The rise of the sharing economy has seen many Australians list their apartments on sites such as Airbnb. But can an owners corporation prevent this from happening?

According to a recent Supreme Court decision, owners corporations for properties in Victoria cannot prohibit short-term letting. However new legislation has also been introduced in an effort to cater to the needs of all owners and occupiers.

The position in Victoria

A decision by Justice Riordan in the Supreme Court of Victoria in 2006 considered whether an owners corporation could enforce a rule to prevent owners from letting their property through Airbnb.

Owners Corporation PS 501391P v Balcombe

The case of Owners Corporation PS 501391P v Balcombe [2016] VSC 384 was concerned with a rule adopted by the owners corporation of a residential apartment complex in Docklands, Melbourne. It prevented an owner or occupier from letting their apartment for less than a month. The owners corporation had become aware that several lot owners were operating a short-term letting business out of their apartments in breach of that rule.

The owners corporation filed an application in the Victorian Civil and Administrative Tribunal (VCAT) seeking orders requiring lot owners to stop using their apartments for short-term letting. The owners corporation argued that they had received complaints relating to the letting including breaches of security. They argued that the short-term letting could be detrimental to the majority of lot owners and occupiers in the building.

VCAT Member J Rowland found that the rule was invalid because it was inconsistent with the intention of the parliament in defining the powers of owners corporations under the Owners Corporation Act 2006 (Vic).

The owners corporation appealed to the Victorian Supreme Court. The question to be decided was whether the owners corporation had the power to make the rule.

What was the decision?

Justice Riordan looked at the legislative purpose of the Subdivision Act 1988 (Vic) and the Owners Corporation Act 2006 (Vic) and determined that the principal role of an owners corporation is to manage and administer the common property, not to encroach upon lot owners’ proprietary rights.

Justice Riordan held that under the common law proprietors have the right to use their lots as they see fit.

How is short-stay accommodation regulated in Victoria?

This case comes at a time when increasing numbers of people are living in high density apartment blocks subject to owners corporations. To cater to the needs of all owners and occupiers, the Victorian Government has recently legislated to regulate short-term accommodation.

In August 2018 the Victorian Government introduced the Owners Corporation (Short-Stay Accommodation) Act 2018 which gave VCAT powers to do the following [1]:

(a) impose fines of up to $1,100 for breaches of the Act;

(b) award compensation of up to $2,000 to affected residents for loss of amenity; and

(c) stop apartments that have been used for unruly parties from being rented out for short-stay accommodation for a period of time.

To safeguard occupiers’ rights to quiet enjoyment, the Act also gave owners corporations the power to issue breach notices to guests. They can issue notices if guests [2]:

(a) make unreasonable or excessive noise;

(b) interfere with residents’ enjoyment of their lots and/or common property;

(c) create health and safety hazards;

(d) damage a lot or common property; or

(e) obstruct common property.

If an owners corporation issues a lot owner with three breach notices in a two year period they can then apply to VCAT to make orders that restrict that lot from being used for short-stay accommodation for a period of time. The notices must be issued for separate events rather than for the same incident.

In circumstances where an owners corporation makes and tries to enforce rules that restrict the use of lots for short-stay accommodation, lot owners also have the right to apply to VCAT to have the matter resolved.

The rights of both lot owners and owners corporations regarding the regulation of short-stay accommodation arrangements can be found in the Owners Corporations (Short-Stay Accommodation) Act 2006 (Vic) which also sets out the process to resolve disputes.