Short-Term Rentals and Airbnb Rules in NSW Strata

Short term rental

Do all owners in your strata scheme feel the same way about short-term rentals and Airbnb properties? Or is there conflict?

Often investors want the freedom to rent out their property in the way they choose, while resident owners may be more concerned about quality of life, security and the constant turnover of short-term guests.

Many owners and residents are also unclear about what is permitted under NSW legislation and what an owners corporation can regulate through its strata by-laws.

This article sets out the position and explains some of the steps an owners corporation can take to manage short-term rental accommodation.

What qualifies as short-term rental accommodation?

In NSW, short-term rental accommodation generally involves a commercial arrangement giving someone the right to occupy residential premises for a period of up to three months.

Certain types of accommodation are excluded from the short-term rental accommodation framework, including:

Residential tenancies
Tourist and visitor accommodation such as backpackers' accommodation, holiday parks, hotels, motels and serviced apartments
Boarding houses
Refuge and crisis accommodation
Disability accommodation

Short-term rental accommodation is commonly described as either:

Hosted accommodation – where the host lives at the property and rents out part of it, such as a bedroom.

Non-hosted accommodation – where guests have use of the whole property and the host is not staying there.

However, when considering what an owners corporation can prohibit through its by-laws, the important legal test is whether the property is the principal place of residence of the person granting another person the right to occupy it.

This distinction is important because an owners corporation's power to prohibit short-term rental accommodation is limited where the property is that person's principal place of residence.

Common concerns about short-term rentals in strata

Short-term rental accommodation can work successfully in many strata schemes, but the frequent turnover of guests can also create additional concerns for residents and owners corporations.

The Strata Community Association (SCA) Australasia has identified potential consequences including increased property maintenance costs, security concerns and a decline in community stability.

Common issues can include:

Unauthorised or inappropriate use of common property
Parties, excessive noise and other disturbances
Damage to common property
Security concerns associated with frequent guest turnover
Theft of packages left in foyers or common areas
Key safes or lock boxes installed around the property
Incorrect disposal of rubbish and recycling
Guests being unfamiliar with the building's by-laws and facilities

There may also be a financial impact on the owners corporation if short-term rental activity contributes to additional cleaning, repairs, security costs or insurance issues.

Short-term rental laws in NSW

Short-term rental accommodation in NSW is regulated through a combination of planning legislation, strata legislation and the NSW Short-Term Rental Accommodation Code of Conduct.

Key requirements include:

Short-term rental premises must generally be registered on the NSW Government's STRA Register.
Non-hosted short-term rental accommodation is generally limited to 180 days per year in Greater Sydney, with different planning rules potentially applying in some other areas.
There is no equivalent annual day limit for hosted short-term rental accommodation under the statewide framework.
Hosts, guests, booking platforms and letting agents must comply with the NSW Short-Term Rental Accommodation Code of Conduct.
Applicable planning, registration and fire safety requirements must also be satisfied.

Owners should not assume that listing a property on Airbnb, Stayz or another booking platform automatically means the proposed use is lawful. Planning controls and the strata scheme's registered by-laws should also be checked.

What authority does the owners corporation have?

An owners corporation can regulate short-term rental accommodation through its registered by-laws, but there are important limits on its powers.

When can an owners corporation prohibit short-term rentals?

Section 137A of the Strata Schemes Management Act 2015 allows an owners corporation to make a by-law prohibiting a lot from being used for short-term rental accommodation where the lot is not the principal place of residence of the person granting another person the right to occupy it.

The owners corporation must pass a special resolution at a general meeting to make the by-law, and the by-law must then be registered with NSW Land Registry Services before it takes effect.

This can allow an owners corporation to prohibit properties that are effectively being operated as dedicated short-term rental accommodation.

What if the property is the host's principal place of residence?

An owners corporation cannot use a by-law to prohibit short-term rental accommodation merely because it objects to Airbnb or short-term letting where the protection under section 137A applies.

For example, an owner may use their principal place of residence for short-term accommodation in circumstances permitted by NSW law, including renting rooms or, subject to the applicable requirements, making their home available while temporarily away.

However, this does not mean that the owners corporation is powerless to regulate that use.

What can a short-term rental by-law regulate?

A professionally drafted short-term rental accommodation by-law can do considerably more than simply prohibit certain non-principal-residence short-term rentals.

Depending upon the circumstances of the strata scheme and the terms of the by-law, provisions may address matters such as:

Requiring evidence that the property is the host's principal place of residence
Requiring compliance with the NSW STRA registration requirements
Requiring compliance with the NSW Short-Term Rental Accommodation Code of Conduct
Preventing advertising of short-term accommodation where that use is prohibited
Requiring appropriate insurance to be maintained
Requiring hosts to provide relevant contact and guest information
Requiring guests to comply with the strata scheme's registered by-laws
Regulating noise and nuisance
Protecting building security
Preventing damage to common property
Regulating rubbish and recycling
Addressing fire safety requirements
Requiring guests to be provided with a copy of the building's by-laws
Providing mechanisms to address costs or damage arising from short-term rental activity

Some professionally drafted by-laws may also contain provisions dealing with matters such as bonds, insurance, guest registers, indemnities and recovery of expenses.

The validity and enforceability of particular provisions can depend upon their wording and the circumstances of the individual strata scheme. Owners corporations considering more extensive restrictions or obligations should therefore obtain appropriate legal advice and have the proposed by-law professionally drafted.

Tenants wanting to offer short-term rentals

A tenant cannot simply list their rented apartment or a room within it on Airbnb.

A tenant generally requires the landlord's express written consent before subletting the premises.

Even where the landlord provides consent, the tenant must still comply with the strata scheme's registered by-laws and applicable short-term rental accommodation laws.

If a registered strata by-law lawfully prohibits the proposed short-term rental arrangement, the landlord's consent does not override that by-law.

Guests must comply with strata by-laws

Short-term guests are not exempt from the normal rules applying within a strata scheme.

By-laws dealing with matters such as noise, nuisance, smoking, parking, use of common property, rubbish disposal, security and damage to common property may continue to apply to short-term guests.

A specific short-term rental by-law can strengthen these requirements by placing obligations on the host to ensure guests are informed of, and comply with, the building's rules.

Handling short-term rental complaints in strata

The first point of contact for a strata-related complaint will usually be the strata committee or strata managing agent.

Where the complaint concerns a breach of the strata scheme's by-laws, the owners corporation can consider the normal enforcement processes available under NSW strata legislation.

Other authorities may also become involved depending upon the nature of the complaint:

Planning or unauthorised-use issues may involve the local council.
STRA registration or Code of Conduct issues may be dealt with through NSW Fair Trading.
Strata by-law breaches may ultimately be dealt with through the NSW Civil and Administrative Tribunal (NCAT).
Criminal matters or serious and immediate disturbances should be referred to NSW Police where appropriate.

Keeping good records is particularly important. Dates, times, photographs, videos, correspondence and details of repeated incidents can assist if formal enforcement action becomes necessary.

Tips to minimise short-term rental complaints

Whether an owners corporation chooses to prohibit short-term rental accommodation where it is legally permitted to do so is ultimately a decision for the owners.

Regardless of that decision, clear by-laws and good communication can help minimise disputes.

Practical measures can include:

Reviewing the scheme's existing by-laws to determine whether they adequately address short-term rental accommodation
Ensuring hosts and guests understand the building's rules regarding noise, common property and rubbish disposal
Requiring appropriate evidence of STRA registration where applicable
Establishing clear contact arrangements for hosts or property managers
Having appropriate rules regarding keys, security devices and access to the building
Providing clear safety information for common facilities such as pools and gyms
Establishing a written process for residents to report complaints
Keeping proper records of recurring problems
Taking consistent enforcement action where by-laws are breached

For schemes experiencing ongoing problems, a specific short-term rental accommodation by-law can provide a much clearer framework than relying solely on general noise and nuisance by-laws.

As experienced strata managers, Strata Master assists owners corporations and strata committees with short-term rental accommodation issues, including arranging appropriate by-laws, preparing meeting motions, communicating with owners and residents, managing complaints and coordinating enforcement where required.

If your strata scheme is experiencing issues with Airbnb or other short-term rental accommodation, please contact us to discuss the options available to your owners corporation.