SHORT-TERM LEASING – Here to stay, or should it go?

Short-term accommodation websites: love them or loathe them but there is no denying the high demand for short-term property leases as alternative accommodation for holidays and business trips, especially apartments.

Ask any strata manager, most will give you arguments for and against short-term leasing within the strata community but the bottom line is: the battle between short-stay visitors versus long-term residents is very real… and no one is winning.

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

Melbourne Case Study

Strata Community Australia (SCA) previously reported on the Waterside Building, in Melbourne’s Docklands, where the City of Melbourne took the owner, Mr Salter, to the Building Appeals Board (BAB).

The aim of the appeal was to get Mr Salter 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 and for the time being it will remain a test case with all eyes watching for the next move.

Current rules vs the proposed new Bill
Currently in Victoria owners and occupiers of residential apartments are regulated mostly by the Model Rules for an Owners Corporation as set out in Schedule 2 of the Owners Corporations Regulations 2007.

These Model Rules impose obligations on owners and occupiers to refrain from certain conduct, including:

  • causing a hazard to the health, safety and security of other people;
  • obstructing use and enjoyment;
  • damaging or altering property;
  • unreasonable interfering with peaceful use and enjoyment.

If an owner or occupier breaches these Model Rules, an Owners Corporation can follow the Rule breach procedure found in Part 10 of the Owners Corporations Act 2006. Currently there is no requirement for the Owners Corporation to show that the owner or occupier’s breach was ‘substantial’ before the breach procedure can be implemented.

However, should the proposed Owners Corporations Amendment (Short-stay Accommodation) Bill 2016 (‘the Bill’) go ahead, this changes. If a breach is reported, the VCAT would only be able to award those affected by disruptive short-stay occupants if an eligible applicant first establishes that the short-stay occupant’s behaviour caused ‘substantial’ interference or damage to the building or its occupants.

This proposed higher legal threshold may be because of the proposal to enable an applicant affected by short-stays to seek monetary orders that would have effect jointly and severally against both a short-stay provider and a short-stay occupant (who is often unknown and difficult to locate once their stay ends).

Not surprisingly, owners are pushing back. An advocacy group, We Live Here, from Melbourne formed in 2015 to push back against the short-stay industry within residential apartment blocks. It claims membership from owners from more than 100 high-rise buildings in Melbourne CBD, Docklands and inner suburbs.

In the meantime, only time will tell how this pans out for the strata industry.

SCA – JS Mueller & Co – is change in the air for short-term leasing?