the on-going improvement in communal living by confronting the inherent problems of short-lets of residential property. The goal: ‘to maintain the distinction between residential use and that of holiday/tourist/visitor accommodation.” The six-page document concludes with:
“Actions Required: OCN should press the following initiatives by the State Government: 1) The State Government in the parliamentary reform process must investigate how councils could be mandated to enforce residential planning, zoning or approval to prevent unauthorised short-term commercial letting of residential properties, and 2) The State Government must ensure that Development Consents are clear, comprehensive and precise as to the manner in which short term letting is dealt with; Development Consents for residential use should also state that no person can advertise or organise the use of the property for short term accommodation.”
The Chair of the OCN’s Sub-Committee on short-term letting is also on the record stating:
“(name) is clearly concerned about “where power rests” in a strata scheme despite changes to the Act that limit the number of proxies. She is right to be concerned.
Even under the new Act many tried and tested ways of getting and keeping control of a Strata Committee remain live and well in the world of apathetic owners. I expect we will also see power exercised in new ways as we move to Pre-Meeting Voting. Indeed it would be naive to think that some owners will not be influenced in the way they submit their electronic votes.
All this is important in how we find a solution to the Short Term Letting “STL”/Airbnb challenge.
To call for “Owners to Decide” whether a building allows STL is not a solution. It poses real risks for any owner who has bought an apartment as their “home” in the reasonable expectation that the Residential Development Consent meant that they could expect to live in a community of Residents. Why?
So how would “Let the owners decide” play out?
It is quite conceivable that commercial interests could secure sufficient power to support an application for a change of building status to short term accommodation.
That may not only mean a change of surroundings for any remaining “resident owners”, but they could also be faced with being levied for their pro rata share of the costs of any fire upgrades and compliance works required for the building’s new purpose. Is this fair and equitable?
The new Act has made it very clear that individual owners facing redevelopment of their homes and termination of their schemes needed special safeguards. Individual owners in buildings heading down the Short Term Letting path deserve equal protection.”
As JimmyT is aware, the short-term letting of apartments in the building in which I live made life a ‘living hell’. Former members of our Strata Committee have spoken to him directly and told him of the seriousness and frequency of threats issued against those who have sought to uphold the Residential Determination of Development Application on the building. These serious threats – to date, 34 ‘legal’ (plus 3 phone calls from an unknown caller, asking one individual whether or not they hold ‘funeral insurance’) – have come from others who hold enormous legal and legislative power plus far greater financial resources than the recipients of those threats.
It is incumbent on our legislators to uphold the rights of those seeking safe, secure, affordable housing and to safeguard our Planning and other levels of legislation covering issues such as Building and Construction Codes, Fire & Rescue, Disability Access…to name but a few. From the looks of it, Parliament hasn’t even considered the many other Acts/legislation covering all forms of lodging.
Legislation-wise, reckon we better stick with what we have – it’s excellent – rather than poke the hornets’ nest.
The alternative – to make individuals within a strata scheme (and those who live in residential suburbs) responsible for the actions and behaviour of (often absent) neighbours and off-shore booking platforms – is unrealistic and unfair in the extreme, plus places individuals, at times, in very dangerous and threatening territory, exposing all to financial ruin in the event that an insurer refuses to pay against a major claim.