AirBnB is one of the world’s greatest disruptors, having shaken up the real estate, travel and hotel industries.
The idea came from two San Francisco-based former schoolmates who were struggling to pay their rent. To make some extra money, the two offered an airbed in their living room to visiting conference delegates. ‘AirBedandBreakfast’ soon evolved into Airbnb and those young men never had to worry about paying rent again.
But did they create a monster? Most properties listed on Airbnb, particularly in Australia, are not technically supposed to be used for short term rentals. The rise in short-term letting has resulted in noise issues and complaints of overcrowding. The fallout of this worldwide phenomenon has also been a decline in available long term rental properties, as landlords realise they can make more from Airbnb than they can with a tenant.
There are thousands of Australians happily leasing their property through the platform. However those who don’t approve of Airbnb say the service is against the law.
Airbnb - landmark rulings
Councils, landlords and strata operations have had to scramble to catch up when it comes to Airbnb-style leasings.
In 2016, a Melbourne couple was found to have breached their rental agreement by subletting their apartment without permission. The owner of the property was allowed to terminate the lease, leaving the couple looking for a new place to live.
In another case, a homeowner on the NSW Central Coast was taken to court over the constant noisy parties being held in their property. The neighbours obtained an injunction which restrained the use of the property for short term letting. They were successful because local planning laws did not allow for this style of leasing.
In Western Australia, a 2016 court ruling favoured strata committees, saying they can legally prohibit the letting of apartments for short term stays.
However, in 2017, the NSW Civil and Administrative Tribunal (NCAT) found an apartment block owners corporation did not have the power to adopt a by-law which prohibited short term accommodation. A court ruled in the favour of apartment owner Peta Estens, who argued “the ban on short term lets was in contravention of the Strata Schemes Management Act, which says that a bylaw must not be harsh, unconscionable or oppressive and that it shouldn’t prohibit or restrict dealings with a lot”.
A similar ruling was made in Victoria in 2016, when a dispute arose between owners in Docklands’ Watergate apartment building. The final decision decreed the owners corporation could not make rules to ban short stay operators.
Airbnb and strata laws
As of late 2017, in New South Wales, strata building by-laws restricting Airbnb-style letting have been declared invalid by Fair Trading. The official rules state” no by-law can prohibit or restrict the devolution of a lot or a transfer, lease, mortgage or other dealing relating to this lot”.
In Victoria, the Watergate vs Balcombe precedent also makes it difficult for strata corporations to ban Airbnb lettings.
Despite the rulings, the issue remains a grey area. Strata owners still have concerns about security and safety. There is also the problem of added wear and tear on a property brought on by an influx of short term visitors.
Even if by-laws must allow short-term letting, it is still possible for stratas to discourage the behaviour by enforcing noise restrictions and increasing building security (thus making it difficult to allow access for short term visitors).
For landlords and property managers, the best way to avoid Airbnb issues is to add a clause in the leasing agreement. Banning subletting and capping the number of occupants will prevent properties from becoming pseudo-hotels.
BDH Solutions have been buying and selling rent rolls for over 30 years. Keep up with our latest listings here.