Short-term letting using platforms like Airbnb and Stayz has become increasingly problematic for many strata schemes with the continual influx of guests and service providers creating disturbance and now causing additional concerns regarding the risk of the spread of COVID-19.
Before COVID-19, the long-awaited changes to the law in this area were due to commence on 10 April 2020. Now not all the changes are happening, and the NSW Government has used its emergency powers under health and safety orders to restrict most short term letting in NSW to combat the spread of COVID-19.
On 6 April 2020 the NSW Minister for Better Regulation and Innovation announced new prohibitions on people staying in short-term accommodation. People who chose to stay in short-term rental accommodation such as Airbnb hosted properties and are not in one of the exempt categories may face up to six months in prison and a fine of up to $11,000.
Those who are staying in short-term rental accommodation for reasons such as work, to take care of another person or for their education are exempt. The Minister also clarified that it is not illegal to merely advertise property for short-term letting.
The Fair Trading Amendment (Short-term Rental Accommodation) Act 2018 (NSW) (FTAA), 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 express power to create by-laws restricting short-term letting and these by-laws will be valid except where a lot is also the principal place of residence of the person who is the short-term letting provider. 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 in to 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.
Contradictory case law and tribunal findings have created confusion in this area and there was a real need for legislative clarification. As of 10 April 2020, section 137A of the SSMA and section 8(1)(bb) of the RTA will give owners corporations certainty of the ability to prohibit short-term letting in a strata scheme and to what extent an owners corporation can do so.
Under the FTAA a code of conduct was set to be introduced regulating short-term letting in NSW. The commencement of this code has now been put on hold.
The code of conduct sets out rights and obligations of short term accommodation participants and provides for the resolution of disputes and complaints. There were to be civil penalties for breach of up to $22,000 for an individual or $110,000 for a corporation. These provisions would have operated to give owners corporations greater comfort in relation to the conduct of participants in short-term letting in strata schemes. At this stage it is unclear when the code of conduct will come into effect, if at all.
New regulations regarding fire safety compliance for premises who provide short term letting, that would have potentially affected strata schemes and the requirement to provide an annual fire safety statement, have also been put on hold.
In 2018 the NSW Government announced its intention to amend the Environmental Planning and Assessment Act 1979 (EPAA) to set limits and caps on the number of days a property could be provided for short term accommodation. These provisions have not been drafted into a bill and it is now unclear whether they will be introduced into legislation at all.
Now is an opportune time for strata schemes to review their by-laws and amend or resolve a new by-law for short term letting noting section 137A SSMA. The new legislation gives owners corporations some long awaited certainty as to what they can and can’t do to restrict and/or control short term letting in their strata schemes.
9 April 2020
Speirs Ryan is a Sydney based boutique property law firm with national coverage. The firm is uniquely placed with specialist teams in both strata law and property transactions. Speirs Ryan has advised a number of stakeholders on strata issues and transactions including owners corporations, lot owners, statutory authorities, developers and private interests.
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Disclaimer: The information contained in this article is provided as personal information only. It is not intended to be legal advice and it should not be used as legal or professional advice. The information in this article should not be relied upon – you should seek legal advice for your own specific circumstances.