Short stay accommodation (serviced apartments / Air BnB) causes many disputes between short stay accommodation providers (owners or tenants of the relevant apartment) and owners of other apartments in the relevant building.

At the heart of these disputes is:

  • The right of an apartment owner to use his or her apartment as they see fit provided the use complies with relevant laws; and
  • The concerns that other apartment owners have with traffic through their building and what is often regarded as bad behaviour of short stay occupiers.

The Supreme Court has confirmed that Owners Corporations Rules will not provide a resolution for the concerns of the aggrieved apartment occupiers. Proposed legislation may give some aggrieved apartment occupiers a way to achieve some relief but it may not be regarded as a satisfactory solution by some aggrieved apartment occupiers. 

OC Rules and Supreme Court:

On 22 July 2016 the Supreme Court of Victoria handed down the latest judgment.

The Court confirmed the VCAT decision that Owners Corporations do not have the power to make a rule restricting short stay accommodation because:

  • the relevant legislation in place is not intended to give Owners Corporations an exclusive power to make rules prohibiting how lot owners use their apartments; and
  • at common law ‘everybody is free to do anything, subject only to the provisions of the law.’

In other words an apartment can be used for short stay accommodation unless the relevant planning scheme or planning permit prohibits that use.

Proposed Legislation:

The Owners Corporation Amendment (Short Stay Accommodation) Bill 2016 intends to give lot owners, occupiers and the manager a mechanism to deal with short stay tenants if they breach these short stay standards of conduct:

  • Not to create noise and behaviour disturbances to other members and occupiers;
  • Not to use the common property in a manner which is hazardous / injurious to other members and occupiers;
  • Not to obstruct the lawful use and enjoyment of the common property by other occupiers and members; or
  • Not to cause substantial intentional or negligent damage or alteration to a lot, the common property or a structure that forms part of a lot or the common property. 

The complaints process will not differ from what is already in place. The Owners Corporation will also be able to serve a “Notice to Rectify Breach” and “Final Notice to Rectify Breach” on the lot owner and the short stay provider (if the short stay provider is not the lot owner) and the short stay occupants.

As per the current process, only the Owners Corporation can apply to VCAT if the breach is not remedied.  VCAT will have the power to make:

  • A prohibition order, however such an order can only be granted if a breach notice has been served on the short stay provider on 3 or more separate occasions within a 2 years period. The order ceases to be in effect if the lot is sold; and
  • An order for a civil penalty of up to $1,000.00 to be paid into the Victorian Property Fund.

Aggrieved apartment occupiers that live in the same building can apply to VCAT for a compensation order of up to $2,000.00 within 60 days of the date of the breach of the standards of conduct.

The aggrieved apartment occupiers however must first make a complaint to the Owners Corporation who must then decide whether or not to pursue the complaint. If the complaint is pursued, a “Notice to Rectify Breach” and “Final Notice to Rectify Breach” must be served before the application for compensation can be lodged.

The difficulty with the proposed legislation in its current form is that each notice allows the person served 28 days to rectify the breach. 

Aggrieved apartment occupiers will only have 4 days to file and serve the VCAT application if an Owners Corporation issues the required Notice to Rectify Breach immediately and then promptly the Final Notice to Rectify Breach.

The aggrieved apartment occupiers will not be entitled to seek compensation under the proposed legislation if the Owners Corporation does not issue these notices or fails to do so very quickly.

The proposed legislation may be amended before it is passed to cure this problem but even if that occurs the legislation is not likely to provide an easy or quick resolution for aggrieved apartment occupiers. 

That said, the proposed legislation has now been sent to the Legislative Council and the second reading will take place on 30 August 2016.

Another Alternative:

There is an alternative available although it is very rarely used.

It is possible to prohibit the use of an apartment from being used for short stay accommodation by appropriately drawn restrictive covenants registered on titles to apartments.

Appropriately drawn and registered restrictive covenants will allow aggrieved apartment owners immediate rights of action without having to first suffer from disturbance by short stay occupants.

Unfortunately restrictive covenants of that type have to be proposed by developers of apartments at the time the developer markets and sells the apartments (at the time of “off the plan” sales) and the developer must then include the restrictive covenants in the plan of subdivision when it is registered.

This is the case because:

  • Buyers of apartments off the plan may be able to rescind their contracts if details of the restrictive covenant proposed are not included in their contracts; and
  • To create effective covenants after the plan of subdivision is registered and apartment sales are settled requires every apartment owner and their mortgagee to agree.

The creation of restrictive covenants of this type is rare because many developers do not wish to restrict the range of potential buyers for their products, ie: they want to be able to sell apartments to buyers who want to be able to use them for short stay accommodation (serviced apartments or Air BnB).