Owners Corporations and Airbnb
A decision of the Supreme Court of Victoria recently considered whether an owners corporation could stop Airbnb rentals. The case of Owners Corporation PS 501391P v Balcombe [2016] VSC 384 was concerned with the Watergate Apartments at Docklands. That is a complex of 349 lots of which 14 were used in a short-term holiday rental business.
Shortly after its registration in June 2004, the body corporate made additional, special rules. These rules included that an owner must not use their apartment for any trade, profession or business (other than letting the apartment for residential accommodation to the same party for periods of more than one month).
What Legal Action Was Brought Forward?
The Owners Corporation brought a legal action seeking orders that Balcombe stops all short-term letting activities. The Owners Corporation complained that there were many negative effects of the short-term rentals including that:
- If not met on arrival, holiday guests breached security by entering the building and loitering in the foyer until they were met and admitted to their apartment.
- Unmet guests left luggage in the foyer.
- Lift doors were regularly jammed by luggage.
- Holiday guests often failed to comply with the Owners Corporation rules.
- Holiday guests were not properly informed about the safety procedures of the building.
- Short-term letting increased wear and tear on the common areas with luggage and cleaning equipment being transported to and from various apartments.
Balcombe denied the claims. Evidence was provided that over 8 years, 3,500 bookings and around 10,500 guests, there were only a small number of negative incidents. This was no more than those caused by long-term tenants and owners.
Rather than looking at the problems associated with short-term letting practices, the Court looked to the legislative parameters of the Subdivision Act (Vic) 1988 and the Owners Corporation Act (Vic) 2006. They also considered whether their provisions empowered the Owners Corporation to prohibit short-term letting. Based on the relevant legislation, the Court decided that the functions and powers of owners corporations mainly relate to common property issues. In general, those powers do not extend to controlling an individual owner’s conduct or use of their property. In this case, after a very long legal battle, the court found that the body corporate did not have the power to prevent short-term Airbnb holiday rentals.
Landlords and sub-letting
On the other hand, a landlord can prohibit a tenant from sub-letting a property for short-term stays. This however, depends on the terms of the lease. In Swan v Uecker [2016] VSC 313, the Court found that the tenant had breached the lease by sub-letting the apartment on Airbnb. The decision focused on technical legal issues as to whether the holiday rental agreement created a sub-lease or licence between the tenant and the holidaymakers. The Court concluded that by providing the guests with exclusive possession of the property, the tenant granted a sub-lease. This therefore breached the main lease with the landlord. It is worth noting that a different outcome may have been reached, if the guest had rented one room in the property rather than the entire property.
On an aside, Berlin introduced laws in 2014 that came into effect earlier this year. These laws severely restrict the rights of owners to let their properties through Airbnb and other similar sites. The measures have been introduced as a result of concerns about significant increases in the cost of renting, resulting from short-term holiday letting. As opposed to any associated inconvenience to other owners or to landlords.
Airbnb and Body Corporate
For legal advice on owners corporation and landlord questions, please contact David Henderson at Hendersons Legal on 9629 2211. We are experienced property lawyers and also provide lawyer conveyancing services in Melbourne for both residential and commercial properties.
This content is intended as commentary and should not be construed as legal advice.
For more information call David Henderson on 03 9629 2211.
