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Even if you’re renting to your own brother, ALWAYS SIGN A LEASE

Recently, it cost Steve Zitsis almost $100,000 in legal fees to learn that even when renting to his own brother George, without a signed lease it is an expensive process to evict a tenant.

It started on friendly terms - there was a verbal agreement that George would rent the house for $250 per week plus paying council rates, water rates and utilities. Steve would pay the home insurance and be allowed to stay in one bedroom every six months when he came to Sydney for medical appointments.

Eight years later, it turned into a family dispute when Steve asked George to move out so Steve could sell the house. George refused to move.

George argued that he was entitled to stay in the house because Steve had promised him he could live there forever, and had even promised to leave the house to him in his will. George also said he had treated the house as his own, he had spent $50,000 renovating the kitchen, ripping up the carpet and polishing the floorboards, installing an air-conditioner and wardrobes.

If there was a signed lease, George would not have been able to argue he could live there forever because the lease would have a fixed term. Nor could he claim the renovations gave him the right to stay, because no renovations are allowed without the landlord's permission.

Steve could not use NCAT (the Tenancy Tribunal) for the eviction because he was now residing at the Surfers Paradise and interstate residents cannot use NCAT. So the eviction proceeding was in the Supreme Court of NSW, hence the high legal fees.

There, Justice Megan Latham (ex ICAC Commissioner) threw out George's arguments and ordered George be evicted.

The photo is of the house, and if you look closely, you will see George's black Mercedes parked in the garage.

The lesson is: Even if it's your own brother, anytime you're allowing anyone to live in your house, ALWAYS HAVE THEM SIGN A LEASE

For my legal case note click Family Disputes #1 Without a lease, brotherly love goes out the door


Purplebricks real estate promises greater fee transparency for sellers

Real estate agents charge sellers a commission, which in Sydney is currently 1.65% of the price - $16,500 on a $1m property; plus marketing expenses of about $5,000 which cover a signboard, photography, listings on domain.com.au, realestate.com.au and its own website, brochures and auction expenses.

Online marketers are disrupting this traditional business model. They are doing away with shopfronts, and operate virtual agency models. By doing so, they are able to lower their cost base and charge less for selling a property.

The most prominent online marketer is Purplebricks real estate, which charges a fixed fee, instead of a commission, for selling a property. It advertises prominently a fixed fee of $5.999 in NSW & VIC, and $4,999 in QLD, WA & SA. The fixed fee includes the services of a 'Local Property Expert', photography and write up for listings on the domain.com.au, realestate.com.au and its own website, a generic signboard, and inspections booked on the internet.

You might think that the fixed fee includes accompanied viewings, marketing reviews, marketing upgrades, an auction and so forth. But you would be wrong! In the fine print, you will find that these are additional services for which additional fees are payable.

Consumers complained to the Queensland Office of Fair Trading that Purplebricks was being misleading in advertising fixed fees, when additional fees were payable. The OFT agreed, and as a result, Purplebricks has changed its advertising to make the additional fees payable more prominent, and has agreed to pay $10,000 to the OFT as a 'fine'.

When carrying out its investigation, the OFT found that Purplebricks was in breach of many of the real estate licensing requirements, and fined Purplebricks another $10,000.

For more information on the action taken by the OFT, click on my article Purplebricks promises no misleading advertising of fixed fees and additional services, and admits breaches of the real estate licensing law


Are you selling your home or investment property? Is a flat fee online agent better than a traditional estate agent? Is it the difference in marketing?

Digital disruption has come to real estate agents in Australian in the form of online agencies which are offering marketing and sales services to assist sellers in selling their property for a low fixed-fee. They are undercutting full service real estate agents which charge a sales commission.

Purplebricks is an online agency. For a look at the Purplebricks Real Estate operating model, and how it is attracting owners to list properties in the Australian Real Estate market, click here



Court rules that Airbnb style holiday letting is unlawful in a strata building

The "Pinnacle" is an exclusive residential condominium on Grace Bay Beach in the Turks and Caicos Islands.

The developer aimed to attract buyers looking for an exclusive place to live, not the holidaymakers along the beach. So the developer included a strata by-law which banned owners from renting out their apartment for less than one (1) month.

This ban was ignored by the owners of apartment 102, who rented to holidaymakers, usually with one week stays. The body corporate sued the owners for breaching the strata by-law. The owners countered by arguing that the strata by-law was invalid because the Strata Law did not permit any restriction on a strata owner’s right to rent out their apartment. The Strata Law is the same in Turks and Caicos as it is in Australia.

The case was fiercely fought, all the way to Judicial Committee of the Privy Council in London, which was also Australia's final court of appeal until 1986.

In the last year or two, the topic of Airbnb style holiday lettings in strata apartments has been hugely controversial in Australia. NSW Fair Trading has advised and the NSW Civil and Administrative Tribunal has ruled that a strata by-law cannot restrict the rights of an owner to rent out their apartment in any way.

The Privy Council rejected this strict interpretation. It ruled on 21 December 2017 that it was possible that the owner’s rights be restricted, if the restrictions were reasonable. In this case, the strata by-law was a reasonable restriction on the right to lease because it was aimed at preserving the residential use of the building. It was reasonable to draw the line at 30 days to distinguish a residential use from a holiday letting use. Therefore the strata by-law was valid.

The ruling is a game changer. This is the new game plan (in my view):

  • The NSW Fair Trading advisory and the Tribunal ruling can be ignored as they are both wrong to reject any restriction on the right to lease.
     
  • If a strata scheme wants to restrict Airbnb style holiday lettings, it passes a strata by-law with a one (1) month minimum stay requirement, just like in the "Pinnacle"!
     
  • If an owner is unhappy with the strata by-law restriction, they can apply to the Local Council or Planning Authority for an approval or permit to use their apartment or villa as a serviced apartment or as a bed and breakfast establishment. If an approval or permit is granted, it will override the strata by-law.
     
  • If the strata scheme does not pass a strata by-law, then the owner can continue with their Airbnb style holiday lettings.

For a detailed analysis read my case note: Can a strata by-law restrict Airbnb style holiday lettings? A new legal decision is a game changer


How to handle Airbnb-style letting in NSW – all you need know

Airbnb is growing fast in Australia and almost half the properties involved are located in New South Wales. Many would-be hosts are wondering about the legal, tax and insurance implications – and their questions have now been answered.

The answers are given in a new video released by Sydney-based specialist travel and tourism lawyer, Anthony Cordato. The video, which is covers six topics, has been placed on YouTube.

“Airbnb-style short-term letting for apartments, for holiday houses and for spare rooms is growing rapidly in popularity for home owners, investors, and of course leisure and business travellers,” Cordato says.

“The regulatory environment is playing catch-up in NSW, and while it is, the legal framework is a grey area.”

New South Wales is a hotspot for Airbnb. There are 30,000 properties in NSW, 70,000 in Australia and 2 million worldwide.

“These are big figures,” Cordato notes.

This video covers six topics:

  1. What Planning Approvals are required for short-term lettings?
  2. What restrictions are there for strata titles properties?
  3. How does Airbnb work?
  4. Insurance
  5. Tax
  6. Loans using Airbnb income

Filmed at a property investment seminar, the video includes interesting and relevant questions and comments from the audience.

If you are thinking of venturing into the world of Airbnb, or similar letting platforms, this is essential viewing.

Written by Peter Needham, chief travel writer, eGlobal Travel Media

 

 


Help the NSW Govt decide on how to deal with Airbnb style short stay letting!

The NSW Government is under pressure from traditional holiday apartment operators, from strata residents, from Airbnb and Stayz, and from property owners who all have a different view about how short-term letting should and should not be regulated in NSW.

After a Parliamentary Committee failed to come up with a politically acceptable compromise, it has issued an Options Paper. It has asked the stakeholders, the general public and the industry to let it know what it should do.

The NSW Government puts forward four options:

  1. Self Regulation: where the industry / operators adhere to a Code of Conduct, which includes complaints management, education and ongoing monitoring and reporting.

  2. Special Rules for Strata Properties: where owners corporations cannot ban short-term letting, but are allowed to make by-laws to make owners liable for breaches by their tenants, to streamline enforcement, to levy extra and to strengthen the powers of the Tribunal.

  3. Regulation through the Planning System: The Government would like to lay down clear planning guidelines for Local Councils, as it sees them as the best gatekeepers.

  4. Registration or Licensing: This is seen a lighter touch than regulation through the Planning System.

This will not be a quick process. In the meantime, the fast growing industry will continue to grow in a legal grey area.

For more information on the NSW Government Policy click: What policy would you recommend to the NSW Govt for short stay traveller accommodation?


Does Airbnb give Boutique Hotels and B&Bs a competitive edge?

Traditional hotel chains and large resorts have long dominated the accommodation industry because of their strong brand marketing and distribution channels.

But as with so many other industries, the internet is disrupting the traveller accommodation industry. Through internet booking platform operators such as Airbnb, Stayz, eDreams and Bookings.com, the internet is providing small accommodation providers with easy and cheap access to a global market for travellers, whether it is for business or pleasure.

There are four services which Airbnb provides, which give Boutique Hotels and Bed & Breakfasts a competitive edge over traditional hotels and resorts, and which allows them to by-pass the traditional travel agents (brick & mortar or online) in making bookings:

  • Marketing
  • Bookings Management
  • Payments Platform
  • Property Damage & Injuries cover

These services are increasing lodging occupancy and pricing power for small accommodation providers.

For more information about how Airbnb is empowering Boutique Hotels and B&Bs to build their business, Click Here


Is Airbnb the answer to boosting cash flow for property owners?

If an owner has a spare room in their home, or has a granny flat, or an investment apartment near a business centre, or a holiday house, then

they can boost their cash flow by renting it out as short-term stays to business and holiday travellers.

This is how it works: The owner sets the rent higher than the long-term rent because it is a short-term letting. For instance, the Airbnb rent might be $65 per day (plus a cleaning charge) for the room, which is higher than the weekly rent of $245 per week ($35 per day) for the same room. This suits the guest because the rent is cheaper than the daily tariff charged by a hotel.

Airbnb is therefore effective way to boost cash flow from a property, whether it is a spare room, a granny flat or a whole house or apartment.

Click for more
 

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