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Short-term letting restrictions and how they impact you

As most of you would know, short term lettings in strata units and houses were causing a big fuss some years ago. Then, there were the debates (including parliamentary debates) as to whether these should be permitted, prohibited or permitted with conditions. Even now, we hear about the massive out of control Airbnb parties from time to time. Then again, there are the many success stories behind these passive income gems. So, where are we at now?

For NSW, the statutory framework governing short term letting has three main parts being: (i) the strata legislation, (ii) the mandatory code of conduct, and (iii) the planning laws.

Strata legislation for units and apartments

On and from 10 April 2020, the Strata Management Scheme Act 2015 was amended to include a new section 137A. In essence, the owners corporations can make a by-law by way of a special resolution in general meeting to ban short term rental accommodation where the person giving the rental arrangement does not occupy the lot as their principal place of residence. In short, the person granting the short term rental needs to live in the lot. If you (or your strata scheme) want to allow short term rentals, we suggest you to arrange a by-law to be made to expressly allow them, subject of course to conditions.

Mandatory code of conduct

On and from 18 December 2020, the mandatory Code of Conduct for the Short-term Rental Accommodation Industry has commenced (albeit gazetted on 28 October 2020). This would be governed by the Fair Trading Act 1987 and Fair Trading Regulation 2019.

Under the legislative structure, “short-term rental accommodation arrangement” (or STRA) means “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, and includes any arrangement prescribed by the regulations to be a short-term rental accommodation arrangement, but does not include any arrangement prescribed by the regulations not to be a short-term rental accommodation arrangement.” Under the regulations, there are some narrow exclusions to this, eg, various prescribed tourists and visitor accommodation, boarding houses, refuge and crisis accommodation, State or Federal funded accommodation, disability accommodation etc.

Of course, those arrangements over 3 months may well be covered by the existing residential tenancy laws being standard.

If you have (or are considering) a short-term rental arrangement (or if you are a party to one – no pun intended), then the code of conduct would likely apply! In brief, it deals with what the booking platforms need to do, registration of the host and premises (on and from 1 June 2021), exclusion register (to bar the “naughty” premises and people), hosts to take out insurance and to notify its owners corporation, guests to observe various behavioural standards and then there is a detailed dispute resolution and enforcement mechanism. Bear in mind that the code of conduct prevails to the extent of an inconsistency with a development consent condition BUT not where the use of residential premises for the short-term rental accommodation arrangement is prohibited by an environmental planning instrument. Critically, the code of conduct and Fair Trading legislation also do not appear to empower property and unit owners to use their property as a short-term rental accommodation. Indeed, the code of conduct explicitly requires the host to observe the planning laws. So, the code of conduct requirements are additional to those under the current planning laws as far as use permissibility is concerned.

Planning laws

This last part is anticipated to be finalised in mid 2021 by Parliament. The current intention is to develop a new planning policy to consistently address the use of properties as a short-term rental accommodation across NSW by property owners. The new planning framework is considering a new definition and class of what is a STRA at a planning law level, a 180 day cap for un-hosted properties, no cap for hosted properties, various minimum fire safety standards and also incorporating the code of conduct structure (above). So, stay tuned!!

More Information

Please contact our Property/Strata law team at Matthews Folbigg Lawyers on 9635 7966 if you would like advice or assistance.

DISCLAIMER: This article is provided to readers for their general information and on a complimentary basis. It contains a brief summary only and should not be relied upon or used as a definitive or complete statement of the relevant law. Liability limited by a scheme approved under Professional Standards Legislation.