New short-term rental rules force strategy rethink

Investors in residential property may have to rethink their revenue strategies, following the commencement of new short-term rental accommodation rules in New South Wales last month.

The tightening of the rules in NSW follows a similar move in Victoria last year. Western Australia has plans in development.

The new rules, which cover rentals for three months or less, makes a key distinction between “hosted” and “non-hosted” rentals. In a hosted rental, the owner or host resides in the dwelling while it is used for rental.

Under the new law, Fair Trading Amendment (Short-term Rental Accommodation) Act 2018, no local council permission will be required if it is a hosted rental.

There can be no more than two people per bedroom and no more than 12 in total.

Restrictions apply if it is “non-hosted” short-term rental accommodation. If the dwelling is located in the Greater Sydney Region there is a limit of 180 days in a calendar year.

Elsewhere in regional NSW there is no day limit unless a council sets a limit (which can be no lower than 90 days).

If the dwelling is in a strata scheme anywhere in NSW and is an apartment, townhouse or villa unit, the right to rent short term is limited to 180 days. If the dwelling is not the host’s principal place of residence, the right to rent can be removed completely by a strata by-law.

In a note to clients, Corrs Chambers Westgarth partner Natalie Bryant says: “A bylaw of this kind  would effectively restrict short-term rental accommodation to circumstances where the resident of a strata lot allows the property to be rented out while on holidays or if a spare room is rented while the host is present.. All other kinds of arrangements may now be restricted if the owners’ corporation makes a special resolution, requiring at least 75 per cent of votes in favour.”

If the dwelling is situated on bushfire prone land or is on a flood control lot, it cannot be used for short-term rental without development consent.

In Victoria, The Owners Corporations Amendment (Short-stay Accommodation) Act gives owners corporations more discretion to self-regulate short-stay accommodation in their buildings.

Under the law, members of an owners’ corporation, tenants and property managers can lodge a complaint against a short-stay accommodation provider who enters into a short-stay accommodation with an occupant who creates excessive noise or behaves in a manner that will likely interfere with the peaceful enjoyment of other occupiers.

Complaints can also be made where the occupant causes health, safety or security hazards, damages common property or obstructs another resident from using their property.

When a complaint is made, an owners’ corporation must decide whether to take action in relation to the complaint. Where it takes no action it must provide a notice to the person who has made the complaint giving reasons why no action was taken.

If action is taken the owners’ corporation must notify the accommodation providers, requiring it to rectify the breach.

If a breach is not rectified the owners’ corporation can apply to the Victorian Civil and Administrative Tribunal to resolve the dispute. VCAT has the power to issue fines up to $1100 to both the accommodation provider and the occupant, and order that other owners be compensated up to $2000 for loss of amenity.

VCAT will have the power to prohibit the use of the accommodation for short-stay arrangements if three separate complaints are made within a 24-month period.

Owners corporations must report at their annual general meetings on the number and type of complaints received, what action was taken and the outcome of any action taken.

The Western Australian government is considering options, following receipt of a parliamentary review of the sector earlier this year. Recommendations in the report were along the lines of the system put in place in NSW.

Drew Meredith

Drew is publisher of the Inside Network's mastheads and a principal adviser at Wattle Partners.