Australia: Airbnb and Stayz – what is the impact on bodies corporate?

Last Updated: 18 May 2016
Article by Don Battams, Anthony Pitt and Hayley Schindler

In recent years, there has been a vast increase in the use of online letting services, such as Airbnb and Stayz, which allow property owners to rent out their property for short term letting through websites that can be accessed worldwide.

The legislative framework has been slow to catch up to the changing nature of temporary accommodation and the "sharing economy" and bodies corporate have limited options to regulate behaviour within their schemes. An options paper released by the Commercial and Property Law Research Centre of the Queensland University of Technology (QUT) and recommendations made by The Grattan Institute offer some hope of changes being made to body corporate laws that will grant bodies corporate wider powers to control transient tenants in short term rentals.

In this Alert, Partner Don Battams, Special Counsel Anthony Pitt and Associate Hayley Schindler consider the benefits and pitfalls of online letting services such as Airbnb and Stayz for bodies corporate.

  • The increase in short term letting
  • Short term letting in a body corporate
  • What can a body corporate do to regulate short term letting?
  • Party house regulations
  • Commercial and Property Law Research Centre of QUT Options Paper
  • Grattan Institute review

The increase in short term letting

Online letting services have rapidly obtained a huge following in recent years. According to its website, Airbnb currently has over 2,000,000 listings in more than 34,000 cities and in 190 countries around the world, which it has accumulated since its inception in about August 2008. Airbnb began operating in Australia in 2009 and Inside Airbnb data shows that it now has more than 66,000 listings (including rooms and entire properties). The Stayz website confirms that Stayz has more than 40,000 entire-property listings in Australia.

The appeal of such online services is that property owners can rent out their property without the need for agents, forms or licences. However, the problems associated with the influx of such services are that there is no regulation and no precedents for dealing with issues caused by these short term letting arrangements.

In some ways, the rating service, by which the property owner and the tenant each rate one another, is designed to ensure that each party behaves appropriately, thereby placing the onus on the property owner to ensure their property is up to standard and on the tenant to ensure that they do not offend. However, the rating process is not always a successful way of regulating behaviour.

Short term letting in a body corporate

Specifically, where the property is a lot in a community titles scheme, there is currently no requirement to obtain the body corporate's consent to let the property on a short term basis, and there are currently no specific regulations for short term online rental services.

Accordingly, short term online letting services can have various impacts on schemes, including:

  • in large scale complexes, which may be zoned for short term accommodation and which are likely to have financial provisions in place designed for the purposes of short term letting:
    • such online rental services may be less concerning as it is likely that the body corporate sinking and administration funds have been set up to deal with certain expenditure caused by or attributed to short term letting;
    • however, lot owners may decide to not let their lot through the on-site manager and proceed with an online letting service instead, in which case management rights may lose their value;
  • in smaller complexes, which may be zoned residential and not for short term accommodation:
    • the body corporate sinking and administration funds will most likely not be designed to deal with short term letting and/or the increased expenditure which may be caused by or attributed to such short term letting;
    • short term letting may impact permanent owner/occupants and tenants due to the constant changes in guests, who may cause nuisance as they may not have the same sense of responsibility as a permanent resident, and are more likely to use on-site facilities such as pools and gyms; and
    • subject to any local council laws which apply to the scheme, a lot owner may be in breach of specific planning controls for the area or the scheme.

An example of the issue outlined at paragraph 2(c) above occurred in the Land and Environment Court of New South Wales matter of Dobrohotoff v Bennic [2013] NSWLEC 61 (2 May 2013). The respondent advertised and rented her house for short term holiday rental accommodation on websites such as Stayz which attracted some tenants who often engaged in antisocial behaviour that significantly and adversely impacted neighbours who were permanent residents. In Dobrohotoff, the Court held that the respondent had carried out development that was prohibited, namely, the use of land for short term holiday rental accommodation in breach of s 76B of the Environmental Planning and Assessment Act 1979 (NSW).

Additionally, the use of lots within a scheme for short term and holiday accommodation may, in some circumstances, change the classification of the building under the Building Code of Australia. This issue was considered in Genco & Anor v Salter & Anor [2013] VSCA 365, where the Victorian Court of Appeal considered whether a 'Class 2' building (like most apartment buildings) can be used for short term and holiday accommodation or whether they are required to change their classification under the Building Act 1993 (Vic) and the Building Code of Australia from 'Class 2' to 'Class 3'1.

The Court of Appeal held that:

  • the way that a building is used may change its original classification under the Building Code;
  • a number of factors will be considered in determining whether the use of an apartment building for short-term accommodation will result in a change of the building's classification from 'Class 2' to 'Class 3' including whether the short-term stay apartments are of such a number and so physically disposed in relation to each other as to resemble the residential part of a hotel as to properly be classified as 'Class 3';
  • the term "dwelling" encompasses short term holiday accommodation and there is no rational basis for limiting the word "dwelling" to just long term residential usage.
  • Accordingly, the Building Code may not assist bodies corporate in restricting short term accommodation in 'Class 2' buildings.

There may also be some safety concerns associated with short term letting services as safety standards may not be upheld as short term letting guests will not be familiar with the property and as there is no regulation applicable to such arrangements, those guests may not be made familiar with fire safety and evacuation plans for the property. This could result in claims being made against the body corporate for personal injury or property damage.

What can a body corporate do to regulate short term letting?

As noted above, the position for bodies corporate or other lot owners with respect to any dispute arising from a lot owner offering their property as short term accommodation through an online service is unchartered and unregulated in Australia. Perhaps due to their rapid rise in popularity, the current legislative and regulatory schemes have not been updated to deal with the issues caused by short term online renting services.

Notably, with respect to the extent to which the by-laws for a scheme can address the issue, there are limitations in the Body Corporate and Community Management Act 1997 (BCCMA) as follows:

  • Section 169 provides that a by-law may only provide for the administration, management and control of common property and body corporate assets and the regulation of, including conditions applying to, the use and enjoyment of lots, common property and body corporate assets, services and amenities. Consequently, the BCCMA may not authorise a by-law prohibiting the use and enjoyment of lots for a particular activity (e.g. short term letting);
  • Section 180(3) provides that, if a lot in the scheme can lawfully be used for residential purposes, then the by-laws for the scheme cannot restrict the type of residential use and Section 180(5) provides that a by-law must not discriminate between types of occupiers. Accordingly, by-laws cannot be made or amended to restrict the use of lots or common property facilities by short term occupiers;
  • Section 180(6) provides that a by-law (other than an exclusive use by-law) must not impose a monetary liability on the owner or occupier of a lot included in a community titles scheme. Accordingly, the body corporate cannot impose a fee structure via the by-laws to make owners who let their property on a short term basis pay the extra expenses incurred for common property maintenance; and
  • Section 180(7) provides that a by-law cannot be oppressive or unreasonable, having regard to the interests of all lot owners and occupiers. Where a by-law seeks to restrict owners or occupiers from doing something it may be found to be oppressive or unreasonable where the restriction is not proportionate to the risk to the rights and interests of other owners and occupiers.

However, despite the above, bodies corporate may introduce by-laws that restrict behaviour, noise, parking and the use of the common facilities. The imposition of such by-laws may provide some comfort. However, given the BCCMA notice requirements and dispute resolution provisions involved with dealing with a contravention of any by-law, such by-laws may be futile where the person causing the nuisance will generally only be occupying the property for a few days.

Party house regulations

In 2014, the Queensland Government amended the Sustainable Planning Act 2009 (SPA) to allow a local government to regulate residential premises that are used as a commercial venue for accommodation or facilities that are regularly used by guests for parties, known as a "party house". This legislation, however, does little to assist bodies corporate to regulate behaviour within their scheme. It is not mandatory for local governments to regulate party houses in its planning scheme and at this stage, few Councils have done so. It remains to be seen whether there will be a greater uptake of the regulatory instruments in the future.

Options Paper

The Commercial and Property Law Research Centre of the Queensland University of Technology (QUT) is undertaking a review of Queensland's property laws for the Queensland Government, including an examination of issues arising under the BCCMA. In the 2014 Options Paper entitled "Body corporate governance issues: By-laws, debt recovery and scheme termination", QUT specifically considered the issue of by-law enforcement and, relevantly, with respect to overcrowding of schemes. Some of the relevant options considered in the Paper, regarding by-law enforcement and overcrowding, include amending the BCCMA to:

  • provide that if the body corporate has a reasonable suspicion of overcrowding in a lot, the body corporate has a right to authorise a particular person to enter the lot to conduct an inspection;
  • allow a body corporate, via a committee decision, to give consent on behalf of the lot occupier (including owner occupiers) to allow the fire service or the local government to enter a lot to investigate overcrowding (with safeguards to ensure the rights of tenants are not unfairly diminished or removed);
  • give the body corporate an ability to issue a monetary fine to owners or occupiers who disregard a contravention notice; and
  • allow the body corporate to delegate (for example, to the managing agent) the ability to issue contravention notices.

Grattan Institute review

The Grattan Institute has last month released a review entitled "Peer-to-peer pressure Policy for the sharing economy" in which it states that the laws concerning short-stay accommodation need to do more to help people limit noise and loss of amenity and that State governments should give owners' corporations more powers to control short-stay rentals, possibly even the power to ban continuous, whole-premise short-stay rentals if agreed to by members. It also states that local governments should focus on controlling disruptions and protecting amenity, not primarily on limiting short stay rentals.

The Institute ultimately recommends that States "should give owners' corporations more power to limit disruptions caused by short-stay letting and streamline dispute resolution."

Conclusion

While bodies corporate can introduce by-laws that restrict behaviour, noise, parking and the use of the common facilities, the BCCMA notice requirements and dispute resolution provisions involved in dealing with a contravention of a by-law result, in practice, in such by-laws doing little to regulate the behaviour of temporary guests who may only be occupying the property for a few days. In light of the options in QUT's Options Paper and the recommendations in the Grattan Institute's report, it is hopeful that we will see a change in the body corporate laws that will grant bodies corporate with wider powers to control transient tenants in short term rentals.

Footnote

1 Class 2 is defined as "A building containing two or more sole occupancy units each being a separate dwelling." Class 3 is defined as "A residential building, other than a building of Class 1 or 2, which is a common place of long term or transient living for a number of unrelated persons, including a boarding house, guest house, hostel, lodging house or backpackers accommodation or a residential part of a hotel or motel."

© HopgoodGanim Lawyers

Award-winning law firm HopgoodGanim offers commercially-focused advice, coupled with reliable and responsive service, to clients throughout Australia and across international borders.

2015 AFR Beaton Client Choice Awards:
Best Law Firm (revenue $50m - $200m)
Best Professional Services Firm (revenue $50m - $200m)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions