06 February 2018

Short term (holiday) accommodation in community title schemes – an international issue

For years there has been tension in some community (strata) title schemes involving conflicts between holiday makers and permanent residents. There have been attempts by schemes which are predominantly permanent residential complexes to outlaw holiday letting via by-laws, and even some attempts by schemes which are predominantly holiday let to outlaw permanent residence.  So far, these attempts have failed in Queensland, with the by-laws being found to be invalid.  The town planning and development approval laws are effectively the only controls, but many local planning schemes and approvals are not sufficiently clear to offer any help.

The popularity of short term accommodation booking services like Airbnb have added further fuel to the fire, and last year saw some significant decisions about the issue. In fact, the issue went all the way to the Privy Council in London, the highest court in the British Commonwealth[1], in an appeal from a case in the Turks and Caicos Islands[2].  The Turks and Caicos Islands are a collection of islands located in the northern Caribbean, almost as beautiful as Far North Queensland. In that case, a body corporate was attempting to enforce a by-law which said that units in the complex could only be used for the private residence of the owner, or the owner’s guests and visitors, but could be rented out for periods of not less than one month.

One of the owners was letting his unit for a week at a time to holiday makers. He argued that the by-law was invalid, because it was a restriction on the sale, disposition or letting of the unit, and contravened a prohibition on such restrictions contained in the relevant strata title legislation. A similar restriction can be found in the strata title legislation in most states of Australia, including Queensland.

The Privy Council found that the by-law was valid, because it did not restrict or prohibit letting, but rather related to the use of the lot, and sought to preserve the fundamentally residential character of the complex.  In doing so, the Privy Council had regard to a similar decision made by the Court of Appeal in Western Australia in June 2017[3].

So will this decision help bodies corporate in Australia who want to impose such by-laws?  Well in some jurisdictions, yes, but not in all.  New South Wales, Western Australia, Northern Territory and ACT will all benefit, as they all have directly comparable legislation to that considered in the Privy Council decision. South Australia has a similar provision, but also has a section allowing a court to strike out a by-law which reduces the value of a lot, which might prove problematic.  The Privy Council decision might also be helpful in Victoria, but the by-law will have to be very carefully worded due to differences in the legislation.  Tasmania has a section in its legislation which specifically allows by-laws to prohibit short term letting, so it should be less of an issue there.  Queensland is different again.

In Queensland we have a section of the Body Corporate and Community Management Act which corresponds with the legislation considered by the Privy Council[4].  However, we also have sections which prohibit by-laws restricting the type of residential use[5], and prohibit by-laws which discriminate between types of occupiers[6].  Short term and long term accommodation have both been regarded as residential uses in Queensland, and there have been several examples of by-laws dealing with the issue having been declared invalid.  There is also a possible argument that it is unreasonable for a body corporate to adopt a by-law which prohibits a use of a lot which would otherwise be lawful, and that doing so breaches the body corporate’s duty to act reasonably under section 94(2) of the act.  That argument has been successfully used to invalidate by-laws which prohibit having animals in a community titles scheme. So whilst the recent decisions offer hope to much of the rest of Australia, it is likely that Queensland will need to await legislative change before bodies corporate can regulate short term letting through by-laws.

[1] It was once possible to appeal to the Privy Council from Australian Courts, but that was abolished in 1986.

[2] O’Connor (Senior) and Others v The Proprietors, Strata Plan No. 51 [2017] UKPC45

[3] Byrne v The Owners of Ceresa River Apartments Strata Plan 55597 [2017] WASC 104

[4] Section 180(4) Body Corporate and Community Management Act

[5] Section 180(3)

[6] Section 180(5)

For more information about this article, please contact Partner Nigel Hales.

Nigel is also the only Accredited Property Law Specialist in Cairns.

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