Supreme Court sets precedent for short term rentals

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A Victorian Supreme Court ruling could have dire consequences for owner’s corporations across the country

The ruling, handed down late last week, effectively bans owners corporations from preventing dwellings in a strata agreement from being used as short term rentals.

The ruling came after the owners committee Watergate Apartments, a Melbourne apartment complex, appealed against a Victorian Civil & Administrative Tribunal (VCAT) ruling from September 2015 that was in favour of Paul Salter and Belinda Balcombe who lease a number of units in the complex on a short-term basis.

The owners committee originally took Salter and Balcombe, who operate their short-stay properties under the business name Docklands Executive Apartments, to VCAT seeking an order to have them prohibited from operating in the complex claiming a strata by-law prohibited apartments in the building from being let for a period less than a month.

The owners committee also cited concerns about security, damage to common property and loss of amenity.

The appeal top VCAT proved unsuccessful, with the Tribunal finding that the body corporate did not have the power to enact such a bylaw to prohibit short term letting.

The owners committee then appealed that decision to the Supreme Court, but were again unsuccessful, with Justice Peter Riordan finding the by-law to prohibit short term letting was made outside the scope of powers given to the committer by legislation in Victoria.

“In my opinion, the prohibition of businesses generally and specifically businesses related to Short-Term Letting exceeded the scope of what was intended by the Parliament in enacting the Owners Corporations Act 2006,” he said.

Justice Riordan said as long as owners comply with relevant legislation in Victoria they should not be prohibited from operating short-term rentals.

“It can be accepted that compliance with the Planning and Environment Act 1987 (Vic) and the Building Act 1993 (Vic) allows the respondents to use their lots for Short-Term Letting.”

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