What can be done about short term letting?

Recently, I was invited by strata management company Dynamic Property Services to sit on a panel, together with other strata ‘experts’, and answer a range of questions asked by strata owners.

One of those questions was: what to do about short term letting in strata?

Below I share with you my personal notes made in preparation for answering the various aspects of that important question:

What action can an owners corporation take to prevent owners from leasing their lots under a short-term letting arrangement?

• Your starting point must always be the planning instruments for the building and local area. These include the original development consent, any modifications to that consent, and the council’s Local Environment Plan.
• If the planning instruments expressly prohibit short term letting, holiday accommodation, serviced apartments, or the like, have a by-law prepared which confirms that the provisions of the planning instruments will be upheld and enforced by the Owners Corporation.
• In my view, such a by-law is valid and enforceable. It simply confirms the legal position. It does not attempt to change it.
• Thinking less legalistically, what about attempting to foster a “culture of caring” in your building? We care about and are proud of where we live, or where we have chosen to invest. We care if our common areas are damaged by thoughtless holiday makers. We care that it costs us all more money if we allow this to occur.

What if the development consent for the site is silent on the issue?

• It is important to look broader than the development consent. Consider planning instruments such as Local Environment Plans (LEPs) which may deal with the issue.
• If all is silent, then the conservative view is that it is probably permitted with Council consent. If you have a by-law, then that is what your by-law should say: that short term letting is prohibited unless you have council consent and evidence of that consent must be provided to the Owners Corporation.
• To be sure, you should make enquiries with Council to determine their position on the issue. Short term letting may be permitted even without Council consent. Your Council should be able to confirm the position, preferably in writing.
• If you outlaw short term letting completely when the planning instruments are silent or the council actually permits it, then you are placing yourself at risk of having the by-law successfully challenged and overturned as a by-law that prohibits something that is otherwise lawful: a by-law has no force or effect to the extent that it is inconsistent with the Strata Schemes Management Act or any other Act or law.

How does an owners corporation engage with Councils to have them deal with the problem?

• With great difficulty and varying degrees of success depending on the council.
• Get someone experienced dealing with council on your team. Someone with contacts. Sometimes it’s a lawyer, sometimes it’s a town planner or architect or surveyor.
• Be consistent and persistent.
• Present solid evidence. Prepare your case as if for court.
• Build a focussed and dedicated team around you.

What further action needs to happen here to have Local/State Government deal with the problem?

• LEPs need to be amended. This is happening in some councils.
• New developments need to be designed to cater for short term stays only. Those buying in to those types of buildings therefore go in with their eyes open, wanting this type of investment.

What implications, if any, impact upon the owners’ corporation insurance?

• Consider: is there a breach of the policy where the building or lot is not being used for its disclosed or approved use? Will you be covered?
• This applies to both contents insurance for lot owners and the Owners Corporation’s building insurance.
• Consider whether lot owners are covered for public liability should there be any injury to a holiday-maker staying in their lot?
• Increased risk: higher premiums. More claims: higher premiums.
• I believe we will see new players come on to the market who do provide this type of insurance coverage.

Want to know more? In this podcast episode, I discussed with Karen Stiles of the Owners Corporation Network how short term letting led to an extra 1000 residents and 18 illegal brothels in one city building.