Roundup: Why the Law Lords’ ruling on Airbnb really matters

Just when I thought I was going to get to 2018 without mentioning Airbnb again, the Privy Council in London goes and stuffs things up – but in a good way.

As other posts on this website (and this story in the SMH) reveal, Law Lords in the UK have unanimously ruled that a residential-only apartment block on a tiny island in the Caribbean can set by-laws restricting short-term letting.

Coupled with a similar ruling in WA’s Appeals Court in June last year, it blows a hole right through any argument that, if you live in a block zoned residential, you can’t have a by-law restricting short-term letting.

Hang on! A ruling in London on a dispute in the Caribbean? Are you serious?

If you can bear to read on, I will explain exactly how this distant ruling could and should have a devastating effect on holiday letting here in Australia.


The latest from the Flat Chat mailbox.  Wot, no Christmas cards!?!

  • Is there a rule restricting levy rises to no more than 10 percent?  THAT’S HERE.
  • Can the strata committee prevent me from giving my garage to a non-resident friend? THAT’S HERE.
  • Can an owner buying 75 percent of units in my block force me to sell mine? THAT’S HERE.
  • Do I have to install regulation height balustrades when I am on the ground floor? THAT’S HERE.

We’re hoping you’re enjoying your Christmas break – or maybe you are just getting to know your neighbours’ little foibles.  Either way, we’re still here if you need us. Merry Christmas.


First off, to be fair, the Privy Council ceased to be the highest court of appeal for Australia in 1986. And the case was in the Turks and Caicos Islands, for heavens sake.  Do you even know where that is? So why would we even care?

Quite simply, we care because the law they were ruling on is identical to the one that is used by Airbnb, and anybody else who wants to turn our apartment blocks into hotels, to say we can’t have by-laws restricting short-term lets.

NSW strata laws were copied, pasted and adopted as the Turks and Caicos laws back in 1971.  And that section – currently Section 139 (2) of the NSW strata Act – has been carried forward here in Australia, in almost identical form from the very first strata laws back in 1962.

A by-law that simply reflects zoning isn’t
‘operating to prohibit or restrict’ anything
.

It says: “No by-law is capable of operating to prohibit or restrict the devolution of a lot or a transfer, lease, mortgage or other dealing relating to a lot.”

Now, I am not a lawyer but that seems pretty clear: you can’t mess with an owner’s legal right to do what they want with their property.

However, it seems to me that their Lordships in London have ruled that, if an apartment block is zoned residential-only, the legal right to short-term letting no longer exists.

Therefore a by-law that simply reflects the restrictions imposed by zoning isn’t ‘operating to prohibit or restrict’ anything. Your “right” to let your apartment to tourists, football parties and bucks weekends has already been taken away by your local council.

Or, to put it another way, we don’t have the right to ignore our zoning, so a by-law that follows the council rules neither restricts nor prohibits us. Get it?

Now, Section 139(2) has been cited by all and sundry as the reason why we have to let Airbnb loose in our homes.  The ill-fated and deservedly ignored parliamentary report into holiday letting in NSW, released last year, admitted holiday letting had a more profound impact on apartment blocks, but then blithely cited 139(2) as a reason for ignoring that fact.

Down in Victoria, where the Labor government invited Airbnb to help them draw up new holiday letting laws, 139(2) was also hailed as an indication of whether apartment owners who bought residential properties should have to tolerate them being turned into weekenders for yobbos and, every two years, outriders from the Barmy Army.

Meanwhile, in Sydney, last year one Member of the Civil Administration Tribunal (NCAT) threw out a by-law which sought to restrict a teacher who was letting her apartment on Airbnb, again citing 139(2).

Now there are a number of issues with this, firstly, it’s been claimed that the Tribunal Member did not take into account either the block’s “residential only” zoning or a legal precedent from WA that said, as did the Law Lords, that 139(2) or its equivalent did not apply.

 

Fair Trading  doesn’t make rulings or decide
disputes and frequently gets things wrong
.

We’ll get back to the WA ruling in a minute, but first it has been pointed out that the specific by-law in the above case was too restrictive in other ways – partly because it had attempted to cover all the bases – and a simpler rule might have been upheld.

But that’s all speculation.  Airbnb has said that the Privy Council ruling is irrelevant and they would rather go by the Tribunal finding in the above case and the statement issued by Fair Trading last year that by-laws couldn’t restrict holiday letting. Of course they would.

So let’s deal with Fair Trading first.  Fair Trading is, at best, an advisory body.  They don’t make rulings, they don’t decide disputes and, it has to be said, they frequently get things wrong. They don’t even discipline strata managers who have screwed up – even though that is supposed to be one of their jobs.

In short, they are a talking shop and their views on anything should be considered with that in mind. When they are proved wrong, they just amend their fact sheets and  plough on as if nothing had ever been said.

As for the Tribunal decision.  Unlike findings from superior courts, basic level tribunal rulings in NSW may not be considered as a legal precedent, even in other tribunal cases.

So much for Airbnb’s depending on them for supporting their view that by-laws have no legal basis.

Now, getting back to the Appeals Court in WA – that jurisdiction’s highest court and the one that Airbnb prefers not to reference. Its rulings definitely should be considered in any case in an ‘inferior” court in other states.

The case in question was where an owner had been letting his apartment to holidaymakers, some for periods as short as four days, in defiance of a by-law saying he couldn’t. He appealed all the way to the WA Supreme Court and lost at every stage.

It’s worth noting, by the way, that the block wasn’t even residential-only – it was zoned mixed use residential and commercial.

So then he took it to the Appeals Court – the highest in the state – citing three grounds, one of which was that the by-law contravened section 42(3) of the WA Strata Titles Act, which says this:

No by-law, amendment or repeal of a by-law is capable of operating so as to prohibit or restrict the devolution of lots or any transfer, lease, mortgage or other dealing therewith or to destroy or modify any easement implied or created by this Act. 

Sound familiar?  It’s basically the same as the provision as we have in our Act and which was bounced by the Privy Council in London.

Sooner or later you have to listen to wiser counsel,
wherever in the world it comes from

Now, if you have a couple of days to spare – or suffer chronic insomnia – you can read the entire Appeals Court ruling here.  A lot of it covers the earlier cases and includes legal discussions about the meanings of terms such as “residential” and “occupier’.

But right at the end, it rejects the appeal on the grounds that Section 42(3) doesn’t overturn the by-law.

So, what do you reckon?

Airbnb thinks the opinions of Fair Trading – which has no legal standing – and an entry-level tribunal that can’t create legal precedents, are more significant than the highest court in WA and the highest court in the British Commonwealth, both ruling on a provision that exists in our statutes.

Airbnb hosts and other short-term landlords are being encouraged to break the law on that basis, and owners corporations are being discouraged from creating by-laws by similarly flawed arguments.

Time to wise-up, folks.  Vested interest will twist the letter of law this way and that, if it means they can make a few extra bucks.

But if you are in a residential only building and are thinking of introducing a by-law restricting short-term letting, sooner or later you have to listen to wiser counsel, wherever in the world it comes from.

 

 

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