Beware of Short Term Rentals, Lettings and Property Investors

Short Term Lettings and Property Investors

Short term lettings have been for some investors an absolute bonanza, returning well above average returns. However, short term rentals have been in a legal limbo since a NSW court decided that short term lettings were not lawful under local planning laws.  

Do you remember the story (only four years ago) about how a determined neighbour stopped a local “party house” in its tracks?  The neighbour was upset about the loss of amenity when a local house was used for short term lettings that resulted in noisy parties, bucks and hens parties, lots of cars and general disruption to the neighbourhood.  The Land and Environment Court gave an injunction, the story is here:

Well on the back of the market and neighbourhood disruption caused by new short term letting platforms like Air BnB and Stayz, the NSW Government has passed laws that will help address the problem by regulating short term rentals.  Property Investors read on…

Beware the Ides of Short Term Rentals – Short Term Lettings and Property Investors

The NSW Parliament has buckled to public pressure and on 15 August 2018 passed legislation to attack the short term letting problem:  first, by giving the Department of Fair Trading the power to have a code of conduct for short term lettings; second by allowing strata corporations to prohibit short term lettings with a 75% majority; and third, by permitting local councils to limit short term lettings to no more than 180 days per year. 

Regulator and Code of Conduct – Fair Trading as Regulator

The Department of Fair Trading will publish a mandatory “Code” to help manage short term rental guests and their behaviour.  The Code will apply to Airbnb and Stayz, owners, real estate letting agents and guests.  

The aim is to have a system for complaints including a “2 strikes and you’re out” rule.  The Code is still being prepared in consultation with industry groups but reading the new legislation it looks like we might get some of these features:

  • Fair Trading will be the regulator
  • Register of Short term rental accommodation
  • Exclusion Register for naughty landlords, guest and letting agents/platforms
  • User Pays if the regulator can exercises the power to recover costs in enforcing or administering the code
  • Penalties for landlords with Serious Code Breaches within 2 years resulting in
  • a 5year ban
  • banned properties being unable to be listed for letting. 
  • Fines of up to $1.1million for corporations and $220,000 for individuals.

Strata Schemes Management Act By Laws with 75% Majority

The parliament has also amended the strata legislation.  Owners Corporations will be able to, by a special majority of 75%, adopt by-laws preventing short-term rentals if the owner is not living in the property.  The by laws, if passed, will prevent landlords in those stratas engaging in year-round short term letting as the primary purpose. The by laws may not prevent the use of an owner’s principal place of residence for short term letting.

New State Wide Planning Laws

Finally, the government is preparing new state wide planning laws that will permit councils to approve short term letting, all year if the host is present, up to 180 days per year in Greater Sydney, and from 180 to 365 days per year outside Greater Sydney depending on Council’s decision.  If you want to get an insight into what might happen with your investment property with the new zoning laws, have a further look here:

The new legislation is passed and will become law once proclaimed.

Fair Trading Amendment (Short-Term Rental Accommodation) Bill 2018

Contact Peter McNamara for advice on your property and investment legal matters.


Source: Written by Peter McNamara, Partner at Clark McNamara Lawyers, Sydney, December 2018