The NSW Government announced new restrictions on the short-term holiday letting industry that commenced 10 April 2020 under the Fair Trading Amendment (Short-term Rental Accommodation) Act 2018 (NSW) (Amendment Act), giving effect to changes to the Residential Tenancies Act 2010 (NSW), Fair Trading Act 1987 (NSW) and Strata Schemes Management Act 2015 (NSW).
Short-term rental accommodation (STRA) has rapidly expanded in recent years due to the growth of online booking services such as Airbnb and Stayz. However, until now, STRA had struggled to fit within traditional legal frameworks that regulate residential accommodation.
In response, the Government has clearly defined an STRA arrangement through the Amendment Act. That being, “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 excluded STRA from the regulation of the Residential Tenancies Act 2010 (NSW) (RTA). In effect, providers of short term accommodation will no longer be able to use the RTA as a shield to permit short term letting where it would otherwise be prohibited.
The second change brought about by the Amendment Act is the introduction of section 137A into the Strata Schemes Management Act 2015 (NSW). Under this new section, an owners corporation is permitted to adopt by-laws that prohibit lot owners from hosting STRA in their strata scheme. Relevantly, a by-law of this kind however, must only apply to strata lot owners that do not hold their property as their principal place of residence.
If a strata lot owner lives in their property as their principal place of residence, they may rent out their property as STRA while they go on holidays or rent out a spare room while the host continues to live there. All other kinds of short term rental arrangements may now be restricted if the owners corporation introduces a by-law by special resolution, requiring at least 75% of votes in favour, that restricts STRA usage. Notification of any new by-law must be given to NSW Land Registry Services within 6 months of its approval.
Previously, by-laws that restricted STRA were at risk of being struck out by the courts for breaching the prohibition against the restriction on dealings. However this change recognises how STRA have become increasingly problematic for many strata schemes with the continual influx of short term guests. Guests of STRA pose an increased risk of not abiding by strata laws that prohibit lot owners and residents from creating a nuisance or hazard, either in their property or on the common property. Guests of STRA are also more likely to interfere with the use and enjoyment of other people’s housing or with common areas, and overall unlikely to comply with their strata scheme’s by-laws due to a lack of knowledge of the by-laws or a lack of care.
Additional reform to be brought about by this Amendment Act was the introduction of a STRA mandatory Code of Conduct under the Fair Trading Act 1987 (NSW). The Code of Conduct was to cover all STRA industry participants, including STRA hosts, holiday renters, agents of STRA users and providers of online booking services to facilitate STRA and introduce enforcement structures set up to penalise those who contravene the Code.
However, the introduction of the Code of Conduct was repealed 3 April 2020 prior to coming into force. Although no official explanation was given, it is suspected that the NSW Government repealed the Code of Conduct to avoid confusion around the STRA industry at such a time when the Government was urging people to remain at home, stop using STRA to go on holidays and help slow the spread of COVID-19.
As the spread of COVID-19 slows and the need to stimulate the property and tourism industry as well as the general economy increases, we anticipate to see a gradual normalisation of the STRA industry and with that, potentially the introduction of the Code of Conduct. We will keep you updated if and when a Code of Conduct is introduced.
Henry William Lawyers can assist with any property related enquires. Feel free to contact our people:
Ron Zucker +61 410 590 111
Vincent Tripodina +61 408 228 108
Chelsea Woodward +61 404 065 899
Anna Polhill +61 431 174 352