Understanding Strata

Understanding Strata

Short term Leasing

Short term leasing

Mention short-term leasing to any strata manager anywhere you are most likely to hear stories about short-term lessees versus long-term residents. 

Local councils across Australia are long fed up with the issues concerning short-term leases and all are desperate for solutions.

In Victoria, the Waterside Building in Melbourne's Docklands has attracted strata industry attention. The City of Melbourne took the owner, Mr Salter, to the Building Appeals Board (BAB) to get him to cease his short-term letting business on the basis that the building is a Class 2 residential building according to the Building Code of Australia (BCA). Council argued that short-stay apartments fall within the Class 3 classification, usually reserved for hotels and rooming houses.

The BAB determined that Class 2 apartments cannot be used for short-term accommodation, including the serviced accommodation offered by Mr Salter. He subsequently appealed the decision to the Victorian Supreme Court.

The Court found that the BAB had erred in its decision on the basis that:

It misinterpreted the building code when it gave the term "dwelling", as it is used in the definition of a Class 2 building, a temporal requirement;
Despite the BAB being described by council's lawyers as an "expert tribunal" it does not have jurisdiction to commit errors of law;
That there was no evidence of a "changed use" as referred to by the BAB in the reasons for its decision; and
That the building act did not permit a building notice to be served unless the building was a danger and that there was no evidence that the apartments themselves constituted a relevant danger.

The matter is now back before the BAB for a fresh look at the matter and for the time being will remain a test case with all eyes watching for the next move.

Meanwhile Inside Strata asked solicitors in NSW and Queensland for their views and experiences with short-term lease cases in their states. Here is what they had to say.

New South Wales

David Bannerman from BannermansLawyers said that short-term lettings of strata units are controversial, as they are a major contributor to building disharmony. "They can cause a number of problems within a building and the current law does not provide effective solutions. Councils, owner occupiers, investment owners and tenants all have grievances about the current system," he said.

"A recent NSW Land and Environment Court decision found that a property used for short-term lettings is not a dwelling house and hence not consistent with the property's zoning, effectively preventing it being used for short-term lettings. We understand that the relevant Council and a number of other councils are amending their local environment plans to permit short-term lettings.

"Proposed solutions include giving owners corporations greater powers to make and enforce by-laws dealing with the issue, giving councils greater powers and giving the Consumer Trader and Tenancy Tribunal power to make orders in relation to short-term letting arrangements where there has been a pattern of problems."

"In our view, with each community and building being different, this issue can only be dealt with properly by way of by-laws specific to a particular building. Our experience is that lot owners and tenants are frequently inconvenienced, often severely, by short-term lettings and resulting overcrowding. We have seen problems ranging from excessive noise and other disruptions to amenity, excessive water and electrical use, damage to common property and obstruction of fire safety and other common property facilities," David explained.

Queensland

Andrew Suttie from Nicholsons Solicitors says the root of the problem lies in the conflicting objectives of the parties — the resident owners are striving to preserve their investment and to find harmony in their home environment while the holiday-makers are there to enjoy themselves.

"The legislation provides: if a lot may lawfully be used for residential purposes, the by-laws cannot restrict the type of residential use," Andrew said.

"So, if the development approval for a building does not restrict short-term letting, a owner can use its lot for that purpose and neither the body corporate nor any other lot owner in the building can legitimately complain. Consequently, the case law is sparse."

"We recently acted for the onsite manager in a Brisbane complex comprised of lots used exclusively for short-term rentals. The development approval for the building prevented the lots being used as permanent residences. At the onset of the GFC, a handful of the investor owners sold their homes and moved into the building. The body corporate was helpless to complain under the Act. The owners applied for a material change of use to allow them to use their lots as permanent residences. Our client's only recourse was to object under the planning legislation. I understand that dispute is ongoing."

"The only other possible recourse for bodiescorporate to complain about short-term letting is where the onsite manager is conducting short-term letting contrary to the terms of its letting authorisation with the body corporate. In those circumstances, the dispute is classified as a "complex dispute" under the Act and the body corporate may commence proceedings at the tribunal or by specialist adjudication for a breach of contract."

"In my view the only resolution of the conflict between long-term and short-term use of lots in community titles schemes is to prevent buildings having both," Andrew concluded.