Unprecedented attack on serviced apartments

By Shane Scanlan

Docklands’ serviced apartment operators came under unprecedented attack from two separate directions last month.

Owner-occupiers have been increasingly concerned about the loss of residential amenity which uncontrolled short-term rentals deliver and have pulled out all stops to wipe out the practice.

At NewQuay, Nolan and Conder owners’ corporations are conducting ballots of owners in an attempt to change the rules and outlaw serviced apartments.

And at Watergate, the City of Melbourne has given owners of serviced apartments 30 days to show cause why “occupation of the building as short-term hotel-style (class 3) accommodation should not be prohibited”.

It is understood that the council’s actions against the Watergate owners is a strategic tactic designed to dislodge a rogue serviced apartment operator.  It is being conducted under building regulations and has nothing to do with zoning or any other planning matter.

Class 3 buildings (hotels) have stricter building safety regulations, but if owners instal new equipment and justify their operations within this class, they may fall foul of owners’ corporations’ rules which state that specific permission must be sought for “change of use” of apartments.

Serviced apartment opponents are likely to seize upon any admission that serviced apartments are being used as “hotel-style” accommodation as evidence of an illegal change of use.

This avenue of attack on serviced apartments may prove unnecessary in the case of the Nolan and Conder buildings if the owners’ corporations there succeed in changing their rules to outlaw rentals of less than 30 days.

The owner’s corporations have proposed a rule change that:

“An owner or occupier of a lot must not lease, sub-lease, license, rent, hire or otherwise deal with a lot or permit a lot to be leased, sub-leased, licensed, rented, hired or otherwise dealt with, for any period less than 30 calendar days.”

It is estimated that about 25 per cent of NewQuay apartments are being rented as serviced apartments and, nominally, 75 per cent of owners must approve rule changes.

This would suggest that a change in the rules is extremely unlikely from the ballot.

But serviced apartment opponents are confident that the ballot will go their way because, in the event of a poor voter response, the threshold for success is lowered to only 50 per cent of owners.

Serviced apartment operators have already cast doubt on the legitimacy of the ballots, claiming a number of irregularities.

With QCs already posturing for position, it seems clear that, should the ballot be successful, this would be only round one in an ongoing battle.

Well-credentialled serviced apartment operators are concerned that they are being targeted because of the actions of rogue operators.

In the case of Watergate, they say one operator in particular is bringing their industry into disrepute and has forced owner-occupiers to fight to protect the value of their properties.

They say the rogue operator doesn’t care who they rent apartments to and this has been known to result in unruly parties of more than 80 guests in small apartments and damage to common areas.

The Watergate owner’s corporation has been fining serviced apartment owners for breaches of rules and recently banned from the building swimming pool any guest who has not been “inducted” in its use.

Serviced apartment operators point to increased rents and general Docklands property values as a justification for their industry.  

They also point to the benefits that serviced apartments bring to local restaurants and warn of a severe fall in property prices should they be banned by owners’ corporations.