Are there any recent cases in 2016 about short stay apartments in Victoria? - Part two

Short stay accommodation

1. In the second post in this series, I will look at the attempt by the Body Corporate at the Watergate Apartments to outlaw so called ‘short stay’ use of apartments within the building complex under their control.

Body Corporate Rules – can they outlaw short stay accommodation?

2. Apparently in respect of the same operators as I wrote about in part one of this series, in Owners Corporation PS 501391P v Balcombe [2016] VSC 384, the Supreme Court of Victoria (Riordan J) (on appeal from VCAT) was called upon to decide the validity of Body Corporates rules that outlawed ‘short stay’ use of apartments within the building complex under their control.

3. Justice Riordan sets out his conclusion in summary in paragraph 1 of his reasons, as follows (emphasis added):

The main question in this appeal is whether owners corporations (previously called bodies corporate) have the power to make a rule prohibiting short-term letting of apartments. I have found that, under both the Subdivision Act 1988 (Vic) (see paragraphs [99] to [124] below), the Owners Corporations Act 2006 (Vic) (see paragraphs [145] to [188] below) and the regulations made under those Acts, Parliament did not demonstrate an intention to confer such extensive powers on owners corporations principally for the following reasons:

(a)   A review of the development of strata title legislation indicates the principal role of the body corporate or owners corporation was to manage and administer the common property of a strata subdivision.

(b)  The relevant legislation does not disclose any intention for owners corporations to have power to substantially interfere with lot owners’ proprietary rights; or for owners corporations to effectively have an unappellable right to overrule uses permitted under planning legislation.

(c)   A parliamentary intention to provide to owners corporations powers that could substantially inhibit the conduct of lot owners on their own lot would need to be expressed in clear and unambiguous language.

I have further found that the relevant rule, in this case, was not deemed to be valid by s 27(2C) of the Subdivision Act 1988 (Vic) (see paragraphs [128] to [132] below), or the transitional provisions of the Owners Corporations Act 2006 (Vic) (see paragraphs [136] to [144] below).

4. Justice Riordan then embarked on an extensive historical review of bodies corporate under the relevant Victorian property legislative enactments.

5. At paragraph 114, Riordan J concluded:

If this construction is correct, then the appellant had no power to make conduct rules and its power, with respect to conduct matters, was limited to enforcing the Standard Rules. In those circumstances … the appeal must fail.

6. Riordan J went on to examine the particular rule in question, and then determined (at paragraph 123):

In my opinion, the breadth of Rule 34 has caused it to exceed the scope of what was intended by the subdivision legislation and, in particular, the Subdivision (Body Corporate) Regulations 2001 (Vic) …

7.  And at paragraph 124:

In summary, I do not consider that the Parliament conferred powers on bodies corporate for the Statutory Purpose of substantially interfering with rights and privileges usually attendant upon freehold owners. … Accordingly, I consider that Rule 34 was not sufficiently directly or substantially connected with the Statutory Purpose to be a real exercise of the rule making power.

8.  In those circumstances, Riordan J concluded that the VCAT decision was correct, and that the Body Corporate rule that purported to outlaw short-stay letting of apartments within the building complex was invalid.

9.  As a result of this decision, it is unlikely that this will be an effective method of stopping AirBnB usage within apartment complexes in Melbourne and Docklands.

WG Stark

Hayden Starke Chambers