Short-term rulings expose cracks in strata

Recent decisions and debates about short-term letting have exposed two cracks in the façade of strata living in Australia.  The first is the changing attitude to living in apartments and townhouses which has been evolving as more people move into strata developments as a first choice rather than a last resort.  The second is the difference between the attitudes to strata living in Queensland and the southern states. Just a few weeks before the Building Appeals Board in Victoria ruled that short-term lets in residential buildings were in breach of building codes, and therefore illegal, the Australian Building Codes Board (ABCB) in Queensland rejected a joint appeal by the Home Unit Owners Association and the Australian Hoteliers Association to ban short-stay letting in residential buildings because of the effect it would have on Queensland’s property and tourism industry. You can read more about this decision, trumpeted by the Queensland branch of Strata Community Australia (the strata managers’ governing body) HERE.  The SCA describe the appeal as an “act of ignorance”, pinning their colours firmly to the mast of commercial interests rather than community building. This should come as no surprise to anyone with even the most slender knowledge of Queensland strata laws and regulations. The most obvious example of how strata developers and managers in the Sunshine State take precedence over strata owners and residents is a practice that’s enshrined in law there but is illegal in NSW and Victoria. Like the other states, Queensland forbids developers from tying the future owners of their buildings to contracts that they haven’t had the opportunity to scrutinise or approve. However, specifically excluded from this are management contracts which are not only financially beneficial to the developers, they are often over-priced and very hard to change or terminate, even under the most extreme circumstance. Recently a building in Queensland failed in a legal bid to have a management contract terminated even though the contractor had gone into liquidation and no longer provided the service.  A court decided the contract was merely an asset for sale by the liquidator to the highest bidder – hard cheese for the owners who would have to live with it. Pre-sales of contracts are just legitimized corruption.  The developer takes a hefty fee, signs up their buildings for 10 or 20 years and then hands the iron-clad contract to the apartment owners who have to not only pay the cost of the management services provided under terms they had no part in negotiating, but have to cover the manager’s cost of buying the contract in the first place. It doesn’t matter how good the management service is, there is a kickback to the developer and a headlock on the Body Corporate that are both welded in place by seriously outdated legislation. What does this have to do with short-term rentals?  A lot of residential managers in Queensland make extra money from running their rental services (often with exclusivity clauses built into their contracts).  Long-term residents frequently complain that they are treated as second-class citizens in their own homes for the simple reason that the manager doesn’t make an extra cent out of renting their units.  Sad but true. Strata managers and developers in Queensland often tell us that their strata laws are the model everyone in Australia should follow.  You can see why they would be so enamoured with them, given that the laws are skewed so heavily in their favour with barely a thought for the long-term strata owner or tenant. By the way, if you want evidence of how fundamentally flawed strata law in Queensland is, their Body Corporate and Community Management Act 1997 runs to a flabby 449 pages whereas NSW’s far from perfect Strata Schemes Management Act  is a muscular 177 pages and Victoria’s work-in-progress  Owners Corporations Act 2006 is a positively whippet thin 156 pages. Size isn’t everything, it’s true, but just searching for the word ‘contract’ in the Queensland legislation calls up a bewildering set of sub-clauses and qualifications which remind you that strata law is a like a joke – it doesn’t work if you have to explain it. Getting back to short-term lets, there was another blow to these strata parasites this week, from an unlikely source – houses used as holiday homes in the NSW Central Coast.  According to THIS STORY, the NSW Land and Environment Court has ruled that the definition of a dwelling house necessarily involved ”a degree of permanent occupancy” which was not applicable to homes let out for less than three months at a time. This is great news for local councils and resident owners that have been fighting ‘rezoning by stealth’ of some short-term letting agencies and landlords who buy into residential strata buildings then rent out their apartments like hotel rooms, to the great distress of those who live there permanently. Even when the short-term landlord have taken over control of the Owners Corporation, and given themselves permission to run short-term lets, individual owners will be able to go to council and have them declared illegal.  And while there will be squeals that this is undermining the “traditional Aussie family holiday home”  all it’s really doing is curbing the greedy exploitation of apartments for bucks nights and footie outings. As Gosford City Council is planning to do already, councils in traditional holiday areas will look at their zoning so the holiday apartments can continue to function as before. But in the inner cities, where short term lets contribute nothing to the local economy and in fact undermine the hotel trade, there’s another big stick with which to beat the bad guys. And that’s the other gap that’s appearing in attitudes to strata living – those of us who see this as the future of inner-city living will applaud these moves.  Those living in the past who still see apartment living as a poor relation, a Plan B or a temporary option for those headed for a McMansion in the Hills will wonder what all the fuss is about. May 5, 2013