Is Airbnb legal in a strata scheme? This is a topical question with a frustrating answer: it depends on the scheme. The nature of short-term stay arrangements are especially difficult for strata schemes and can have significant impacts on the scheme itself. Short-term stays can increase costs, risks and wear and tear. Understandably, many schemes have sought to ban short-term letting in their scheme altogether. To date, Airbnb and strata schemes have had rocky relationships.

However, owners, frustrated with being barred from the lucrative short-term stay market, are starting to challenge by-laws seeking to ban short-term letting in the New South Wales Civil and Administrative Tribunal (NCAT) and equivalent state tribunals nationally. These challenges have begun popping up all over Australia. In NSW, the most recent is the decision of Estens v Owners Corporation SP 11825 (Estens).

This article explains how these legal issues apply to Airbnb and strata scheme by-laws.

By-laws Cannot Stop an Owner Leasing Their Property

Owners corporations have a lot of power when it comes to making by-laws for their scheme. However, the law restricts this power in certain cases. For example, the law says you cannot prevent an owner from leasing their property.

NCAT considered this issue in the Estens case. Estens, a lot owner in the strata scheme, challenged the by-law on the basis that it restricted her ability to lease her lot for short-term periods. NCAT agreed with Estens and decided that the owners corporation had no power to make the by-law prohibiting her from renting to a third party of her choice.

The Estens case may be confirmed by further NCAT decisions, or it could be appealed in the Supreme Court and overturned. The future is uncertain. However, whatever the outcome, strata schemes should be thinking about their by-laws, especially if they have by-laws that seek to restrict short-term letting.

There is some discussion on whether the same position will apply to a licence over the use of the lot. In Victoria, Airbnb arrangements have been characterised as licences. A licence is similar to a lease, but is a contractual arrangement, rather than a property right attaching to the lot. Restricting licensing could face the same fate as restricting leasing if courts class a licence as a ‘dealing’ within property law generally.

Airbnb and Strata By-laws: Rules to Follow

If you represent an owners corporation, there are several ways you may be able to draft by-laws that minimise the damage from short-term letting.

First, be careful with by-laws that seek to outright ban owners from dealing with their lots. Those kinds of by-laws are the most open to challenge. Remember, it is relatively easy for an owner to challenge a by-law in NCAT. Owners can represent themselves and NCAT is not concerned with strict rules of evidence.

Secondly, communicate with all owners and gather their views on short-term letting. This does not just mean what the committee is concerned about. Seek out the views of all owners in the scheme, majority and minority. Good communication is a great tactic to keep owners onside. Once you diagnose the problem you can determine appropriate restrictions.

Thirdly, consider whether the by-law is trying to take away key rights, or just control how owners manage the lots. An owners corporation may pass by-laws that assist with the management of the lots and common property. For example, this could include requiring certain information from owners when letting or sub-letting, or clarifying responsibility for increased insurance premiums or damage.

Fourthly, seek out legal advice on the proposed by-law. An owners corporation committee is legally required to act with due care and diligence. One of the best ways to do this is to seek out professional advice.

Key Takeaways

Marketplaces like Airbnb continue to develop and become more popular. It is clear that strata need to consider how to approach this new form of property sharing. Strata schemes should be careful to understand their owners’ concerns rather than give in to bullying or factions who are unhappy with Airbnb. With adequate restrictions, short-term letting can be part of your community while not overburdening it.

If you need more advice on the relationship between Airbnb and strata schemes, including having your short-term letting by-laws reviewed or drafted, call LegalVision’s strata lawyers on 1300 544 755 or fill out the form on this page.

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