Short Term Lettings in Strata Schemes: the good the bad, the ugly

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Before I start I have a confession. As a former long term resident of a strata building in Manly I have personal experience of holiday accommodation mixing (or not) with long term residents. For those in a situation like mine, that is, having up to six people (or was it a herd of elephants?) in full time party mode living in a one bedroom apartment above them, it is not fun. But this is one extreme.

Short term letting can also have a positive impact on your building. It can be invigorating for other residents (provided the units don’t become party units), provide higher investment return for lot owners who, if they want to preserve their investment, will be keen to keep up property maintenance and, it may enable lot owners the income to have on site building managers who generally do a great job in keeping the property in tiptop shape and increase security. It can also, through turnover of “residents” serve to prevent personality issues from building up between long term owner occupiers.

Having set out the pro’s and the con’s the most common question I am asked is whether an owners corporation can you ban short term lettings in strata schemes?

The answer: it depends. Your by-laws may prohibit short term letting. This prohibition may or may not be valid and it depends on your Local Environmental Plan (LEP). The LEP will set out the zoning for the building and the permitted, permitted with consent and prohibited uses. It will also have a definition of residential dwelling that may include several types of short term letting. It may also include a clause that is commonly called a “by-law buster” adopting section 28 of the Environmental Planning and Assessment Act 1979 (NSW). This section provides that a restriction (such as a by-law) may not have the effect of preventing a development if the LEP adopts section 28.

If your LEP contains the by-law buster and your zoning prohibits short term letting then you by-laws will generally be valid. If your zoning permits types of short term stays with or without council consent then your by-laws need to be carefully drafted to ensure that they are not rendered invalid by the by-law busting provision.

Even if short term stays are permitted, generally they are only permitted with Council consent. Lot owners and the owners corporation can object to any unapproved use.

Owners corporations should also be aware that are alternative ways to prevent some of the issues connected with short term letting. For instance, if wear and tear and overcrowding are an issue then a by-law aimed at restricting the occupancy of the lot should be considered. Under the Strata Schemes Management Act 2015 the occupancy of a unit can be restricted to 2 adults per bedroom.

Alternatively a by-law that provides for a bond for each new occupier of a lot may be helpful as would be a by-law prohibiting smoking, smoke drift and regulating the disposal of cigarette butts within the scheme if your building is plagued by holiday makers smoking or by my personal favourite, something which they would not do in their own home, throwing used butts over balconies.

Another possibility if security is an issue is introducing key cards to improve security as they can relatively easily be recoded and requiring lot owners to pay for additional or replacement key cards.

We recommend you seek legal advice tailored for your scheme. We also recommend that if a lot is used for short term letting that this be disclosed the scheme’s insurer and the owners corporation seek advice about passing on any additional premiums caused by this use.

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