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A Victorian ruling that strata block owners corporations can’t create rules (by-laws) prohibiting apartments from being let short-term could have a devastating effect on high-rise residents across the country.
The Victorian Civil Administration Tribunal (VCAT) finding over the Watergate building in Melbourne’s Docklands, cited a NSW strata law that owners corps may not pass any by-law that interferes with an owner “dealing” with their property. And it may even extend into areas such as by-laws banning pets.
The Watergate, once known as Partygate because of its former use for bucks parties and hens nights, complete with hookers, strippers and snowdrifts of drugs, wanted to enforce its rules against the tenant of several properties who was sub-letting them short-term to holidaymakers.
But VCAT said that their rule over-reached into areas of town planning and was therefore invalid. Boom! A basic pillar of building strata communities is blown away.
Pity help the long-term residents of Watergate when other owners realise there is a motza to be made with holiday rentals. Party on, dudes!
The decision late last month came in the same week that City of Sydney handed residents of the Bridgeport, in Sydney’s CBD, a Land and Environment Court ruling prohibiting short-term lets there.
The Bridgeport, which has no by-law banning short-term rentals, still has many of its apartments listed online on Airbnb, Gumtree and Stayz and the like, despite the LEC ruling that they are illegal under council zoning regulations.
There, far from fighting short-term lets, its executive committee – which contains current and former Coalition state MPs – has as yet failed to inform owners who are letting their apartments short-term that they are breaking the law, and meanwhile whistleblower owners have been threatened with financial ruin through legal action.
Just as an aside, I wonder if “Team Bridgeport” as they apparently call themselves, are hanging out for the Liberal Coalition wet dream of a government stooge replacing Clover Moore in Town Hall after the next council elections.
Having one of their own in charge might lead to a subtle “adjustment” of zoning and suddenly everything would be copasetic after all.
Conspiracy theorist? Who says I am?
Will the Melbourne verdict have implications here? There is so much money to be made through holiday lets that it will be worth someone, somewhere, challenging by-laws. But it won’t be the Bridgeport rule-benders: the last thing they need is a High Court verdict that owners corps can’t create their own rules.
Meanwhile, the NSW government, while steadfastly turning a blind eye to the Bridgeport scandal, is looking closely at online letting agencies and how they impact on everything from planning to tax and tourism.
Here’s hoping they loosen up the rules for inviting paying guests into our homes but come down hard on the airheads letting entire apartments illegally, turning our homes into hotels. There’s a lot more on this on flatchat.com.au.
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
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When you read the VCAT decision in full, I think that no other result could have been possible. It’s not VCAT’s fault if they interpreted the law correctly.
But perhaps the issue can be better resolved by local planning authorities?
AFAIK, OC’s are not permitted to break planning laws and I have read VCAT decisions where they have stated the same.
@JimmyT said:The questions now are, will the Owners Corp take this to the Supreme Court? And how many other by-laws that stray into other areas of legislation – such as pet ownership and parking – may be invalidated because they ‘over-reach’?
One problem for an OC in Victoria wanting to take the matter to a higher court is that it needs a special resolution (OC Act s.18). As I know only too well, a special resolution in a large OC is very difficult to obtain (at least 75% must (1) actually vote and (2) vote for the resolution for it to be passed or 50% for and not more than 25% against for it to become interim).
If there is the desire, the state government could amend the OC Act to allow OCs to make rules about leases. But in Victoria new rules also need a special resolution. In many OCs rules are created by the original developer when they have 100% voting power. Still, allowing the rule would at least give OCs the chance to determine how their building is used.
Austman said….. a special resolution in a large OC is very difficult to obtain (at least 75% must (1) actually vote…..
In NSW the vote on a Special Resolution is determined from the numbers of Owners voting on the Motion at a General Meeting, not from the total number of Owners in the Strata Plan.
So you could have 100 Owners in the Strata Plan of which 25 attend the Meeting personally and/or by proxy, it would be quorate, and depending upon their Lots’ units of entitlement, a vote in favour by as few as 19 Owners could be sufficient to pass a Special Resolution.
@Whale said:
Austman said….. a special resolution in a large OC is very difficult to obtain (at least 75% must (1) actually vote…..
In NSW the vote on a Special Resolution is determined from the numbers of Owners voting on the Motion at a General Meeting, not from the total number of Owners in the Strata Plan.
So you could have 100 Owners in the Strata Plan of which 25 attend the Meeting personally and/or by proxy, it would be quorate, and depending upon their Lots’ units of entitlement, a vote in favour by as few as 19 Owners could be sufficient to pass a Special Resolution.
The difficulty with a special resolution is that it can be easily defeated by one or a small number of owners campaigning in opposition. They only have to persuade a minority to ‘play it safe’ and oppose. Opponents of something tend to be more motivated than the ordinary folk who would support a reasonable proposal but may or may not get around to showing up for the meeting or appointing a proxy.
Given that many retires could be looking at downsizing by selling the family home to move to a CBD apartment I do not think they would be very impressed buying into a residential apartment block full of short term tourists. The wear and tear to the building is increased. The noise is increased. The security is compromised. Public liability insurance could be negated. Young families living permanently in inner city apartments may feel nervous at numerous strangers entering and leaving a residential building. The effect on business on legitimate hotels could be negative. I don’t think such a ruling is at all fair to residents. I sincerely hope this is never adopted by Sydney authorities or NSW towns generally.
I can understand the sentiments here and I support them.
But VCAT has to decide on points of law (not public sentiment).
And they have found that the OC Act doesn’t allow an OC to make rules that restrict short term rentals.
So the VCAT decision needs to be challenged or the OC Act needs to be changed. Or the matter has to be handled outside the OC Act altogether (eg by a planning authority).
If there’s another alternative, I’d really like to know what it is!
One other point to consider is the Residential Tenancy Act. If you have a building zoned Residential then occupation must be in accordance with the Residential Tenancy Act.
Last month, in NSW, the NCAT ruled that short-term Tourist/Visitor AND Airbnb Agreements were not Resident Tenancy Agreements. In fact the NCAT Member was bemused as to why he was being asked to issue an Order as, in his words, the Act was crystal clear – it was obvious that these weren’t Residential Tenancies.
The NSW Land and Environment Court has judged that Residential tenancies and short term lettings aren’t compatible. And they sure aren’t, having had tourists/party groups all over and through our Residential building.
If there’s another alternative, I’d really like to know what it is!
Maybe the chink is via insurance? The risk to OC’s and all owners is that building insurance is partly/completely negated by uses contrary to legal frameworks – town-planning/zoning/permissions, plus occupancy limits imposed in fire-regulations, etc.
Would/could an insurer or the insurance council pre-emptively provide guidance on this? Or do we need to wait until some future claim is refused for the message to get out and, finally, sink in?
Ultimately strata owners are on the hook for any and all costs that the OC sinking fund can’t cover. If rebuilding/repairs required andif insurance refused then all owners can be liable for $$$.
I can imagine then an affected OC will have to become very, very familiar with its’ debt collection options. This could be complicated if the building is unhabitable; an owner might choose to walk away from their lot and its’ debt obligations, leaving the OC with no recourse (ultimate/final) to sell the lot to recover the debt as the lot could be worthless. (other than the lot’s share of land value which would be near impossible to sell without a usable lot)
Hi fcd
You’re absolutely right but it’s not a ‘chink’, it’s a gap as wide and as obvious as the Sydney Harbour Heads. You must understand that our Residential Strata is controlled by those short-term letting. So to spell this out:
Our original Insurer declined to insure us when short-term letting was declared.
One must declare that you’ve been refused insurance when applying with another Insurer. Our current Insurer has never been advised. (Chink one.)
So our current Insurer agreed to provide insurance with a proviso, that the EC writes to every member of the OC telling them that they are in breach of the Development Consent and as such, MUST STOP short-term letting. This proviso has never been adhered to – the Committee Members are those steering the whole short-term letting operation.
The lure of what I call ‘big fast bucks’ is what those in control of our Strata are focussed on – their immediate, big returns – and by doing so they gamble with our Insurance and our financial ruin…remember, Strata Owners have unlimited liability. (kerChink two.)
The Insurer keeps renewing the policy but says the “Terms and Conditions remain unchanged”…and three years down the track the proviso still hasn’t been adhered to. (small Clang)
And a ‘condition’ of your Policy is that you must abide by all Laws governing your building, like the LOCAL PLANNING/DEVELOPMENT CONSENT. (bell starts ringing)
When an individual Owner contacts the Insurer, the Insurer pretty soon stops talking to you cause you’re not the Owners Corp, you’re one owner only and don’t represent the ‘body’. (louder…warning…Bell)
So we sit with all things crossed and hope that something doesn’t wipe us and our neighbours out, like one of those first night short-term guests who doesn’t know how the griller works, leaves the iron on, doesn’t know where the fire escape is…oh, the escape route is blocked cause no one who is suppose to be looking after the building checks the building as they’re too busy checking guests in and checking them out and cleaning apartments before the new guests arrive. (Alarm..fire…FIRE!)
Now what odds do we get that in the event of a major incident caused by something to do with an “Illegal Use of Premises” the Insurer say: “Ah, but you haven’t complied so why should be pay you hundreds of millions in compensation? And tell us, how much does everyone have in their bank/Super accounts and if we split this bill up according to your Units of Entitlement…”
I get the feeling that the Insurers are primed and will happily knock back a claim – as they will be entitled to do – the day this scenario arrives.
But there are people short-term letting who are willing to take this risk/ gamble every day.
Where to go? To the Council who issued the Development Consent. They have to be lent on like your life and financial security depends on it. The Council MUST take this matter to the Courts. There are examples where Councils in NSW have won. So: push your Council with all your might!
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