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Airbnb and Owners Corporations: What’s happened so far and what might happen in the future

Airbnb in apartments – where do Owners Corporations stand?

As Airbnb and other short-term rental platforms continue to see a massive increase in popularity and use, Owners Corporations around Australia are looking for answers.

For individual lot owners, there are a lot of positives that go along with leasing through Airbnb or another similar platform.

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Higher returns as opposed to more traditional six or 12-month leases and better cashflow are just two reasons why more and more property owners are turning to short-term leasing.

But how does this play out in apartment buildings?

The reality is, while Airbnb and other short-term rental platforms are great for individual lot owners, it comes at a cost to the collective.

From increasing costs attributed to maintenance and repairs of common property and assets from increased traffic and use, to potential security breaches, there is plenty reason for apartment owners to be concerned about short-term rentals in their building.

Especially if their apartment is their home.

SECURITY CONCERNS

Security is among the biggest concerns for apartment owner-occupiers, according to one Strata Plan-managed committee.

“The lack of security concerns us as a committee,” one committee member told Strata Plan.

“We live on site, but we don’t know who is getting these [access] devices. We’re quite an active committee, we like to know who is in and around our home.”

Guests need access to common areas to reach their short-stay homes, from where they have access to common facilities such as garages, lifts, pools, gyms and any other facilities on the property which all owners pay for.

If access devices, such as keys, fobs and remotes are not properly returned, a building’s security may be compromised.

If damage occurs on common areas, every owner is left to carry the cost.

Of course, every property owner has a right to make certain decisions around how they use that property, but at what point do the needs of the collective need to be safeguarded?

“We just see people treat our home like a hotel. We notice that there’s a lot more of a mess when people leave,” the concerned committee member said.

“There’s a bit less respect for our building. It’s similar to regular tenants, but there’s a higher turnover so it becomes more noticeable.”

Leadership in this area has to come from the state government, who will provide the framework for Owners Corporations to consider their own measures to control or manage Airbnb in their apartments.

WHAT HAS HAPPENED SO FAR?

Airbnb recently reported to a Victorian government inquiry into short-stay rentals that it had 26,000 listings in Victoria.

Approximately half of those are in Melbourne, which makes the Victorian capital one of Airbnb’s top 10 cities.

To date, the legislation and relevant court decisions have not been kind to Owners Corporations as a collective.

Efforts from committees to write and enforce rules within their communities banning Airbnb-type arrangements have been ruled outside of their powers, most specifically in 2016.

The Victorian Supreme Court case of Owners Corporation PS 501391P v Balcombe [2016] dealt with a case whereby the Owners Corporation tried to impose a rule which prohibited lot owners from letting their properties for less than one month at a time.

Justice Peter Riordan ruled that the Owners Corporation Act 2006 (VIC) did not give the Owners Corporation power to regulate a lot owner’s dealings in respect of his/her lot.

While Airbnb was not specifically mentioned in the ruling, it represented a statement of principle as to the rights of apartment and unit owners to deal with their properties as they see fit.

Further concerns have also been raised about how Airbnb guests compromise insurance, both of the property owner and the Owners Corporation.

The stoush over short-stay renting gave birth to the We Live Here movement in 2016.

We Live Hear advocates for the rights of apartment owner-occupiers and residents and launched a petition to stop, “residential buildings … being turned into unregulated hotels”.

SHOULD OWNERS CORPORATIONS MANAGE AIRBNB?

The laws around short-stay rentals have been subject to a Victorian government inquiry, which concluded at the end of 2017.

The Victorian Parliament’s Environment and Planning Committee recommended several changes to the original Bill which was put before the parliament with the aim of regulating short-stay accommodation.

The original Bill – which advocated potential fines and bans for people operating “party flats” – was blocked in the upper house of the Victorian Parliament and referred to the committee.

Among the committee’s nine proposed amendments was giving Owners Corporations power to regulate short-stay accommodation.

However, despite these recommendation’s the state government’s reviewed proposal has reverted to the original proposal of fines and bans.

Upon the release of the revised proposal, We Live Hear director Marshall Delves told Fairfax News:

“The reality is that if this bill passes, then Victoria will be open for business to short-stay operators 365 nights of the year every year, for all time.

“The government is proposing to give Airbnb free rein to do what it pleases, while residents are forced to suffer. If the Bill passes, the combination of higher maintenance costs, reduced amenity, breaches of security and a loss of community means that apartments in Melbourne will be a ‘lemon’ for anyone expecting to live in the units, let alone raise a family. Apartment towers will simply become hotels, and owners will drift back to the suburbs in search of amenity.”

HOW IS AIRBNB MANAGED IN RESIDENTIAL BUILDINGS OVERSEAS?

The Victorian government has no shortage of examples to draw from in considering its short-stay laws.

Paris is Airbnb’s most popular city.

The French capital grew from 12,000 listings to 16,000 in 2016 alone, prompting a strong response from the local government.

Local government feared the impact of Airbnb on housing affordability in the city, as well as the avoidance of holiday taxes, while apartment owner occupiers also held concerns about the people entering their buildings.

As a result, Airbnb hosts in central Paris are capped at 120 days a year, following from similar examples in London and Amsterdam.

In Berlin, Germany, Airbnb hosts are no longer allowed to rent their entire apartment through the short-stay website without proper permits.

Of course, hosts could still rent out rooms within their apartments.

Those who disobeyed the rules could face fines of up to €100,000.

WHAT ARE THE POSSIBLE OUTCOMES

It is extremely unlikely that the current Victorian government will pass legislation which affords Owners Corporations the power to ban or limit the rights of property owners to use their property for short-stay rentals.

However, their proposals include increased powers for dealing with problem rentals.

The proposed system focuses on a “three strikes and you’re out system”, with Owners Corporations able to seek damages and pursue owners whose properties were used as “party houses”.

The policy was developed following consultation with Airbnb, which obviously supports such an outcome.

“We think the Victorian government’s legislation is world-leading; it is why we have supported it including when others haven’t and have said to the NSW Government that they should adopt the same approach,” Airbnb’s head of public policy (Australia New Zealand) Brent Thomas said.

“Put simply, this is a victory for common sense and innovation. The government’s reforms will provide much needed clarity and certainty for Victorians who have voted with their feet and embraced home sharing.”

Another possible outcome could be the creation of a registration and compliance framework for commercial-residential short-stay accommodation.

There has also been talk of imposing additional Owners Corporation fees or levies on lot owners who opt to use their property for Airbnb-style rentals. The proposal also included a $2000 compensation for residents affected by unruly.

No exact rate has been proposed, however the purpose of this fee would be to cover maintenance and repair damage caused by guests.

Owners Corporation may also consider setting up their own registers in which they ask lot owners to voluntarily disclose if they are using their property for short-term leasing, so that owner occupiers and fellow residents can be more aware of what is happening at their homes.

Like most of our customers, Strata Plan waits with baited breath to see what steps the Victorian government takes to help concerned property owners’ best safeguard their properties.

While property owners have a right to use their private property for personal gain, some consideration also has to be given to the community which forms their Owners Corporation as well.

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