Amendments to short-stay legislation a welcome relief to owners’ corporations

The government’s stunning decision to empower owners’ corporations (OCs) to choose for themselves about whether to permit short-term letting in their buildings is a game-changer for owner occupiers and tenants alike across Melbourne.

On January 1 next year, an amendment to the Owners’ Corporation Act 2006 will be assented by Parliament to permit OCs to attempt to pass a rule to prohibit the use of an apartment as short-stay accommodation (but not prohibiting an owner of a unit, or a lessee or sub-lessee from providing a unit as short-stay accommodation if that person occupies the lot as their principal place of residence).

There are a few things to note about these amendments to the legislation.

Firstly, the definition of “short-stay” has been defined as a “continuous period of less than 28 days.”

What this means is that a guest would have to rent a unit for more than 28 days for a continuous stay in order to be exempt from the prohibition.

Secondly, the definition of “place of principal residence” has not been defined by the legislation. So, the Courts or Tribunal may be called upon to clarify this via a test case.

I would speculate that the Australian Tax Office (ATO) definition of “place of principal residence” test would likely be the best source of precedent to adopt. This would require proof that the owner or tenant lives in the unit full-time and that it is their main residence.

Thirdly, if a building already has a rule registered on title by the developer that purports to ban short-stay accommodation, this won’t necessarily and automatically become lawful and enforceable. The building may have to attempt to pass an updated rule to adopt the new terminology and limits created by the new legislation.

Fourthly, if a building wishes to pass a rule to restrict short-term letting, it may choose to do so by way of passing a vote at an AGM or a special general meeting, or it may call for a ballot by way of post or email to pass a special resolution.

Fifthly, the required threshold of voting for passing a rule to restrict short-term letting would be no less than 75 per cent of the total aggregate of lot entitlements. However, if more than 50 per cent of the aggregate vote in favour of the Rule (but less than 75 per cent) then this would be considered as an “interim special resolution.”

The OC may be able to declare the vote as a special resolution if, after 28 days’ notice, not more than 25 per cent of the lot entitlements of the building have objected to the interim special resolution.

Complicated? Yes, of course. Difficult to achieve? For some buildings, yes. Impossible? No, but some buildings will struggle to pass an interim special resolution, if less than 50 per cent of the building bother to cast a vote.

Overall, the amendment to the legislation is celebrated and welcomed by owners and residents alike. For too many years have their buildings been overrun by tourists and unruly partygoers.

Now, finally these buildings have a gilt-edged opportunity to rid themselves of the intrusions to their amenity and privacy, and safety and security.

Hats off to the Parliamentarians of the Victorian Legislative Assembly, who finally listened to the needs of residents and owners. •