VCAT Ruling Offers Nod To Subtle Short Stay Controls For Owners Corporations

VCAT Offers Validation For Subtle Short-Stay Controls

short stay lease owners corporationA recent VCAT decision confirmed that Owners Corporations in Melbourne do not have the authority to implement a blanket ban on short-stay leasing within their buildings.

However, it did offer validation for some other methods an Owners Corporation can use to have greater control over short-stay tenancies.

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The case centred around a building named The Imperial in Doncaster, where the Owners Corporation passed a rule seeking to ban short-stay letting through platforms such as Airbnb in their building.

One owner, Zheng Sheng Lim, contested the rules after the Owners Corporation removed his security fobs’ access to the building, hence making the building inaccessible to his tenants.

VCAT ruled that the Owners Corporation could not place a blanket ban on short-stay leasing and had no right to block the access of tenants to the building, however, it did give a nod to some of the other rules the Owners Corporation had looked to implement.

Three days’ notice and induction for tenants

Perhaps the most potent rule which was given approval from VCAT was one which requires the tenant gives three-days’ notice to be given to the Owners Corporation as well as attending a building induction before being permitted to move into the property.

This is obviously a huge deterrent for any tenants looking to stay for the weekend via an Airbnb listing.

In his decision, VCAT member A Vassie wrote:

“Mr  Lim has alleged that the “tenant’s directive” and the rules have been imposed for an improper collateral purpose: to discourage lot owners from accepting short-stay tenants. I reject the allegation. There has been no evidence of any connection between the “tenant’s directive” and the rules on the one hand and the dispute about access for Mr Lim ’s tenant on the other hand.”

The approval of this rule may be seen as a vital swing in the fight for power between property investors looking to use short-term rentals to maximise their return on investment and owner-occupiers who are concerned about the nature of short-term leasing within their building.

The Owners Corporation in question hopes the rule will allow it to exert extra control around the nature of tenancies within the building as well as deterring the use of short-stay platforms.

Tony Mosca, the Owners Corporation chairperson, was quoted as saying:

“An owners corporation can’t stop Airbnb. What we can do is put in rules so that people can’t come and go willy-nilly, without knowing who is in the building. It’s a de facto mechanism that means we can control who comes and goes.”

owners corporation rules short stays

Other approved rules

The rule requiring three-days’ notice from tenants seeking to move into the property was not the only rule which was approved during the hearing.

Other rules approved also required that owners in the building who overuse the induction process may have to pay for extra charges, according to realestate.com.au

The rules allow the Owners Corporation to charge an extra $100 per induction if an owner uses more than two per year, a fee which could rise up to $300 if the induction took place outside of business hours.

Mr Lim suggested that the rules were discriminatory to him, which was also rejected by the member, who wrote:

“I accept the OC’s submission that the requirement for payment of an additional induction fee in those circumstances is not discriminatory because it applies to all lot owners and occupiers. If it potentially affects Mr Lim more than other lot owners, that is because Mr Lim  chooses to have numerous short-stay tenants.”

These rules are a huge disadvantage to anyone seeking to list their apartment on Airbnb or other short-stay rental platforms.

Strata Community Australia Victorian boss Rob Beck said the decision would help to provide further clarity around the sorts of rules Owners Corporations can implement within their buildings with respect to short-term leasing.

“We’d welcome interpretations that help owners corporations govern and keep the peace between owners and tenants,” Mr Beck told news.com.au

“There have been other attempts where they (an owners corporation) have, for example, tried to instigate charges for gyms and pools, and they have been thrown out as unlawful.”

How to Implement Similar Rules In Your Owners Corporation

Implementing such rules now seems a practical and fair way for owners to regulate what happens within their building, however creating and registering new rules is not as simple as it looks.

Here are the steps you’ll need to follow to make new rules for your Owners Corporation.

  1. Identify the issue
  2. Confirm the issue is affecting/concerning multiple owners and the committee
  3. Write the new proposed rules
  4. Put the proposed rules to a vote
  5. Register the rules

If you and other owners within your property are concerned about short-term leasing already occurring in your building or are worried that it may potentially become an issue the first thing you will need to do is see if these concerns are shared by fellow owners.

If you are a member of your Owners Corporation committee, then you should ask around your committee to see if this is a shared concern.

If you are not a member of your committee, consider writing to them via your Owners Corporation manager.

Once it’s established that this is an area of concern, your committee should consider seeking legal advice on how to word the new rules to ensure they are clear and precise and easily enforceable – should they be adopted.

Once your rules have been written, it’s time to put them to a vote via a Special Resolution.

This can be done at a Special General Meeting, via a ballot or as a special motion at your Owners Corporation’s next Annual General Meeting.

New rules require 75 per cent of lot entitlements to vote in favour of the new rule. This can be very tricky to achieve, so it’s important to ensure you, your committee and your manager work collaboratively to spread the message about the meeting or the ballot to ensure the best possible attendance and/or voting returns.

Once approved by meeting or ballot, the rule must be registered with the Victorian Titles Office. They will have no effect until this is completed.

For help implementing similar rules in your Owners Corporation, start a conversation with Strata Plan today using the enquiries form below.

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