Is this the death of short stay accommodation in apartment buildings in Victoria?
What a week! The Victorian Parliament has introduced a bill (the Short Stay Levy Bill 2024) to allow an Owners Corporation to register a rule that prohibits a lot owner using their lot for short stay accommodation.
So, what is short stay accommodation?
Accommodation for a continuous period of less than 28 days. The current definition is for a period that is less than 7 days and 6 nights.
How is the prohibition created?
The Owners Corporation just needs to pass a special resolution to include a rule with the specific prohibition. The rule then must be registered on title with Land Use Victoria.
How is the resolution passed?
Whilst a special resolution requires 75% to pass, if there is at least 50% voting in favour and no more than 25% vote against it can pass as an interim resolution.
This means that lot owners with 50% of the vote can dramatically change the ability for some lot owners to generate income and can dictate how their lots can be used.
It also means that with changes to ownership of lots, the Owners Corporations rules can be changed and changed again.
We suspect that this will create havoc for the value of any lot to be used for short stay accommodation.
Likewise, where short stay accommodation is a problem, these new laws will be welcome relief and a great way of getting rid of the few short stay accommodation lots in an apartment building.
Are there exceptions?
Yes, the prohibition will not apply to a lot owner or the lot owner’s lessee or sub lessee who is using the lot as their principal place of residence and wants to rent it out as short stay accommodation.
But what is principal place of residence?
Like all “good” legislation, there is no definition of principal place of residence. If we look to the definition for land tax purposes, you cannot rent out the land for more than 6 months in a year.
This leaves open some questions and potential ways of skirting the proposed prohibitions for those who only have one principal place of residence.
Is it law yet?
No, it was introduced on 27 August 2024 and it will need to be passed by the two Houses of Parliament. The law also includes a 7.5% tax so it could be that the bill becomes law quickly.
But the legislation might change.
What if it becomes law?
Owners Corporations should, if they want to prevent short stay accommodation, get their rules created, approved and registered with Land Use Victoria.
What are the consequences of a breach?
The bill provides no additional remedy for a breach of the rules where a prohibition has been granted. This means that in the case of a breach the Owners Corporation will need to issue a breach notice, wait 28 days, issue a final breach notice, wait another 28 days then go to VCAT and seek an order. Currently, the maximum civil penalty which can be imposed by VCAT is $1,000. Hardly, a deterrent. Owners Corporations will need to get an order and then if there is a further breach make an application that the lot owner is in contempt of the VCAT proceedings.
What if I am buying off the plan?
Developers have the opportunity to create rules which could restrict short stay accommodation and have them registered at the time of the plan being registered. If you have signed up to an off the plan contract (and you intend on using the lot as short stay accommodation) you might want to check with the developer as to whether they propose to impose the prohibition.
Need advice or assistance?
Contact Phillip Leaman who heads the Owners Corporations team at Tisher Liner FC Law. We have extensive experience in creating and registering Owners Corporation rules and advising Owners Corporations and lot owners.