Airbnb has undoubtedly changed the short-term leasing market in Australia and many Owners Corporations are unhappy with the change.  In response, one Owners Corporation in Woolhara passed a by-law which had the effect of banning short-term letting in the building.  In a landmark decision by the NSW Civil and Administrative Tribunal (“NCAT”), it held that the Owners Corporation did not have power to make such a by-law.

In Estens v Owner Strata Plan 11825 (“the Estens Case”), NCAT was satisfied that an Airbnb tenancy constituted a lease of the property (which is consistent with the decision in Victoria in Swan v Uecker [2016] VSC 313).  This finding by NCAT was crucial because an Owners Corporations cannot make a by-law that “prohibits or restricts the devolution of a lot or a transfer, lease, mortgage or other dealing” (section 139(2) of the Strata Schemes Management Act (“SSMA”)).

NCAT concluded that the by-law in question breached section 139(2) of the SMMA and published short reasons for its decision which only referred to a NSW Fair Trading publication from November 2016.

NCAT’s reasons did not refer to the Local Environmental Plan (“LEP”) in Woolhara, which bans short-term accommodation without prior consent from Council.  A LEP will override any strata by-law.  Historically, however, Councils have not enforced a LEP in relation to short-term accommodation.

The Estens Case is in direct contrast to the Western Australian case of Byrne v The Owners of Ceresa River Apartments Strata Plan 55597 [2017] WASCA (“the Byrne Case”).  In the Byrne Case, the owner of an apartment obtained planning approval from Council to allow their apartment to be used for short-term accommodation.  The by-laws of the building, however, require owners to use their apartments “as a residence” or grant occupancy rights “to residential tenants” only.  The Court held that the term “residential tenant” means an intention to reside permanently or for a substantial period, and that Airbnb tenants do not have these characteristics. Finally, the Court of Appeal held that the by-laws were valid because it did not restrict the owner’s right to grant a lease, it only restricted the use of the apartment.

It not known whether the Estens Case will be appealed.

The prevalence of Airbnb rentals and different treatment of by-laws in Australia by the courts suggests that these kinds of cases will become more frequent or legislation will be introduced.  As it currently stands in NSW, however, Owners Corporations have very limited recourse to deal with often disruptive and noisy Airbnb tenants – at lease for now.

Alison De Gruyter