Short-stay decision to change the face of Docklands

By Bethany Williams    

It’s the battle that has divided Docklands.

After four years the Watergate short-stay matter drew to an apparent close in June.

VCAT member Linda Rowlands found that the Watergate Owners’ Corporation (OC) did not have the power to make a rule prohibiting stays of less than 30 days and, by doing so, effectively opened the door to short-stay operators across Docklands and Victoria.

Member Rowlands is yet to make her final orders and the Watergate OC is yet to decide whether it will appeal the decision, but if the decision stands it is likely to have major consequences in Docklands.

Watergate OC chair Barbara Francis said the committee would decide whether or not to appeal the decision after Member Rowlands hands down her final orders at a VCAT hearing at the end of August.

“The question now is where does this decision leave us and other OCs in terms of our ability to make rules?” Ms Francis said.

The Watergate OC rules, including the 30-day minimum stay rule, were established by the building’s developer and were inherited by the lot owners.

Ms Francis said she was now looking to the State Government to intervene.

Pending an appeal from the Watergate OC, it appears the matter has reached its conclusion as far as the legal system goes, having been tested by the Building Appeals Board, the Supreme Court, the Court of Appeals and VCAT.

After unsuccessfully attempting to curb short-stays at the Watergate building, the City of Melbourne appears to have stepped back from the issue, leaving any further intervention to the State Government.

Prior to last year’s election the Labor Party promised better regulation of short-stays.

In February, Consumer Affairs Minister Jane Garrett appointed a panel to look at the impact of short-stays in residential buildings and to make recommendations to herself and Planning Minister Richard Wynne.

The two main recommendations of the panel were:

to make providers of short-stay accommodation responsible, to a limited extend, for such parties in apartments they let; and

to empower owners’ corporations to deal with the problem using existing powers, prescriptions and processes under the OC Act.

Ministers Garrett and Wynne are expected to announce regulatory changes in the coming months. See the full story on the short-stay panel’s recommendations on page 11.

In the meantime, the VCAT decision is expected to have far-reaching consequences in Docklands, and, depending on your point of view, these changes could be positive or negative.

According to Strata Title Lawyers CEO and Watergate OC solicitor Tom Bacon, Member Rowlands was clear that rules restricting the length of stay were invalid under both old and new OC rules.

“If the (Watergate) OC doesn’t appeal, and if the decision stands, then it’s the final blow for OCs that have one of these types of rules for short-stays,” Mr Bacon said.

No NewQuay OC has rules restricting short-stays and, given the recent decision, its unlikely any would attempt the difficult process of achieving a special resolution to change its rules.

Former Conder resident Sally Hewitt sold her NewQuay apartment earlier this year due to the prevalence of short-stays and says the VCAT decision will see property values diminish and buildings degrade quickly.

“I can see that some of those buildings in NewQuay will become predominantly short-stay,” Ms Hewitt said. “They’ll become totally devalued and destroyed and the community will disintegrate.”

Ms Hewitt said as a consequence of the decision the Government would have to see that the current situation was “ludicrous” and step in.

Watergate building manager Marshall Delves said he expected there to be an increase in short-stays at the Watergate building following the VCAT decision.

Mr Delves said there had been an increase in people posting Watergate apartments on AirBnB and Docklands Executive Apartment operator Paul Salter had increased his apartments from 9 to 14 in the past 12 months.

He also said he was concerned the building would regain the “party” reputation it previously had due to short-stay accommodation in the building.

The building was dubbed “partygate” while short-stay business Grand Harbour Accommodation was operating in the building. The business closed in 2012.

“The biggest concern for owners is the impact on the value of their properties,” Mr Delves said.

At the same time, Docklands buildings that don’t currently have any problems with short-stay accommodation, such as Dock 5 in Victoria Harbour, are also fearful of what the VCAT decision could mean for them.

Dock 5 OC chair Stan Ham said the committee was greatly concerned about the outcome of the VCAT case.

The building is currently around 60 per cent owner-occupied and has a policy of six-month minimum stay. Mr Ham said the committee was worried about the potential impact of the decision on the building.

“We are a community here at Dock 5, we pride ourselves on knowing our neighbours,” Mr Ham said.

However, Yarra’s Edge, which so far has remained untouched by short-stays, is likely to remain so due to a restrictive covenant that applies to all lots in the precinct.

The covenant, established by developer Mirvac, is registered on all Yarra’s Edge titles and prevents owners from granting a lease or licence to occupy for less than three months or allowing anyone else to do so on their behalf.

This highlights the different approach towards short-stays taken by developers across Docklands. At the other end of the spectrum is MAB Corporation, which many residents say fostered the short-stay industry at NewQuay through its Grand Mercure business.

According to Mirvac, the covenant was instigated “to protect the amenity and quiet enjoyment of the residential community” and is also included in its other developments outside Docklands where there are OCs.

Mr Bacon said it was unusual for developers to pass restrictive covenants, however it benefited Yarra’s Edge by acting as a private treaty between all owners.

“The restrictive covenant is not subject to extinguishment in the same manner as a rule and is not subject to the Owners Corporation Act 2006, and the recent VCAT decision would have little application to Yarra’s Edge.”

“Covenants may be modified or extinguished, but only upon application to the Supreme Court or through a planning permit process, both of which would no doubt be opposed by the Owners’ Corporation,” Mr Bacon said.

Watergate short-stay operator and president of the Victorian Accommodation Industry Association Paul Salter said he would like to see an increase in short-stays in Docklands and elsewhere, because it would provide owners with greater flexibility in how they choose to deal with their property investment.

“A free market that is driven by customer reviews will provide consumers with high quality, value for money choices,” Mr Salter said.

“The value to the Victorian economy in terms of employment, tourism and investment is substantial and it will keep us in line with the other major cities of the world that embrace change.”

Mr Salter also said the VCAT decision would positively impact on local businesses.

“Shop owners, restaurant owners, café owners and anyone who operates a small business in the Docklands will now breathe a sigh of relief because they benefit substantially from the spending by short-term guests who visit their businesses.”

“It is the short-term guests from interstate and overseas spending their money at our local businesses that ensures they can survive and be there to provide their services to the local community.”

He said stopping short-term accommodation would have caused investors to leave the market, property prices to fall, increased unemployment, declining tourism and local businesses to close.

Mr Salter also said the suggestion that the behaviour of short-term guests was different to long-term residents was “utterly ridiculous”.

The Docklands Chamber of Commerce, of which Mr Salter is an executive committee member, says it will continue to support short-stay businesses in Docklands, but only those that are “run professionally”.

“We understand that businesses who are members of the Victorian Accommodation Industry Association actually follow a national ‘Code of Conduct’,” Chamber president Joh Maxwell said.

“It is these businesses that have strong processes, effective management and are conducted in a professional manner that the Chamber will continue to support.”

“The Chamber recognises that there should be no support for rogue operators who disadvantage the local community.”

“The employment created and the additional spend with Docklands is an important aspect of shared business success within our precinct, particularly for members of the Docklands Chamber of Commerce,“ Mrs Maxwell said.

While small businesses might benefit from the increase in short-stays, what about the bigger hotels? Will the anticipated increase in short-stays affect their viability?

Docklands already has a number of hotel-style accommodation options and there are a number of others currently under construction or proposed.

Singaporean developer Hiap Hoe has begun construction of a hotel at NewQuay, Digital Harbour’s The Altus will also include a hotel component and Lend Lease has proposed a waterfront hotel in Victoria Harbour.

The M Docklands building currently under construction on LaTrobe St will also include a Peppers hotel.

Mr Salter says Tourism Victoria actively supports the benefits to the consumer from increased accommodation choice, but the organisation declined to comment when contacted by Docklands News.

However, Tourism Accommodation Australia (TAA), the industry body for the accommodation industry, says government at all levels need to formulate new regulations to protect interests of both guests and property owners due to the growth of the “share economy”.

Whatever side of the argument you’re on, it’s clear that this decision and practice will continue to divide Docklands.

However, with some form of government action expected following the recommendations of the short-stay ministerial advisory committee and a possible appeal on the cards, the Docklands short-stay saga certainly isn’t over yet.

“TAA believes the ruling by VCAT ignores the many issued involved with allowing unregulated short-term accommodation,” TAA acting CEO Carol Giuseppi said.

She said turning apartment blocks into “quasi-hotels” needed to be regulated.

“The uncertainty that has resulted from this ruling means that it is essential that government address the issue and establish a new framework that requires registration by potential short-term accommodation providers based on them meeting specified health, safety, tax, insurance and regulatory requirements,’ Ms Giuseppi said.

“There is a major difference between an individual letting out a room in a house to a fully commercialised operation involving renting our apartments as a business.”

“TAA is not seeking to prevent the short-term letting of a room by an individual, if this is controlled, but to prevent the commercialisation of this activity.