NSW Strata Changes to Short Term Letting

With the spread of COVID-19 (coronavirus) a growing concern in Australia, the NSW Government has introduced new rules for short-term rental accommodation (STRA) in a bid to restrict short term letting in Sydney, Greater Sydney and across New South Wales.

Kevin Anderson, NSW Minister for Better Regulation and Innovation stated that, “As per the public health orders, people must stay home with the exception of a number of circumstances including work and to provide care”.

From 10 April 2020, anyone who is found leaving their home without a ‘reasonable excuse’ could face up to six months in prison and face a fine of up to $11,000 under the emergency ministerial directive. However, those staying in short-term rentals for reasons such as work, education or looking after another person are exempt.

Short-term rentals include online booking services such as Airbnb and Stayz which have recently surged in popularity over the last few years.

Under the Fair Trading Amendment (Short-term Rental Accommodation) Act 2018 No 41, ‘short term rental accommodation arrangement’ is described as ‘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.’

The Fair Trading Amendment Schedule 2 Amendment of Strata Schemes Management Act 2015 No 50 for short-term rental accommodation also adds:

‘A by-law made by a special resolution of an owners corporation may prohibit a lot being used for the purposes of a short-term rental accommodation arrangement if the lot is not the principal place of residence of the person who, pursuant to the arrangement, is giving another person the right to occupy the lot.’

In other words, owners corporations can create by-laws to restrict short-term letting, unless the lot is the principal place of residence. For example, an owner of a strata lot can rent out their second bedroom as a short-term letting. Anything else would be restricted under this by-law, effectively banning short term rentals in these strata properties. Technology such as Airbnb is not prohibited provided that the term of the agreement is more than three months.

However, any such by-law will still need to be adopted by special resolution by the owners corporation, with a minimum of 75 per cent of votes in favour at a general meeting. Once agreed, it is important that the owners corporation speak to owners and residents about this new by-law and determine how pre-existing rental bookings are managed. If short-term rental guests are currently staying in the strata accommodation, the lot owner could be in breach of the new by-law, so arranging a future date of when this new by-law begins is recommended.

Residential tenancy laws have also been changed to clarify that from 10 April 2020, short-term rental accommodation arrangements of three months or less (90 days) are not agreements covered by the residential tenancy framework.

The cons of short-term letting

Short-term letting has been a concern for strata owners for some time, especially since the recent rise of Airbnb and Stayz. Not only do strata properties potentially need more maintenance and upgrades due to an increase in footfall and wear and tear, there are potential security risks with unknown people entering the building, accessing lockboxes, creating damage or noise complaints and anti-social behaviour for neighbours.

Any damage that is caused to other apartments or common areas through short-term rentals is not covered by a strata’s insurance policy due to the property being used commercially rather than residentially.

This recent change to strata laws is however a positive step for owners corporations who manage short-term rental accommodation in their strata property. To discuss how these new laws and changes might affect you and future strata living, we recommend speaking to your Strata Manager at The Strata Collective.