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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

Do I need permission to renovate my home unit?

In the DIY TV Shows, the contestants renovate a whole block of apartments before they are strataed for sale. Therefore they don’t need to comply with all those annoying rules and requirements for renovation approval that all strata owners need to comply with.

What are those rules and requirements? Up until now, in NSW, all work affecting the fabric of the building, from major work such as a new bathroom to minor work such as putting up a shelf in a bathroom, have all required the same approval, namely a special resolution (a 75% majority) at a general meeting of the owners corporation.

But from 30 November, 2016, this changes in a number of ways depending on whether the work is cosmetic work, a minor renovation or a major work. Specifically –

– Cosmetic work such as putting up a shelf, hanging pictures, painting and patching, laying carpet, installing built-in wardrobes and replacing blinds and curtains (like for like) will not require any approval. This is a DIY renovators paradise!

– Minor renovations such as renovating a kitchen, installing a wooden floor, electrical work, installing an air conditioner will require approval by a simple majority (a 50% majority) resolution at a general meeting of the owners corporation. This work is not DIY territory because the owners corporation can be expected to require that the work be carried out by licensed tradesmen, at specified times, and according to approved plans.

– Major work covers all renovations that are not cosmetic work and minor renovations. Major work is all work requiring waterproofing and structural work, such as new bathrooms, laundries, plumbing work, replacement of external doors and windows, pergolas and awnings. Major work will require approval by a special resolution (a 75% majority) at a general meeting of the owners corporation. This work is for licensed tradesmen with structural engineer’s certificates and waterproofing certificates.

For more detailed information, click How the new Strata Laws make renovating easier for strata owners

How long do you have to make a building defects claim against the builder of strata apartments?

Owners of new strata apartments regularly find defects, some minor, some major.

The new Strata Schemes laws in NSW will make it compulsory for a defects survey to be carried out within a year, and will provide a retention fund of 2% of the building cost to cover repairs.
But often, it takes several years before major defects come to light, such as foundation subsidence resulting in walls cracking, cladding on facades falling off, water penetration via faulty roofing or waterproofing, flooding, and so forth.

The question is - how long do you have to make a defects claim against the builder?

The answer is - 6 years after the building work was finished, not 6 years after the the building defect was first discovered.

Determining the exact date the building work was finished can be vital, as a recent case decided in the Supreme Court of NSW demonstrates. This is a link to my article Don't wait until it's too late to make a Strata Scheme building defects claim

Strata Title ownership is changing next year. Are you ready?
New Strata Laws will come into effect in NSW on July 2016. This article explains the major changes that will apply from that date

How to make settling your home unit purchase smoother
Buying a home unit is very exciting and very stressful at the same time.
This article suggests 6 jobs that you can be doing to de-stress the process and make settlement smoother.

The 4 significant changes you need to know
Do you own a strata apartment in New South Wales? Are you purchasing off-the-plan? Strata title law is changing -to commence on 1 July 2016.

Why landlords and tenants face special risks when leasing strata shops, offices and industrial premises
This article covers four commercial leasing issues for strata shops, offices and industrial premises-
Building repairs; Tenant signage and fit-out; Strata Levies; Tenant use and trading

Is Defect Free Construction achievable for strata title buildings in NSW?
NSW Fair Trading says that waterproofing, fire safety and structural defects are the ‘holy trinity’ of building complaints it receives from apartment owners, in new multi-storey apartment buildings. There are six reforms for building defects contained in the new strata law.

Advice for landlords for renting strata apartments / home units
For landlords, renting out a strata unit is entirely different from renting out a house because a strata unit is part of a strata community. Repairs and tenant behaviour are special hazards when renting out a home unit - the rules about repairs and tenant behaviour for strata owners.

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