Since the rise of AirBnB, many communities have felt the deleterious effects of short term letting. Conversely, a lesser publicised but equally important issue has stayed in the industry for longer: buildings developed for short term accommodation having to contend with long term tenants.

Bodies corporate are frequently told that they cannot restrict how long a person resides in a lot, so it is not an issue that should concern a body corporate beyond making and enforcing by-laws to regulate what people do when in residence.  In other words, the body corporate should only be concerned with the behaviour of residents and guests once they are there, rather than trying to stop them from coming in the first place.

If short and long term occupation of lots in a residential building are not incompatible, why do planning authorities specifically zone parts of a local government area for these different types of use?

We will explore this controversial and often misunderstood area of strata law and discuss what bodies corporate can and can’t do.

 

Overview

There are many strata communities in Queensland that are used for both long term residential living and short-term accommodation. Inevitably, disputes have arisen in these communities where the interests of permanent residents and holiday-makers are not aligned.

The current view of the law under the Body Corporate and Community Management Act 1997 (Qld) (BCCMA) is that a body corporate cannot restrict short term letting in the by-laws. However, a body corporate can better manage short term letting by imposing more stringent obligations on owners letting a lot for short term stays and on the behaviour of the guests.

When the BCCMA was created in 1997, its stated objects included promoting economic development, encouraging tourism potential in the strata industry and providing an appropriate level of consumer protection for owners and intending buyers.  Those objects show that the government did not want the relatively new emergence of strata titling to discourage people from having the confidence of buying into a development at the risk of some “body corporate” telling them what they could and could not do with their property.

But those objects were to be balanced with other important ones, such as providing:

• a framework to accommodate future trends in community titling; and
• bodies corporate with the flexibility they need to accommodate changing circumstances within their schemes.

In the 1990’s, if someone wanted to go on a holiday, they stayed in a hotel that had a front desk and staff on hand able to immediately deal with unruly guests.  Queensland also took the unique path of establishing a management rights industry that allowed a business to secure the advantage of residing onsite to exclusively run that letting business.  It was said that having a resident manager would give everyone the comfort of knowing that they could deal with unruly tenants at all hours of the night in much the same way as a hotel.

Hotels and management rights are still a key feature of Queensland’s tourism industry.  But who in the 1990’s could have imagined that that just two decades later someone could book holiday accommodation with the click of a button of a mobile device kept in their pocket and all they would need to do to gain entry to the room would be to know the pin code of a keysafe that would be attached to the side of the building?

The circumstances of the strata industry have changed remarkably, but Queensland’s strata legislation has not allowed bodies corporate to keep pace.

 

The by-laws

A body corporate has the ability to regulate the use and enjoyment of lots through the scheme’s by-laws, but this is subject to certain limitations imposed under section 180 of the BCCMA.[1]

Numerous adjudicators have considered this issue when bodies corporate have attempted to restrict the way in which a lot may be used by imposing a minimum length on the term of any lease, and the overall consensus is that by-laws restricting leasing in any way are invalid.[2]

The current position under the BCCMA is that short term accommodation and/or holiday letting is:

1. a type of residential use; and
2. a form of a lease,

that cannot be prevented or restricted by a by-law under the BCCMA.[3]

Conversely, the same argument applies to a building purpose-built for short term accommodation – a by-law can not be made restricting long-term tenancies.

In Hilton Park[4], the Queensland Civil and Administrative Tribunal (QCAT) found that the legislature had intended for the term ‘residential’ to include holiday letting/short term accommodation and that imposing a restriction on holiday letting through the by-laws would contravene section 180(4) of the BCCMA because it restricted a ‘dealing’ with a lot.

The position is different for those communities that are still governed under the Building Units and Group Titles Act 1980 (Qld) (BUGTA), due to the decision in Fairway Island. A detailed review of that decision is available here.

In that case, the District Court of Queensland upheld the validity of a by-law that restricted the use of a lot for a rental period of less than one month. His Honour Judge Barlow QC found that:

“Short-term use of a house by holiday makers or other persons seeking short-term accommodation is different from longer term residential use, even though it may be difficult to draw a clear dividing line. In its ordinary meaning, to use a building for a residential purpose does not include using it for the purpose of letting it out to others (and those others using it) for holidays or other temporary accommodation.”[5]

It was also successfully argued that a ‘dealing’ is a particular transaction that involves registration of a lease under the Land Title Act 1994 (Qld), which short term letting arrangements are not.  The District Court held that short term letting arrangements were in fact licenses.[6]

The Court was able to come to this conclusion because the BUGTA does not prevent a by-law from restricting the type of residential use in (see section 180(3) of the BCCMA) and the Court could look at the ordinary meaning of “residential”, which was not defined in the BUGTA or the by-laws.

That was not the case in Hilton Park, and the position established in that decision remains uncontested. So, for communities governed by the BCCMA, Hilton Park will remain the law (unless it is challenged or distinguished), and it will not be possible to restrict the term of letting through the by-laws.

If a body corporate cannot restrict short term letting under the by-laws, it could certainly look to regulate the activity in some other way.  If the scheme has issues with the penthouse being let for parties, the body corporate may be interested in making a by-law that restricts the number of occupants per lot.  If the swimming pool is being used by holiday makers until all hours of the night, it could create a by-law to regulate the opening and closing time of the swimming pool and place a lock on the gate.  If people are abusing the right to use the barbeque areas, it could create a by-law to prohibit the use of glass and create a booking system to better manage the use of the facility.

But the problem with limiting bodies corporate to simply enforcing by-laws that regulate the behaviour of occupants is that the party may well and truly be over by the time a committee gets around to issuing a by-law contravention notice.  But even then, a contravention notice is only a precursor to lengthy and sometimes costly legal action that has to be taken in the Commissioner’s Office or the Magistrates Court before any teeth are shown.

Bodies corporate should be given the ability to better enforce the by-laws by issuing fines for continued breaches.  This a recommendation put forward in 2017 by the team charged with reviewing ways that the BCMA can be improved after considering the position in other jurisdictions.  That paper can be viewed here.   But almost three years later, that has not been introduced into legislation.

Bodies corporate that are concerned with short term stays should closely examine what issue is arising because of that and consider creating a suite of by-laws to better manage those behaviours.

If, as an industry, bodies corporate won’t have the ability to restrict the short- or long-term use of a lot altogether, then they should be afforded better rights and powers to control behaviour and meaningfully enforce their by-laws.

 

Planning and development

 If the term of occupancy can not be restricted under the by-laws, bodies corporate should consider whether the power may exist under the development approval.  This becomes a planning issue.

There are two restraints on the use of land that apply under the planning laws:

1. The development approval for the site; and
2. The planning scheme (for example the Brisbane City Plan 2014).

The City Plan determines what uses are permitted in a designated zone and the development approval lists the existing permitted uses for the premises. Certain uses require a development approval to operate lawfully as uses that constitute ‘assessable development’ under the Planning Act 2016.

One of the purposes of a planning instrument is to ensure that developments are suited to the environment and space in which they are built.  If a strata community that was developed for long term residential purposes suddenly becomes a busy hotel due to an increase in short term letting, then the environment of that community will obviously change. If that was not the intended purpose of the development, and restrictions were imposed on the development approval to prevent that, a body corporate may seek to enforce that.

Owners that allow their properties to be used contrary to the development approval are committing a development offence under the Planning Act 2016.  A development offence may be prosecuted by the local government, or affected stakeholders may seek enforcement orders in the Planning and Environment Court.  A body corporate is also able to commence enforcement proceedings by passing a special resolution.

An example of this occurred at Noosa Lakes Resort[7] which was originally approved for development of 94 townhouses with each townhouse to be occupied by to separately occupied under a dual-key configuration.  The intent was to facilitate short term accommodation because kitchen facilities were not permitted in the units.  As time passed, some lot owners preferred the predictable income stream that would come from placing long term tenants in their unit.  To make the unit more comfortable for those long-term tenants, many established kitchen facilities.  The owner of the management rights raised the obvious concern that they were trying to run a hotel operation, and they were disadvantaged by the removal of many units from the short-term letting pool because of these changes.

The local government commenced enforcement proceedings in the Planning and Environment Court and sought orders that would prevent owners from installing and using the kitchen facilities to create self-contained units. The Court found that it was a condition of the development approval that the ground floor of each unit could not lawfully contain kitchen facilities.  The order effectively restricted those parts of the units from being used for long term residential use. A copy of the full decision is accessible here.

That is why development approval/s for scheme land are important document that bodies corporate should familiarise themselves with.  If a lot is being used in contravention of that approval, complaints can be made to the local government for enforcement action to be taken.

There is a catch.  A development approval may be amended by submitting a development application for a material change of use.  If successful, the permitted use of lots in the scheme can changed.

 

Wrap up

 At least for now, bodies corporate cannot restrict short term letting unless it is not a use permitted under the development approval.  Bodies corporate need to implement a new suite of targeted by-laws to better regulate the behaviour of occupiers.

The debate around body corporate regulatory powers needs to be enlivened and the recommendations made many years ago for improvements to the BCCMA need to be implemented by the Government as a priority. Bodies corporate need more robust powers to protect their communities.  The by-law enforcement process should no longer be seen as a toothless tiger.

 

This article was contributed by Jason Carlson, Partner – Grace Lawyers

References
[1] For example, section 180(3): if a lot may lawfully be used for residential purposes, the by-laws can not restrict the type of residential use, and section 180(4): a by-law cannot prevent or restrict a dealing with a lot (which is traditionally been understood to mean a lease of any sort – incorrectly, in our view).

[2] For example see Sainte Maxime [2005] QBCCMCmr 631; Holiday North [2005] QBCCMCmr 688; Liberty [2007] QBCCMCmr 333; Bridgeport Apartments [2007] QBCCMCmr 520; Noosa Close [2007] QBCCMCmr 612; First Avenue Mooloolaba [2011] QBCCMCmr 241.

[3] Body Corporate for Hilton Park v Robertson [2018] QCATA 168 (Hilton Park).

[4] Ibid.

[5] Redman v The Proprietors – Fairway Island GTP 107328 [2020] QDC 68 at [45].

[6] Redman v The Proprietors – Fairway Island GTP 107328 [2020] QDC 68 at [38].

[7] Sunshine Coast Regional Council v Owners of Lots 1-40 on SP115731 at Noosa Lakes Resorts & Anor [2013] QPEC 13.

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