James Moir of Polczynski Lawyers:
It is disappointing that this type of information is released by Government agencies. It is only partly correct.
Section 123 of the Environmental Planning & Assessment Act specifically says anyone can bring proceedings for a breach of that Act, whether or not their rights are infringed by the breach.
In the Land & Environment Court case of Dobrohotoff v Bennic, a neighbour in Gosford did exactly that. The Dobrohotoffs successfully argued that the Bennics were conducting short term letting next door without council permission, in breach of the Environment Planning & Assessment Act.
The purpose of a by-law saying something similar is that it allows owners corporation to take NCAT action for a breach, rather than the more costly Land & Environment Court action.
Further, standard by-law 18 in Schedule 3 to the 2016 Regulation (by-laws for new schemes), says:
18 Compliance with planning and other requirements: (1) The owner or occupier of a lot must ensure that the lot is not used for any purpose that is prohibited by law. (2) The owner or occupier of a lot must ensure that the lot is not occupied by more persons than are allowed by law to occupy the lot.
This shows the Government does want owners corporations to be able to take NCAT action for planning breaches. The extension of model by-law 18(1) is that an owner or occupier should not use their lot for any purpose that requires approval, without that approval.
On the issue of short term letting, I agree that a by-law banning leases of less than 3 months breaches s139(2) of the Strata Schemes Management Act 2015. However, the better short term letting by-laws do not approach the issue in that manner.
An OC can ban the type of use to which a lot is put, and this approach has been upheld by the Supreme Court in cases like Salerno (smoking) and Hamlena Pty Ltd v Sydney Endoscopy Centre Pty Ltd (medical uses).
The Court said that whilst such a by-law might reduce the pool of potential lessees and purchasers, it does not offend the prohibition on by-laws that restrict leasing and transfer. If a by-law can ban those uses, there is no reason why it cannot it can ban commercial uses such as Airbnb.
There is however one exception to this broad scope for by-laws. If an owner obtains development approval (DA) for that use, the DA “trumps” the by-law (s28 of the EP&A Act and clause 1.9A in most Local Environmental Plans).
Accordingly, if an owner obtains council approval for short-term letting or Airbnb, no by-law can prohibit it.