Going on holiday? Why not let a short term tenant pay for your trip.

How councils restrict an owner's right to lease their unit

How an owner of land may use the land he or she owns, depends upon the local council's zoning
controls. A local council uses zoning controls to influence the way land is zoned within a local shire.
For example, some areas may be used for industrial use while others are zoned for residential use.

The zoning controls are found in a section 149 certificate and are based on the Local Environmental
Plan (LEP) of the council. In practice, a council will use zoning controls to impose restrictions on a
land owner's use of property when a development application is lodged and the development consent

As short-term letting services such as Airbnb have become increasingly popular, councils have begun
to impose consent conditions that restrict short-term letting in some strata unit developments. This
has come about because of complaints from owners and occupiers of units who have become tied of
casual holiday makers who may treat a leased apartment more like a hotel than a place where people
permanently reside.

A council may attempt to impose a letting restriction by stating in the conditions of development
consent that:

    (i) by-laws must include a prohibition on the leasing a strata lot for periods of less that 3 months; and

    (ii) a restriction on use (RoU) must be registered against the common property title that prohibits
          short-term leasing.

While by-laws and RoU's are recorded on the title of the common property at the time a strata scheme
is created, an owner's corporation has power to make changes to the by-laws at any time.

Strata Law

What most councils and owners corporations are not aware of is section 139 (2) of the Strata
Schemes Management Act 2015.

Section 139(2) provides:
"that no by-law can prohibit or restrict the devolution of a lot or transfer, lease or mortgage or
other dealing relating to a lot".

This means that any strata by-law that restricts short-term leasing is invalid and cannot be enforced
by an owner's corporation or the council.

This does not mean that owners and occupants can run wild. If short-term tenants disturb other
occupants of the building, complaints can be made to NSW Fair Trading relating to disturbances such
as noise and overcrowding. Penalties can also be imposed.

On the other hand, while a council has the power to enforce a RoU, in practice they do not. A council
is more likely to wait to investigate a breach of an RoU, when a complaint is made.

Have your say

The Berejiklian government has released an options paper to obtain feedback and suggestions
relating to the control of short-term letting.

Some related and helpful links are set out below:

Short-term Holiday Letting in NSW options paper
Strata Living
Your Investment Property Mag

Should you like further information about buying an investment property or the letting of your strata unit please contact Deborah Kent




Deborah Kent