Short term rental has been a growing market segment and area of concern for the general Strata Community in New South Wales.

Previously, attempts by Owners Corporations to control short term rental through the use of by- laws has proven unenforceable. This is due to the Estens v Owners Corporation SP11825 [2017] NSWCATCD 63 (Estens) decision invalidating the by-law.

Since then, the industry has been awaiting the State Government to make changes to the Strata Scheme Management Act and establish a Code of Conduct for the industry to provide certainty.

Notwithstanding this, from 10 April 2020, a change to strata laws helps Owners Corporations to manage short-term rental accommodation in their buildings.

 

Key Changes

  • Owners Corporations are now able to adopt by-laws that limit short-term rental accommodation in their strata scheme, by not allowing it in lots that are not the host’s principal place of residence. This means if someone lives in a strata property as their principal place of residence, they will still be able to rent out their home or rooms while they live there, or temporarily go on holidays.
  • Residential tenancy laws have been changed to clarify that from 10 April 2020, short-term rental accommodation arrangements of 3 months or less are not agreements covered by the residential tenancy framework.

Further changes will allow for a code of conduct for short term rentals in the regulations that are yet to be established.

 

What if my Owners Corporations want to limit short term rentals?

These changes will allow the establishment of a by-law to limit short term rentals under section 137A of the Strata Scheme Act 2015 (SSMA). Therefore, if an Owners Corporation are considering these changes it should consider: –

  • The needs of all owners within the Scheme – is this something that the majority of owners support?
  • Undertake a review and consolidation of the Scheme’s by-laws, to ensure that they meet the full requirements of the owners. This is a great opportunity to complete a full review of all by-laws.
  • Some plans have already adopted relevant model and specific short term rental by-laws that may need to be reviewed to ensure they are compliant with these changes. This can be completed by a solicitor and/or Committee.
  • Have the new by-law drafted by a solicitor to ensure it is compliant with the correct section of the Act (Section 137a). Keep it as simple as possible to make sure it is not impacted upon by the future Code of Conduct.
  • Complete a Special General Meeting of the Owners Corporation and have the by-law ratified by Special Resolution .

These changes could be controversial, so open and clear communication with all owners is vital.

 

Our Scheme already has a short term rental by-law – What now?

If your scheme has already established a short term rental by-law, the Owners Corporation need be aware that:

  • There is NO restriction on resident owners and tenants subletting at this point, this will be addressed in upcoming changes to the State Environmental Planning Policy (SEPP).
  • Any existing by-law should be reviewed to ensure that it is compliant with these changes and is enforceable. This should be completed by a strata solicitor.
  • Any breach of this by-law should be subject to normal due process (clear warnings).
  • Any formal Notice to Comply is only issued as resolved at a General Meeting or issued under the correct delegation (Strata Committee, Strata Manager).
  • That there is clear and documented evidence of the breach be presented to NCAT.

 

Summary 

  • Changes to SSMA now allow Owners Corporations to establish and enforce by-laws to limit short term rentals.
  • These changes do not apply to resident owners.
  • Owners Corporations wishing to take advantage of the changes are encouraged to have existing by-laws reviewed and/or any new by-law drafted by a solicitor.
  • Be aware of the implications of the State Environmental Planning Policy (SEPP) on your complex.
  • Ensure your by-law enforcement procedures allow for due process as required by the Act.

  

FAIR TRADING AMENDMENT (SHORT-TERM RENTAL ACCOMMODATION) ACT 2018, defines ‘short-term rental arrangement’ as ‘a commercial arrangement for giving a person the right to occupy residential premises for a period of not more than 3 months at any one time’.

The FTAA also introduces section 137A into the Strata Schemes Management Act 2015 (SSMA) which provides that:

‘A by-law made by a special resolution of an owners corporation may prohibit a lot being used for the purposes of a short-term rental accommodation arrangement if the lot is not the principal place of residence of the person who, pursuant to the arrangement, is giving another person the right to occupy the lot’.

This means that owners corporations will now have the power to create by-laws restricting short-term letting except where a Lot is also the principal place of residence.

The intention here is that if you live in a strata lot and wish to provide short term accommodation whilst you are also in occupation, ie short term letting another bedroom in your lot or whilst you are temporarily absent from your residence, this is permitted but otherwise strata schemes can now have a by-law that restricts any and all other types of short term letting.

THE BETTER REGULATION  LEGISLATION AMENDMENT ACT 2019 (NSW) introduces a new section into the Residential Tenancies Act 2010 (RTA), section 8(1)(bb) which expressly excludes short term letting arrangements from the operation of the RTA. Some providers of short term accommodation have attempted to use the RTA as a shield to permit short term letting where it would otherwise be prohibited. This amendment to the RTA removes the ability to do this.