Victory for short-stays

By Bethany Williams

Short-stay operators breathed a sigh of relief last month, when the Victorian Civil and Administrative Tribunal (VCAT) found owners’ corporation (OC) rules prohibiting the practice were invalid.

VCAT member Linda Rowland on June 29 found that the Watergate OC did not have the power to make a rule prohibiting stays of less than 30 days.

The VCAT decision paves the way for short-stay operators throughout the state as it means OCs can’t make rules preventing short-term letting.

“The decision now effectively means that owners’ corporations do not have the power to make rules that prohibit short-term letting in residential buildings,” Strata Title Lawyers CEO and Watergate OC solicitor Tom Bacon said.

“The decision impacts on all owners’ corporations throughout Victoria and affects all rules of this type made under either the 1988 or 2006 legislation,” Mr Bacon said.

The Watergate OC is yet to decide whether it will appeal the decision at the Supreme Court.

OC deputy chair Rus Littleson said the committee was disappointed by the decision and said it favoured opportunists in the short-stay industry.

“We are most concerned that apartment property values throughout the state will suffer because of this decision. It is effectively an open invitation to opportunists to exploit legal loopholes,” Mr Littleson said.

“The short-stay industry is unregulated – any outfit can start up, hold an apartment building to ransom and damage its reputation. The State Government needs to make changes to look after residents and their investments.”

The Building Appeals Board, the Supreme Court, the Court of Appeals and VCAT, have now all tested the issue of short-term letting of apartments.

Having been tested across a range of courts and tribunals, it now appears that the only other option would be the introduction of new legislation by the State Government.

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

The seven-member panel, which includes Watergate short-stay operator and president of the Victorian Accommodation Industry Association, Paul Salter, has now made its recommendation and the ministers are expected to announce their decision this month.

Mr Salter said he was looking forward to the decision now that the panel had completed its joint submission and applauded the decision of VCAT member Rowland.

“I would like to thank VCAT Member Ms Linda Rowland for making her decision based on the relevant laws, she indicated she would take this approach at the end of the hearing in May,” Mr Salter said.

“Her decision will enhance the fabric of the Melbourne community by enabling greater accommodation choice for consumers and it will further help to secure the city as one of the most liveable in the world, attracting both local and overseas visitors.”

The VCAT decision follows action taken against nine lot owners by the Watergate OC.

The OC alleged owners had breached OC rules through the use of their apartments as short-stay accommodation as part of Mr Salter’s Docklands Executive Apartments business.

In her written decision, published on June 29, Ms Rowlands said she proposed to dismiss the Watergate OC’s application and make final orders at a hearing on July 29.

Member Rowlands found the Watergate OC’s rule restricting stays of less than 30 days was invalid under both the Subdivision Act 1988 and the Owners Corporation Act 2006.

The additional rule was passed in August 2004, at the inaugural general meeting of the OC, and was made under the Subdivision Act 1988.

However, existing rules were carried on when the Owners Corporation Act 2006 came into effect, requiring Member Rowlands to test the validity of the rule under both Acts.

She found the decision was not valid under the Subdivision Act 1988 because there was “no specific function or power” given to bodies corporate to regulate the use of a private lot.

She said, under the Act the general functions and powers of the OC were to administer the common property.

But the rule in question regulated any trade, profession or business in residential lots and banned short-term letting altogether.

According to Member Rowlands, the only source of power to make the rule would be with relation to the Standard Rules around preventing nuisance, hazard or noise.

However, she found it was not sufficiently connected to the Standard Rules to have been made by the body corporate and was “beyond powers” because it sought to prohibit certain types of uses rather than regulate activities of occupiers.

Member Rowlands also found the OC did not have the power to prohibit short-term letting under the Owners Corporation Act 2006.

The OC had relied on powers to make rules given to it under Schedule 1 of the Act, specifically relating to health, safety and security, use of common property, change of use of lots and behaviour of persons.

Member Rowlands said she was not persuaded the change of lots power enabled OCs to make what she called “town planning decisions” and said it did not give OCs the power to determine the use of a lot.

She also found that the rule could no be made under OC powers relating to health, safety and security because these powers did not extend to prohibiting a legal use or determining the use of a lot.

Member Rowlands found no factual basis that short-term letting affected the health, safety and security of other occupants.

In relation to behaviour, Member Rowlands said there was little evidence of the behaviour of long-term occupants and accordingly, it was difficult to determine whether short-term occupants caused more damage and created more nuisances.

However, Member Rowlands said even if she accepted that short-term occupants did cause more issues due to their behaviour, the powers given to the OC did not extend to prohibiting a “lawful use” of a lot.