Are you using Airbnb illegally?

Airbnb is a popular and often cheaper alternative these days to otherwise expensive hotels and serviced apartments.

Unit owners are understandably eager to take advantage of the flexibility of short-term arrangements and high returns for holiday periods, long weekends and those frequent periods when parliamentarians come to town. But what if the Owners Corporation in your unit complex passes a rule that bans the use of Airbnb? Will the rule be valid? The NSW Civil and Administrative Tribunal (NCAT) was recently asked to look at this in the case of Estens v Owners Corporation SP 11825.

Rule declaring Airbnb an illegal use

Ms Estens, the owner of a unit in Woollahra (NSW), rented her home through Airbnb whilst she was travelling interstate or overseas. Ms Estens said that she always found her apartment in impeccable condition after she returned from letting it on Airbnb, and that she was very selective with guests she permitted to lease her property. She had received no trouble over a period of 12 months, aside from receiving two complaints from fellow unit owners regarding misuse of the washing machine in the commercial laundry. As a result, she changed her Airbnb rules to limit the use of the washing machines and also prohibited pets in her unit.

In March 2017, the Owners Corporation passed a special by-law having the effect that Airbnb was an illegal use for all units in the complex. In response, Ms Estens sought an order from the NCAT to invalidate the rule, on the basis that the Owners Corporation did not have the power to make it.

Airbnb is valid residential use

To convince the NCAT that Airbnb was a valid residential use, Ms Estens relied on a 2016 NSW Legislative Committee Environmental Planning Report which said that (among other things) the Committee regarded short term letting of a residential property as ‘residential use of the same character as longer term letting or traditional tenancy’.

The Owners Corporation argued that no section Strata Schemes Management Act 2015 (NSW) permitted the use of Airbnb. The Owners Corporation said that the common areas of the building were being subjected to a high rate of wear and tear as a result of luggage being continuously moved in and out of Ms Esten’s unit, and also pointed to issues of security and control of short term occupiers including abatement of noise.

Ultimately the NCAT agreed with Ms Estens, declaring that an Owners Corporation cannot pass by-laws banning short-term letting, including Airbnb. The NCAT said that it was satisfied that the manner in which the Airbnb arrangement operates ‘is sufficient to constitute a tenancy or lease’. The NCAT based this on the fact that the tenant has exclusive possession of the property, and concluded that the arrangement is properly described as a lease rather than a licence.

Would the outcome be the same in the ACT?

Not necessarily. Whether or not Airbnb is a commercial or residential use has not been defined by any ACT law. Whilst there have been a handful of cases in Victoria dealing with the issue, no cases have been brought before the ACT courts. The ACT has an extremely strict planning framework, which is much more rigorous and detailed than other jurisdictions. Furthermore, the Unit Titles (Management) Act 2011 (ACT) confers broad powers on an Owners Corporation operating in the ACT as compared to other jurisdictions. Units owners can, in the case of a disagreement or dispute with an Owners Corporation, lodge an application the ACT Civil and Administrative Tribunal to determine the issue.

If you are concerned about whether your use of Airbnb is permitted, please contact the Property & Construction Dispute Resolution Team for specific advice. Penalties may apply for illegal uses of units, and uses which are not permitted by the Units Plan (or Crown lease for non-unitised properties).

For more information contact the Building and Construction Dispute Resolution Team:

Alisa Taylor — Partner — Construction Dispute Resolution
(02) 6279 4444