The controversy surrounding short-term letting in strata apartments is all about permitted use.
Local Councils are responsible to lay down permitted use and administer it through property zoning. So long as the zoning permits residential use, and the strata owner rents their apartment for residential purposes, then the owners corporation is cutting across the Local Council’s functions if passes a by-law banning short-term lettings.
Local Council planning / zoning plans are nuanced. For example, using a property as a residence in a residential zone does not require a Council permit or consent. But if the residential use is a business use, such as for tourism and visitor accommodation, a permit or consent is required, which is granted subject to suitable conditions.
What is a ‘business use’ is a matter of degree. It is not necessarily a black and white ’90 day’ rule, although using it as a guide is useful.
This ‘leave short-term letting to the local Council’ approach is supported by section 136(2) of the Strata Schemes Management Act 2015 (NSW) which states –
A by-law has no force or effect to the extent that it is inconsistent with this or any other Act or law.
And there lies the answer to your hypothetical – the by-law has no force or effect because it is inconsistent with the planning law, administered by the Council.
We will soon have a decision on this by the Tribunal – NCAT – it is the central argument in an application to declare invalid a strata by-law banning short-term lettings of less than 90 days.