On 12 December 2013, the Court of Appeal of the Supreme Court of Victoria handed down its decision in the case of Guiseppe Genco and City of Melbourne v Paul Salter and Building Appeals Board  VSCA 365. The case concerns the use of residential apartments in multi-storey buildings for short term holiday accommodation.
Often, these buildings have been classified as Class 2 buildings during the building permit process, and the design and approval of essential safety measures, such as the required fire safety features has been carried out on the assumption that occupants will reside in the building for several weeks or months and will be familiar with the building and its egress paths. When apartments are then used for short term, hotel-style accommodation, the question arises as to whether the essential safety measures are sufficient for occupants who are less likely to be familiar with the building.
In this case, the municipal building surveyor for the City of Melbourne (Council) issued building notices and building orders under theBuilding Act 1993 (Act) to the owner of three individual apartments located within two towers at Waterview Walk, Docklands. The building had been classified as Class 2 in the occupancy permits. The notices and orders were issued on the basis that:
- the apartments were being used for short term accommodation as a hotel (Class 3) which was contrary to the occupancy permits
- the buildings were a danger to the life and safety of any person using the building, in that the occupant characteristics, fire safety needs and reaction to a fire or other emergencies had varied from that for which the building was originally designed, approved and intended to be used.
The owner of the apartments appealed to the Building Appeals Board (Board) against the issuing of the building notices and orders – this was dismissed. The owner then applied to the Supreme Court seeking judicial review of the Board's decision. Justice Beach, of the Supreme Court, quashed the decision of the Board and remitted the appeals to the Board for re-hearing. To read more about this decision, click here.
Council then appealed to the Court of Appeal against the decision of Justice Beach. The Court of Appeal dismissed Council's appeal. The matter was considered by Justices Nettle and Osborne, and is now remitted back to the Board for re-hearing.
Class 2 short term stays permitted without a change in Class 3
A key issue to be decided by the Board and the Courts was whether the use of the apartments for short term accommodation had the consequence of changing the classification of the building from Class 2 to Class 3. The term "dwelling" as used in Part A3 of the Building Council of Australia (BCA) was given much consideration. In the first instance, the Board said the term should be read to assume long term occupation of a building and that the "hotel style" use of the apartments meant that they were no longer being used as dwellings and therefore the Class 2 definition did not apply. The Board relied heavily on the notion of the term "dwelling" having this temporal element to it.
Both the Supreme Court and the Court of Appeal disagreed with the Board. They said that an apartment was still a "dwelling" even when it was being used for only short term stays. It follows that where an apartment has been used for long occupation, or was intended for such use, and is later used for short term occupation, this on its own, does not trigger a change of classification of the apartment from Class 2 to Class 3.
When does an apartment become Class 3?
Notwithstanding that the duration of occupation does not trigger a change of classification, Justice Nettle (one of the two Court of Appeal Justices) said that 'if a building comprised of a number of sole-occupancy units each being a separate dwelling, is in the first place, properly classified as Class 2, but later all or a substantial number of the units is adapted for use as short term hotel style serviced apartment accommodation then, depending on all the facts and circumstances, it may be that each of the units so used should properly be re-classified as Class 3'.
According to Nettle J, this would be done pursuant to regulation 112(2) of the Building Regulations 2006 (Regulations), based on the class the units most closely resemble. Nettle J gave an example of motels and hotels where the residential part is wholly comprised of self-contained sole occupancy units each of which include sleeping facilities, bathing facilities and rudimentary cooking facilities. He stated that even though these could on one understanding be considered to be Class 2 dwellings, they should be classified as Class 3(b) buildings. In so concluding, he had regard to the evident purpose of the legislation, which is to provide for construction, fire and safety standards of buildings according to their design, construction and use. Nettle J went on to say that, as there is not much difference between hotel or motel units of this type and a serviced apartment enterprise comprised of self-contained sole-occupancy units hired out as short-term hotel-style accommodation, then it might be appropriate to also classify those units as Class 3(b).
Nettle J said that whether or not such serviced apartments used for short term hotel-style accommodation should be classified as Class 2 or Class 3 will depend on a range of factors including:
- the number of apartments being used in this way
- their physical position in relation to each other (whether or not they resemble the residential part of a hotel)
- the range and nature of services provided to patrons of the apartments (e.g. common facilities such as a dining room, restaurant, swimming pool, gymnasium, laundry and business facilities, reception facilities).
Nettle J indicated that in the example before him because there were only a few short term serviced apartments scattered randomly among a much larger number of units not used for serviced apartments, and because the services provided by the owner to the patrons were "relatively exiguous", it did not seem to him that the units operated by the owner resembled the residential part of a hotel or motel. He accepted that this is a question of fact and degree, and the Board's decision ought not be set aside unless it appears not to have been open on the evidence or as informed by the wrong principle. He accepted that the Board's decision was open on the evidence but that it should be set aside because it was informed by the wrong principle (i.e. the duration of the stay).
Osborn J had a more 'clear-cut' view of the distinction between a Class 2 building and a Class 3 building in this type of context, which is based on two considerations:
- whether or not the units provide for entirely self-contained facilities for residential accommodation (Class 2), or share or lack some facility which is usual to a separate dwelling (Class 3)
- whether or not each apartment is occupied jointly by related persons (Class 2), or provides accommodation for a number of unrelated persons (Class 3)
Osborn J also did not definitively conclude whether or not the three apartments in this case should be classified as Class 2 or Class 3. His comments suggest he was of the view that the apartments should be classified as Class 2 buildings.
The differences in the reasoning of Nettle J and Osborn J suggest that the two judges may disagree with each other on the appropriate classification of some examples of serviced apartments used for short term accommodation. At least it appears that Nettle J would have regard to some additional factors to Osborn J, such as the number of apartments being used in this way and their physical position in relation to each other.
Change in use may result in danger
The Court of Appeal accepted that a change in use of a building might give rise to a danger to the life, safety or health of persons using the building. This could form the basis for issuing a building notice under section 106(d) of the Act. In this case, the Court of Appeal considered that the evidence did not establish that an actual danger existed. The Court stated that at best, the evidence was that the safety measures in the building may no longer be appropriate as a result of the change in use of some apartments to short term stays, and that a review may be required to determine whether there is a danger.
The result is that, according to the Court of Appeal the onus rests with the MBS or RBS to carry out a review to establish whether or not the fire safety measures are in fact sufficient for a change of use to short term stays, before the MBS or RBS can form an opinion that a danger exists. Such a danger might exist for example if, as in this case, alternative solutions were assessed and approved on the basis that occupants would be long term occupants who were familiar with the building. If such a review is done, the MBS/RBS may then be in a position to form a view that there is a danger and he may therefore use the building notice and building order process, regardless of whether or not the units in question should properly be classified as Class 2 or Class 3.
Implications of the decision
Going forward, where a Municipal Building Surveyor is asked to respond to a claim that apartments in a building classified as a Class 2, are now being used for short term 'hotel-like' accommodation he/she will need to consider the following:
- how many units in the building are being used this way?
- what is their physical position in relation to each other (are they scattered around the building or in a group or in a certain area of the building)?
- what 'services' are provided to the occupants/patrons e.g. are there common business facilities a reception area, a swimming pool or other recreational facilities offered?
- does the short term use present an 'actual' danger (as opposed to a potential danger)? It may be appropriate to seek an expert opinion/report on this issue.
Subject to all of the above considerations a notice or order may be warranted either on the basis of a change of use to Class 3 and/or because of an actual danger to life, safety or health to the public or to those using the building.