ARAMA ReportIndustryNews In BriefOpinion

Short-term letting: a paradigm shift?

While the short-term letting market has increased substantially in popularity, it does appear to be increasingly fraught with controversy, particularly with regard to long-term owner-occupiers and apparent building disharmony.

For the sake of clarity, short-term letting is the rental of an apartment for a short period of time, i.e. from one night through to a couple of months, and the most common guests are corporate guests, holidaymakers, or travellers passing through.  The apartment is generally fully furnished so that the guest can be accommodated with just the contents of their suitcase, and usually holds a preferential locality.

This scenario is not exhaustive; however, as short-term letting also caters for those that may be transitioning from a rental to an owned property, or in the middle of an interstate relocation or family crisis, and to label all short-term lessors as problematic or disruptive is limiting and inaccurate. Any change or review to the law regarding short-term rentals would undoubtedly be detrimental to this demographic.

The root of the problem appears to lie in the conflicting objectives of the parties (dare I say NIMBY?), and the current lack of clarity or effective legal solutions regarding by-laws. The resident owners are striving to preserve their investment and to find harmony in their home environment, but may be experiencing day-to-day issues, including noise, overcrowding or excessive wear-and-tear, while the incumbents (read holiday-makers) are there to enjoy themselves and may be completely unaware of the alleged infringements.

As a management rights body with over 3300 buildings in Australia and more than 50 years’ experience, ARAMA counters many of the arguments being touted regarding short-term lettings, in that there is, in fact, likely to be less wear-and-tear or services utilised in a short-term rental as generally the property is occupied for fewer nights per annum when compared to long-term rentals or owner occupation. Maintenance and upgrades are likely to be more regular in order to preserve the appeal of the property, and there is no evidence to substantiate the claims that short-term tenants are more likely to constitute a danger to the building and themselves than permanent residents.

This is obviously a complex and emotive issue, and one that ARAMA and a number of other bodies are keeping a very close eye on, but in our view, the legislation provides that if a lot may lawfully be used for residential purposes, the by-laws should not restrict the type of residential use if it is to be considered reasonable.

If the development approval for a building does not restrict short-term letting, an owner can use that lot for that purpose and neither the body corporate nor any other lot owner in the building can legitimately stop them. Several supreme court cases in different states have validated this last point. With each community title scheme and building being different, perhaps the resolution of the conflict between long-term and short-term use of lots in community titles schemes is to prevent buildings from having both; to have by-laws specific to a particular building. This is a decision for the developers to consider, which will be weighed against market appeal.

It has been established by the courts that a body corporate or owners corporation has little room to rule against the use of lots for private short-term letting. A body corporate can self-regulate, to a certain extent, by adopting by-laws that are reasonable and enforceable against owners and occupiers of the building; however, legislation limits the extent of those by-laws.

By-laws that impose an unfair monetary obligation on a particular owner, or group of owners, or that discriminates between types of occupiers are prohibited. In other words, the body corporate cannot establish one set of rules for owners or permanent residents, and another set of rules for tenants.

The greatest impact of this issue, obviously, is evident in small schemes with permanent residents and no resident manager. In those types of buildings, dealing with the potential unplanned impacts of short-term letting can be problematic.  Perhaps the introduction of management rights would be a simpler solution for unit owners than changing legislation.

Ultimately, it appears that currently there are more questions than answers. Will these issues and current test cases mean that other activities that have the characteristics of a business be allowed in a rented property? And what are the likely implications of these changes in respect of the different safety and convenience regulations applicable to hotels/motels/ hostels, given that these activities appear similar to short-term letting of residential property? What are the insurance implications given that short-term letting has at least some of the characteristics of a business activity?

The business of management rights is adept at managing short-term letting, long-term letting and can facilitate the often competing interests of unit owner investors and owner occupiers. We believe that the question of short-term letting has been settled, and that unit owners should have the right to choose what they do with their unit providing it does not impact on the schemes set of reasonable by-laws. ARAMA will continue to monitor this matter and we will keep you updated.

Eric Van Meurs

Eric is the National President of ARAMA. Australian Resident Accommodation Managers Association (ARAMA) is a membership based, not for profit, peak industry body which represents the interests of people who are involved in Management Rights.

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