Owners Corporations can’t stop Lot Owners cashing in on Airbnb

Summary

Melbourne is in the top 20 Airbnb cities in the world, with record numbers of apartments and houses being listed on the popular website. Whilst great for investors, short term letting has been a source of major frustration for long term tenants, owner occupiers and owners corporations.

In the case of Owners Corporation PS 501391P v Balcombe, the Court found that an owners corporation did not have power to prohibit lot owners from engaging in short-term leasing.

Background

Ms Balcombe and Mr Slater operated a short-term leasing business under the name Docklands Executive Apartments and utilised apartments within the Watergate Apartments in their business both for leasing and running of the business. The Watergate Apartments are a mixed use development.

The Owners Corporation rules prohibited short term leasing in the building, providing that owners could not lease their apartments for periods of less than one month.

The Owners Corporation commenced proceedings against Ms Balcombe making a claim for an injunction restraining Ms Balcombe from letting their apartments for a term of less than 30 days as it was in contravention of the rules. The hearing was ruled in favour of Ms Balcombe.

The Owners Corporation appealed this decision to the Supreme Court of Victoria.

Decision

The Supreme Court found that the Owners Corporations did not have the power to make a rule prohibiting short-term letting of apartments. In reaching this decision, the Judge stated that Parliament did not demonstrate an intention to confer such extensive powers on owners corporations for the following reasons:

  1. strata title legislation indicates the principal role of the owners corporation was to manage and administer the common property;
  2. the relevant legislation did not disclose any intention for owners corporations to have power to substantially interfere with lot owners’ proprietary rights; and
  3. a parliamentary intention to provide to owners corporations the power to prohibit short term letting would need to be expressed in clear and unambiguous language.

What does this mean for you?

Owners corporations cannot prohibit the short-term leasing of apartments by lot owners.

In 2018, Victorian Parliament implemented the Owners Corporation Amendment (Short-stay Accommodation) Act which has given owners or occupiers of a lot the right to make a complaint to the owners corporation about unfavourable conduct of a guest undertaking a short stay.

Unfavourable conduct includes creating noise likely to substantially interfere with peaceful enjoyment of a property, and behaving in a manner likely to unreasonably and substantially interfere with the peaceful enjoyment of an occupier.

Essentially short term guests can now be fined through VCAT for their unruly behaviour in apartment complexes.

We are currently unaware of any intention of the Victorian Parliament to introduce any further legislation to restrict short term letting in Victoria, and consider any changes in this regard to be unlikely in the near future. Conversely, in New South Wales, laws were recently passed which prohibit properties from being offered up for short term accommodation for more than six months in any given year.

In the event that you wish to discuss this in greater detail, please contact one of our team members to discuss.

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