Short Stay Accommodation and Owners Corporations

The use of airbnb’s and other sites have become popular in Victoria, particularly for investors in holiday towns and in apartment buildings.

Unfortunately, as a result of the constant change of occupiers in lots, more permanent resident’s quiet enjoyment can be disturbed.

So what can owners corporations do if there is a problem with short stay accommodation occupiers?

Complaints and disputes about Short Stay Accommodation Arrangements

Sections 159A to 159F of the Owners Corporations Act 2006 provides a mechanism for lot owners and owners corporations to deal with complaints about the following conduct:

(a)     unreasonably creating any noise likely to substantially interfere with the peaceful enjoyment of an occupier or a guest of an occupier of another lot (other than the making of noise where the owners corporation has given written permission for that noise to be made);

(b)     behaving in a manner likely to unreasonably and substantially interfere with the peaceful enjoyment of an occupier or a guest of an occupier of another lot;

(c)     using a lot or the common property, or permitting a lot or the common property to be used, so as to cause a substantial hazard to the health, safety and security of any person or an occupier;

(d)     unreasonably and substantially obstructing the lawful use and enjoyment of the common property by an occupier or a guest of an occupier;

(e)     substantially damaging or altering—

(i)     a lot or the common property, intentionally or negligently; or

(ii)     a structure that forms part of a lot or the common property, intentionally or negligently.

So what does a person do if there is offending conduct?

A complaint must be made in the approved form (available from Consumer Affairs Victoria or your OC manager). The Owners Corporation must decide whether or not to take action in respect to the alleged breach. If there are reasonable grounds for the breach, the Owners Corporation must provide a breach notice and if not cured, the Owners Corporation may apply to VCAT and seek one or more of the following orders:

(i)     a prohibition order under section 169D;

(ii)     an order for a civil penalty under section 169G (not exceeding $1100);

(iii)     any applicable order that VCAT may make under section 165.

What if the Owners Corporation wants to buy short stay accommodation can they?

Yes, the Owners Corporation has the power to prohibit certain short stay accommodation by passing and registering rules.

So, what is short stay accommodation for the purpose of the prohibition?

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.

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.

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 restraining the lot owner from using the lot for short stay accommodation. Currently, the maximum civil penalty which can be imposed by VCAT is $1,000.

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 on short stay prohibitions and rule making.