Prohibiting Short Term Letting in NSW Schemes – The Devil is in the details

From 10 April 2020 owners corporations were able to rely on by-laws that prohibit short-term letting. As always however the devil is in the details.

When trying to regulate short-term letting, the first point that owners corporations and owners should be aware of is that a by-law can only prohibit short term letting where the lot is not the principal place of residence of the person who is providing the accommodation.  

This brings up two related sub-issues:

1. While principal place of residence has not been defined the principal place of residence exemption ruling no. LT 082v5 under the Land Tax Act 1956 assists. The ruling states: “[t]he term “principal place of residence” means the one place of residence of a person, whether within or outside Australia, that is the principal place of residence of that person. “ This means that a person may only claim one place of residence as their principal place of residence and, if they provide short-term letting out of more than one lot in the scheme then a by-law can prevent short term letting of the non-residence lot or lots; and

2. Can a corporation claim a lot as its principal place of residence?

The second point of note is that short term letting is now defined in the Strata Schemes Management Act 2015 and the Fair Trading Act 1987 as a “short-term rental accommodation arrangement”. In defining short-term letting, the Acts create further limitations. A short-short term rental accommodation arrangement:

  • must be a commercial arrangement – in other words consideration (usually money) must change hands. Letting a “friend” house sit at no cost while the occupants are away or a simple unit swop for a short period would likely not be a commercial arrangement; and
  • is an arrangement of less than 3 months occupation at any one time.

The definition is at s54A of the Fair Trading Act 1987 and we have extracted it in full below for those who are interested.

The good news is that if there is a by-law prohibiting short-term rental accommodation arrangements and the occupant is not claiming the lot as their principal place of residence and the arrangement is commercial and allows occupation of less than three months then NCAT action can be taken to prevent this use. The devil is that owners corporations will need to have evidence of the use and that the lot owner / occupant does not use the lot as their principle place of residence and the scheme has a by-law prohibiting short term letting.

The second piece of good news is that the Code of Conduct and the supporting regulations (mostly) came into effect on 18 December 2020. An article on what is required by the host, guests and booking platforms under the Code is here:  https://kerinbensonlawyers.com.au/code-of-conduct-for-short-term-rental-accommodation/  This means that it will likely be more effective from later this year to make a complaint under the Code of Conduct for serial offenders.

“”short-term rental accommodation arrangement” 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

section 54A Fair Trading Act 1987 (NSW)

This is general information and should not be considered to be legal advice. I recommend you obtain legal advice specific to your individual situation.

One response to “Prohibiting Short Term Letting in NSW Schemes – The Devil is in the details

  1. Pingback: NSW: Prohibiting Short Term Letting in NSW Schemes - the Devil is in the Details·

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s