How councils restrict an owner's right to lease their unit

How an owner of land may use the land he or she owns, depends upon the local council's zoning controls. A local council uses zoning controls to influence the way land is zoned within a local shire. For example, some areas may be used for industrial use while others are zoned for residential use. The zoning controls are found in a section 149 certificate and are based on the Local Environmental Plan (LEP) of the council. In practice, a council will use zoning controls to impose restrictions on a land owner's use of property when a development application is lodged and the development consent given.

As short-term letting services such as Airbnb have become increasingly popular, councils have begun to impose consent conditions that restrict short-term letting in some strata unit developments. This has come about because of complaints from owners and occupiers of units who have become tied of casual holiday makers who may treat a leased apartment more like a hotel than a place where people permanently reside.

A council may attempt to impose a letting restriction by stating in the conditions of development consent that: (i) by-laws must include a prohibition on the leasing a strata lot for periods of less that 3 months; and

(ii) a restriction on use (RoU) must be registered against the common property title that prohibits short-term leasing.

While by-laws and RoU's are recorded on the title of the common property at the time a strata scheme is created, an owner's corporation has power to make changes to the by-laws at any time.

Strata Law What most councils and owners corporations are not aware of is section 139 (2) of the Strata Schemes Management Act 2015.

Section 139(2) provides: "that no by-law can prohibit or restrict the devolution of a lot or transfer, lease or mortgage or other dealing relating to a lot".

This means that any strata by-law that restricts short-term leasing is invalid and cannot be enforced by an owner's corporation or the council.

This does not mean that owners and occupants can run wild. If short-term tenants disturb other occupants of the building, complaints can be made to NSW Fair Trading relating to disturbances such as noise and overcrowding. Penalties can also be imposed.

On the other hand, while a council has the power to enforce a RoU, in practice they do not. A council is more likely to wait to investigate a breach of an RoU, when a complaint is made.

Have your say The Berejiklian government has released an options paper to obtain feedback and suggestions relating to the control of short-term letting.

Some related and helpful links are set out below: Short-term Holiday Letting in NSW options paper Strata Living Your Investment Property Mag