Owners’ corporations (OC) hoping to ban short-stay tenants from residential buildings have suffered a setback with the Victorian Civil and Administrative Tribunal (VCAT) ruling on June 29 that their ability to make rules is limited.
In another test case centred on the Watergate building in Docklands, VCAT member Linda Rowland found that the 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,” 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.
Residents 3000 president John Dall’Amico said the best response for CBD residents was to be aware of the increased security and safety risks. Mr Dall’Amico said it seemed clear that short-stays in residential buildings were here to stay and that OCs needed to adjust to the new reality or at least continue their push to have them banned.
“Whereas in the past there may have been 10 sets of eyes watching out on a floor, this number is diminishing with short-term holiday makers replacing local residents,” Mr Dall’Amico said.
And, he said, short-stay visitors lacked the opportunity to become familiar with the safety and security issues facing the building, which posed a risk to themselves and others.
“It’s unlikely that they will be properly inducted into the building, compared to hotels which have safety and emergency procedures in place as routine.”
The Watergate OC is yet to decide whether it will appeal the decision at the Supreme Court. Watergate 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.
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.