Insights

In brief: Reforms introduced by the NSW Government including new registration and regulatory requirements may reduce the number of listed properties on short-term letting platforms.

Reforms introduced by NSW Government provide new regulatory framework for short-term letting platforms

On 21 August 2018 the Fair Trading Amendment (Short-term Rental Accommodation) Act 2018 (NSW) was assented to in NSW. The reform package introduced by the NSW Government is intended to provide a new regulatory framework to govern short-term holiday letting, such as Airbnb and Stayz. The legislation will be in addition to new planning laws that are yet to be introduced, which will further regulate short-term holiday letting. 
 
The reforms amend two pieces of legislation:
  • the Fair Trading Act 1987 (NSW); and
  • the Strata Schemes Management Act 2015 (NSW).
The reform introduces three key items:
  1. a code of conduct for the short-term rental accommodation industry;
  2. a registration system of premises used for short-term rental accommodation; and 
  3. reforms to strata management powers to allow for prohibition of certain lots to be used for short-term rental accommodation. 

Code of conduct for the short-term rental accommodation industry

The introduction of an industry code of conduct for short-term rental accommodation arrangements will most likely be introduced in 2019. The code will certainly have an effect on the short-term letting market. 

Short-term rental accommodation arrangements are defined under the Act as a commercial arrangement giving a person the right to occupy residential premises for a period of not more than three months at any one time. The code of conduct will apply to letting agents, hosts and guests.
 
Importantly, the code of conduct will prevail over development consent conditions imposed under the Environmental Planning and Assessment Act 1979 (NSW). 

Although the code of conduct has not yet been introduced, the government has stated it will introduce the following:
  • a 'two strikes and you're out' policy, meaning that hosts or guests who commit two serious breaches of the code of conduct within two years will be banned for five years;
  • a serious strike will include any behaviour which unreasonably interferes with a neighbour's quiet and peaceful enjoyment of their home;
  • a complaints system, to be assessed by independent and impartial adjudicators approved by the Commissioner for Fair Trading, which will be available to neighbours of short-term holiday letting premises, strata committees and owners corporations; and
  • platforms and property agents will have to check the complaints register before taking on new customers.
A "serious breach" is expected to be further defined in the code of conduct to be introduced in further regulations as this concept is currently not dealt with in detail in the Act. It is noted that the maximum fine available for contravening the code of conduct is $110,000 for corporations and $22,000 for individuals. 

Reforms to strata management powers to restrict short-term holiday letting

The reforms have also amended the Strata Schemes Management Act 2015 (NSW) to enable owners corporations to pass by-laws prohibiting a lot being used for the purposes of a short-term rental accommodation arrangement.

The option is now open to developers to restrict short-term rental arrangements for investment properties in developments from the initial registration of a scheme (noting that properties that are principal places of residence are outside the reach of the Act).

For existing schemes, owners corporations can only pass such by-laws by way of a special resolution, which requires 75% of the vote of the owners corporation. As above, such by-laws may only be passed if the lot being used for short-term rental accommodation is not the principal place of residence of the host. 

New planning laws to govern short-term holiday letting in NSW

The NSW Government has also indicated that new planning laws will be introduced to further govern short-term holiday letting. The intended laws will provide that if a host is present then they may use their home for short-term holiday letting all year around as an exempt development.
 
When the host is not present, the residence may only be used for short-term holiday letting up to 180 days in Greater Sydney. The 180 day limit does not apply to any other areas of NSW, although local councils outside Greater Sydney will have power to impose limits no less than 180 days per year.

Calling last drinks on tax breaks for hosts?

We have previously reviewed the impact of Airbnb on the hotel industry and noted the lack of regulation neutrality between short-term holiday accommodation and traditional hotelier and hostel accommodation. Arguably, the current reforms will be welcomed by the market as a way of evening the regulatory playing field and fostering greater parity in the market by reducing the short-term letting stock available.
 
However, in our view short-term letting properties and hotels remain inherently different so therefore may continue to operate in their own respective market segments without too much overlap of guests. However, the new registration and regulatory requirements imposed on Airbnb hosts may reduce the amount of listed properties on the short-term letting platforms. Further, the Australian Taxation Office may view these new regulatory changes with interest, as the ability of Airbnb hosts to operate a small business largely 'under the radar' of the Australian Taxation Office may now begin to be eroded as hosts will be identifiable under the new registration regime to be administered by NSW Fair Trading.

This article has been published by Colin Biggers & Paisley for information and education purposes only and is a general summary of the topic(s) presented. This article is not specific legal advice. Please seek your own legal advice for any questions you may have. All information contained in this article is subject to change. Colin Biggers & Paisley cannot be held responsible for any liability whatsoever, or for any loss howsoever arising from any reliance upon the contents of this article.​

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