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A collective pause required prior to short-term letting reforms

Thursday 01, Feb 2018

In recent weeks, the NSW Government has proposed the Fair Trading Amendment (Short-term Rental Accommodation) Bill 2018 (Airbnb Reform Package), which aims to clarify whether an owner's corporation can impose a by-law preventing short-term letting of a residential property.

The reformation will allow an Owners Corporation to pass a by-law which prohibits an owner of a strata lot to use their lot for short term rental accommodation if the lot is not the owner's principal place of residence.

The reform package will also introduce a mandatory code of conduct and a complaints system that will apply to online platforms such as Airbnb. This includes a mandatory code of conduct and 'two strikes and you're out' policy whereby guests and hosts who commit two serious breaches of the code within two years will be banned from all short-term accommodation platforms for five years.

While the proposed regulations do provide some relief to the restrictions imposed by the Act, there still remains the need for a stricter and more clearly defined model to regulate the industry.

As revealed in the inaugural National Strata Data Report issued recently by the University of New South Wales, the strata title and accommodation sectors in New South Wales and throughout Australia are major drivers of the economy and between them provide tens of thousands of jobs, both directly and indirectly.

The sector has a $995 billion (billion) footprint Australia wide, with approximately 900,000 lot owners in NSW alone.

As the peak industry body that represents people who are involved in ownership of management rights or are involved professionally in the management rights industry, ARAMA believes the reform package lacks certainty and clarity. This uncertainty is particularly evident in whether any by-laws restricting short term letting which had previously been adopted by an owner's corporation will still stand under the reform package.

Additionally, the proposed law reform will not stop owner's corporations from introducing other measures that will govern how short-term rentals will work within their strata schemes.

ARAMA have therefore, in co-operation with other stakeholdersauthored a responsive position paper in relation to the Government’s short term letting proposals, currently before Parliament.

Our comments reflect the serious approach that we take towards the responsible and concordant management and administration of the properties and people impacted by short term rentals in strata title schemes, and the need for harmonious relations to exist between those lot owners who are owner occupiers and those lot owners who are owner investors.

The position paper makes it clear that while ARAMA shares the Government’s concern about issues relevant to short term letting, we also believe that current Government proposals to address these concerns require more consultation with industry especially the management and letting rights industry.

We estimate that there are approximately 900,000 lot owners in NSW and that approximately half of these are investor owners. We estimate that almost 100,000 investor owners utilise their lots as a short-term rental in community title schemes in NSW and that this number is increasing due to market led demand from the visitor economy.

While we applaud the NSW Governments response to the STHL Options Paper and their desire to give visitor economy consumers a diversity of choice while cracking down on bad behavior in community title schemes we are calling on the NSW Government to ensure that all operators of STHL are registered with Fair Trading to enable the regulators to identify who the operators are via stricter licensing.

ARAMA believes that each individual lot owner should have the right to occupy their lot in whatever way they choose providing the behaviour of the occupants does not breach the strata schemes lawful and reasonable by laws.

ARAMA recognises the importance of the existing letting agreement between the on-site letting agent and the Owners Corporation as a positive mechanism for control of guests behaviour, for the purposes of identifying the existence of appropriate insurances and for the purposes of identifying which lots are actually used for rental purposes.

To this extent ARAMA suggests that an onsite letting agent in possession of a letting agreement with the Owners Corporation should be considered as exempt development 365 days per year where the operating agent resides on site. ARAMA agrees that all other STHL should be limited to 180 days in Greater Sydney with 365 days allowed in all other areas of NSW and that Regional Councils should have the power to decrease the 365-day threshold to no lower than 180 days per year where there is no letting agreement between the Owners Corporation and the onsite letting agent.

We acknowledge that there may be some difficulties in implementation and enforcement of this and support the NSW Governments efforts to allow Owners Corporations to adopt a by-law, with a 75 percent majority, preventing shot term letting in their block if the operating agent does not live on site and the letting authority with the Owners Corporation is not in existence.

Our concerns are shared by other stakeholders within the strata and accommodation sectors. We are aware that private sector providers such as HOME AWAY have publicly said the proposals need more consideration while local authorities in New South Wales also are uneasy about the proposed legislation.

Our request to Government is a simple one. Delay the passage of the current legislation until there has been more consultation. We also know that if AirBnB is the problem then management rights is the solution.

ARAMA wishes to work with all of the relevant Government departments to “get it right”.