It is very likely that in many instances individuals are offering their properties for rent through websites such as airbnb and stayz without knowing whether or not they are breaking the law.
It is increasingly common for people to want to rent their property for short term accommodation online. Short term rentals have the potential to result in disturbance to neighbours and the increased frequency of the practice has concerned the hotel industry lobby, presumably due to the loss of market share. In fact, the hotel industry lobby has recently called on the government to take action by introducing and enforcing tighter regulations and levying tax on short term rental operations.
Whether a property may be used for short term accommodation depends on the zoning of land and the exempt and permissible uses within that zone designated in the local council’s planning instruments. Less commonly, a property may be used in a way presently prohibited in the zone because of prior development consent or historical use (known as existing use rights).
There are already provisions in the Environmental Planning and Assessment Act 1979 (Planning Act) which enables any person to take action in the Land and Environment Court of NSW where a property is used without the necessary planning approval. While such action is usually taken by a local council seeking a declaration that the use is unlawful and orders that it cease in circumstances where complaints have been received that the use is causing an impact to other residents, such action could also be taken by third parties including aggrieved neighbours, hotel operators or industry associations.
Bringing court proceedings to enforce the Planning Act requires a significant investment in terms of time and cost, firstly to establish whether an authorised use is taking place and if so to collect evidence of it, and secondly to prosecute court proceedings. The actions taken North Sydney Council and the City of Sydney Council over the years with respect to serviced apartments are instructive.
The action by North Sydney Council to prevent the use of apartments within Blues Point Tower for short term rental accommodation was considered by the Court of Appeal. In that case the Court of Appeal decided that the meaning of “residential dwelling” encompasses a degree of permanency of habitation absent from use of apartments on a short term basis. An application for special leave to appeal to the High Court was unsuccessful so it seems the law is reasonably well settled.
In the City of Sydney’s planning controls serviced apartments are now separately defined and the council has had success in recent years preventing the use of apartments in Liverpool Street and Sussex Street as serviced apartments without consent.
It is not always the case though that planning instruments clearly indicate whether short term rental accommodation is permitted in a residential zone where dwelling houses are permitted. Some councils such as Shoalhaven and Kiama specifically permit it whereas others, such as Byron, do not.
In Dobrohotoff v Bennic  NSWLEC 61 (Dobrohotoff), the Land and Environment Court (Court) considered the use of a single dwelling for short term rental accommodation in the Gosford local government area and found it to be unauthorised. That decion has wide reaching implications for property owners to wish to rent their property on a short term basis and in response certain councils, including Gosford and Pittwater councils, have amended their planning instruments to specifically permit short term rental accommodation in certain zones as exempt development which does not require development consent to be obtained.
While competitors to operators such as airbnb and stayz could utilise the provisions of the Planning Act to take action against unauthorised use of dwellings for short term rental accommodation, this could only be on a case by case basis. There could never be a “test case” with wide ranging application, because in each case the Court needs to construe the relevant planning instrument and any applicable development consent or existing use rights and consider discretionary matters. At best, a competitor could target a specific building in which is frequently let via the websites, a residential flat building in the City perhaps.
Utilising the Planning Act is not the best answer for the hotel industry lobby given the limitations identified, but in targeted situations, it is an option while the government considers its request for more broad reaching changes such as tax reform. It is likely to be more useful for aggrieved neighbours.