Latest on Short Term Apartment Operators

A Chronological Look at events to date regarding Short Term Letting
Short stay accommodation panel

Consumer Affairs Victoria
2015

In February 2015 the Victorian Government established an independent panel to recommend ways to improve the regulation of CBD residential buildings, so property is protected from unruly ‘short-stay’ parties.

The panel’s considerations included the interests of stakeholders, current issues with short-stay accommodation, international experience, and possible legislative change to better regulate the sector.

The panel has reported to the Minister for Consumer Affairs, Gaming and Liquor Regulation, and the Minister for Planning on the issues, options and recommendations to address the issues.

Report of the independent panel on short-stay accommodation in CBD apartment buildings:

Download (PDF, 2.62MB)

If you are experiencing trouble viewing the Report, please click “Download PDF” above.

Victory for short-stays

Bethany Williams – Docklands News
June 30th, 2015

Short-stay operators breathed a sigh of relief last month, when the Victorian Civil and Administrative Tribunal (VCAT) found owners’ corporation (OC) rules prohibiting the practice were invalid.

VCAT member Linda Rowland on June 29 found that the Watergate 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,” Strata Title Lawyers CEO and 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.

The Watergate OC is yet to decide whether it will appeal the decision at the Supreme Court.

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.

Mr Salter said he was looking forward to the decision now that the panel had completed its joint submission and applauded the decision of VCAT member Rowland.
“I would like to thank VCAT Member Ms Linda Rowland for making her decision based on the relevant laws, she indicated she would take this approach at the end of the hearing in May,” Mr Salter said.

“Her decision will enhance the fabric of the Melbourne community by enabling greater accommodation choice for consumers and it will further help to secure the city as one of the most liveable in the world, attracting both local and overseas visitors.”

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.

Building code ban on short-term lets

Domain – The Age
March 29th, 2013

Footy fans, bucks parties and schoolies running riot in residential strata buildings could be a thing of the past if a key ruling in Victoria is used as a legal precedent elsewhere in Australia.

Short-term lets and serviced apartments are the bane of many strata residents’ lives, especially in inner-city or beachside apartment blocks.

Holidaymakers want to relax and have fun. Bucks and hen parties, not to mention schoolies, want to play up. Travelling footy fans are either going to be celebrating a victory or drowning their sorrows after defeat.

Why would they give a stuff about their temporary neighbours’ legal right to the peaceful enjoyment of their lots?

At best short-term lets are an irritation to long-term residents – at worst they are strata parasites leeching off the good things about residential buildings while running their apartments like hotel rooms.

Well, that could soon be coming to an end, according to Tom Bacon of Teys strata lawyers. He’s just successfully run a case at the Building Appeals Board which has ruled that running serviced apartments in the Watergate building in Melbourne’s Docklands contravenes the Building Code of Australia.

The City of Melbourne council had issued orders against Docklands Executive Apartments (DEA), a serviced apartments operator, after the owners’ corporation of the 350-unit Watergate building complained about party noise, damage to common property, fighting, smoking, and tampering with fire exits, fire extinguishers and lifts over a three-year period. DEA appealed, claiming short-stay and serviced apartments were a permitted use of a residential building.

“The BAB has determined that serviced apartment activities are not permitted in purely residential buildings in Victoria,” says Mr Bacon. “In theory, because this case involves the interpretation of the Building Code of Australia, this is a landmark decision throughout all states, not just Victoria.

“Obviously, DEA could bring an appeal in the Supreme Court,” he adds. But in the meantime this case may have ramifications for other buildings in Australia experiencing similar issues with serviced apartments.
The serviced apartment dispute that has divided Docklands will continue on to the Supreme Court.

Appeal

Bethany Williams – Docklands News
April 4th, 2013

The Building Appeals Board (BAB) last month dismissed Docklands Executive Apartments’ (DEA) appeal against a building order issued by the City of Melbourne in 2011. But the serviced apartment community has rallied around DEA operator Paul Salter and will launch a Supreme Court action.

Around 50 operators from Melbourne and beyond attended a meeting arranged by industry group VicShortStay in NewQuay last month and agreed to continue the fight. By Easter the group had raised more than 65 per cent of the $200,000 needed to fund the court action. It has appointed legal counsel but, as Docklands News went to print, had not lodged its case with the Supreme Court. The move follows the release of the BAB’s determination on March 22, which affirmed the decision of council to issue building orders against owners of serviced apartments in the Watergate building.

The Watergate building is a Class 2 residential building according to the Building Code of Australia (BCA), but council has argued that serviced apartments fall within the Class 3 classification, usually reserved for hotels and rooming houses. The building orders issued by council in 2011 ordered Watergate serviced apartment owners to comply with building regulations applicable to Class 3 buildings or to cease trading. It is widely accepted that the cost of converting a serviced apartment to comply with Class 3 regulations would make operating serviced apartments unviable.

Yezz Pty Ltd, which operated as Grand Harbour Accommodation, and DEA appealed the building orders at the BAB. The Watergate Owners Corporation also joined the case in support of council. Yezz Pty Ltd withdrew from the case in November last year and has ceased operations at Watergate. The determination issued by the BAB last month was based on the interpretation of the BCA and specifically the term “dwelling”. The BCA defines Class 2 as “a building containing two or more sole-occupancy units, each being a separate dwelling”.

According to the determination, the panel formed the view that the term “dwelling”, as it is used in the Class 2 definition, did not only refer to physical characteristics required by building codes but also to a sense of connection by the occupants. The panel found that the operation of serviced apartments in the Watergate building was not a use permitted under the existing occupancy permit for Class 2 and constituted a change of use. The panel agreed that council’s municipal building surveyor was correct in classifying the subject apartments as Class 3 due to the apartments use for short-term stays and, therefore, dismissed the appeal.

Watergate Owners Corporation chairperson Barbara Francis, who gave evidence during the hearings, said she was delighted and relieved at the outcome. Watergate building manager Marshall Delves, who also gave evidence at the hearings, agreed and said the decision was a credit to everyone at Watergate. “It’s the hard work of the Watergate staff and Owner’s Corporation committee that started two years ago that has brought about this result,” Mr Delves said. Mr Delves said Watergate had opened it up for all other buildings in Melbourne to see what could be achieved. Former Arkley Owners Corporation chairman and committee member Roger Gardner said the verdict was a big step forward in combating the problems relating to serviced apartment in Docklands and that the decision had wide ramifications. Serviced apartments in Docklands could be under threat if the Supreme Court action is unsuccessful as it could pave the way for council to issue building orders against other serviced apartment owners. Docklands Private Collection of Apartments operator Peter Kelly said NewQuay would struggle without serviced apartments. Apart from the affect on Docklands’ tourism trade, Mr Kelly said the demise of serviced apartments would also have implications.  “I can’t comprehend people who live here who don’t understand what 400 serviced apartments coming on to the market will do to apartment values,” Mr Kelly said.

The outcome of the case could also have implications throughout Melbourne and Australia because it pertains to a national building code. “I can’t comprehend people who live here who don’t understand what 400 serviced apartments coming on to the market will do to apartment values,” Mr Kelly said. The outcome of the case could also have implications throughout Melbourne and Australia because it pertains to a national building code.

Court Quashes regulator ban on short-stay leases

Simon Johansen – Property Editor for the Age , Melbourne
June 1st, 2013

The Supreme Court has overturned a decision by the building industry regulator that banned short-term tenants from occupying apartments in residential buildings.

The regulator’s decision banning short-stay occupants – such as holidaymakers, schoolies or hen and bucks nights – had been welcomed by aggrieved apartment residents who commonly blamed them for rowdy behaviour and property damage.

On Thursday the Supreme Court overturned the Building Appeals Board’s decision after Paul Salter, the owner of short-stay business Docklands Executive Apartments, appealed.

In 2011, the City of Melbourne issued Mr Salter with a contravention notice because he was leasing three units in Melbourne’s 350-apartment Watergate building to short-stay occupants, typically for four days or less.

He was banned by the board in March from renting out the units after he was found to be breaching The Building Code of Australia (BCA). The BCA is a national code so the decision set a national precedent.

The board ruled that short-term leasing was a change in the building’s use and not allowed in residential buildings described as class two under the building code. It said short-stay apartments fell within the class-three building classification, usually reserved for hotels and rooming houses.

But in his decision, Supreme Court Justice David Beach said there was no evidence short-term stays constituted a “change of use” in a building.

“The decision of the Building Appeals Board made on 22 March 2013 must be quashed and the appeals remitted for rehearing and determination in accordance with law,” Justice Beach said.

It was not the court’s function to determine “the desirability of apartments, in apartment complexes, being let out for short-term use,” he said.

Short-stays are an ongoing point of conflict between dwelling owners and nearby residents.

At least four owners’ corporations across Australia were looking to take action against short-stay operators in the wake of the board’s decision.

Justice Beach ordered the appeals to be reheard by a differently constituted Building Appeals Board and awarded costs against the City of Melbourne.

No decision on VCAT hearing

Docklands News
December 20th, 2013

Short-term apartment operators believe induction procedures introduced at the Conder building earlier this year are discriminatory, the Victorian Civil and Administrative Tribunal (VCAT) heard last month.

In February, the Conder Owners Corporation made pool, sauna and gym induction mandatory, citing advice from its insurer.

At the hearing on November 11 the OC’s lawyer Mitch McKenzie told VCAT the introduction of the new procedures was proper and appropriate

Residents of the building are required to complete an induction before being given swipe access to the facilities.

Short-term residents are only able to use the facilities after completing one of the induction sessions held each Monday morning. Operators opposing the induction rule at VCAT say this is impractical for short-term residents.

Metro Real Estate is a MAB Corporation business, which trades as Grand Mercure Docklands out of the Conder, and is acting for around 200 lots in the VCAT action.

During the VCAT hearing last month, Metro’s lawyer Robert Hay said the induction procedures were “clearly discriminatory”.

Mr Hay referenced a Court of Appeals decision, which said, in exercising its power, an OC must not operate in a way that unfairly discriminates.

He said it was “absurd” that the induction process allowed visitors of inducted long-term residents to use the facilities but prevented short-term residents and their guests from using them.

“So you are in a better position if you are the guest of a long-term resident than if you are a short-term resident,” Mr Hay said.

Mr Hay also referred to the insurance document the Conder OC relied on when passing the resolution for the induction procedures.

He said the insurance document was dated April 2011, but the meeting where the resolution was passed was not until December 6, 2012. He said residents were not advised of the induction procedure until January 31, 2012, suggesting there was no urgency about the matter.

Short-stay operator Lyn Kelly said she believed the introduction of induction procedures at the Conder had nothing to do with insurance.

Lyn and Peter Kelly manage Docklands Private Collection of Apartments and, when they launched VCAT action personally (independent of their business) owned one apartment and managed four apartments at Conder.

Since launching the action, they have sold their apartment and now manage just two apartments in the building.

“I feel this is all about the serviced apartment business,” Ms Kelly said.

But the Mr McKenzie said the rule restricting access to the gym, sauna and pool was proper and appropriate.

He said it flowed from the rule that allowed body corporates to ensure safety and security of common property.

“There’s an unfortunate tension and it’s been read as if it’s intended to make things difficult for short-term residents,” Mr McKenzie said.

He said people would be differently affected by the rules and it was unfortunate that short-term users may be affected.

He said there was already discrimination inherent in the existing arrangement in so far as children and non-residents not being allowed to use the gym.

The parties have been granted temporary access to the facilities until a decision is reached by VCAT.

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