Posted on July 3, 2018 by Sophia Urlich

NSW Government one step closer to regulating Airbnb

The State Government has taken the first step towards regulating the short-term rental accommodation (STRA) industry and the practice of short-term holiday letting in New South Wales (NSW) by introducing the  Fair Trading Amendment (Short-Term Rental Accommodation) Bill 2018 (Bill).

The practice of short-term holiday letting raises many issues for local councils including ratepayers complaining about the conduct of tourists who affect neighbourhood amenity.

The Bill is part of a package of reforms resulting from a 2016 parliamentary inquiry into the regulation of the STRA industry and an extensive public consultation process involving the release of an options paper in late 2017, which we previously blogged about here.

The changes proposed by the Bill will work with proposed changes to the planning framework to facilitate STRA.

Short-term holiday letting is currently regulated inconsistently through the NSW planning system.

In his Second Reading Speech, the Minister for Innovation and Better Regulation, Mr Matthew Kean (Minister), indicated that the larger regulatory framework will involve the introduction of a statewide planning instrument, which will:

  • introduce a clear definition of STRA; and
  • make short-term letting a permitted use for residential premises, within certain limits.

The Department of Planning and Environment is also proposing to introduce new state-wide planning rules. The Minister for Planning and Housing, Mr Anthony Roberts, has indicated that these rules will include that:

  • when the host is present on site, STRA will be allowed as ‘exempt development’ for 365 days per year;
  • when the host is not present on site, STRA will be allowed as ‘exempt development’ with a limit of 180 days per year for hosts in Greater Sydney and 365 days per year in all other areas of NSW;
  • local councils outside Greater Sydney will be able to decrease, through their local environmental plans, the 365–day per year threshold to no lower than 180 days per year; and
  • certain planning rules will apply to properties on bushfire prone land.

As the above measures have not yet been developed or implemented, the permissibility and operation of STRA currently remains at the discretion of local councils.

The changes proposed by the Bill 

The Bill proposes to amend:

  • the Fair Trading Act 1987 to provide for a mandatory code of conduct (Code) applicable to all participants in the STRA industry; and
  • the Strata Schemes Management Act 2015 to allow strata scheme by-laws to prohibit STRA in certain situations.

A “short-term rental accommodation industry participant” is defined to include:

  • online booking service providers;
  • letting agents;
  • owners of residential premises who enter STRA arrangements (i.e. hosts);
  • persons who occupy residential premises pursuant to a STRA arrangement (i.e. guests);
  • any other person, in trade or commerce, who facilitates STRA arrangements, as prescribed by the regulations.

A “short-term rental accommodation arrangement” is defined to mean:

a commercial arrangement for giving a person the right to occupy residential premises for a period of not more than 3 months at any one time…

The regulations may also include other arrangements or exclude arrangements from the above definition.

The proposed Code 

Proposed section 54B(2) provides that the Code may:

  • set out the minimum rights and obligations of STRA participants, and provide for the resolution of complaints and disputes concerning their conduct;
  • provide a registration system for the registration of residential premises used for the purposes of STRA arrangements including details about when the premises are used for such purposes;
  • authorise the maintenance of an exclusion register containing the details of STRA participants who fail to comply with the Code; and
  • prohibit or restrict persons whose details are listed on the exclusion register from entering into, or participating in, STRA arrangements.

Of note from a planning law perspective is that the Code will also prevail to the extent of any inconsistency with the conditions of a development consent. This does not mean that the use of residential premises for STRA is authorised where that use is prohibited by an environmental planning instrument.

The proposed offences and penalties for non-compliance

The Bill creates certain offences and penalties for non-compliance with the terms of the Code by STRA industry participants.

The penalties for STRA industry participants who contravene the Code includes a penalty of up to:

  • 1,000 penalty units ($110,00.00) in the case of a corporation; and
  • 200 penalty units ($22,000.00) in the case of an individual.

The penalties also include civil penalties for contraventions which, according to the Minister’s Second Reading Speech, can be as high as $1.1 million for corporations and $220,000 for individuals.

The proposed by-laws

The Bill proposes to amend the Strata Schemes Management Act 2015 to allow an owners corporation to make and adopt a by-law that prohibits a strata lot being used for the purposes of a STRA arrangement, but only if the lot is not the principal place of residence of the person who is letting out the lot.

In his Second Reading Speech, the Minister stated that:

This approach will ensure that lot owners can let out their properties when they are on holidays or when they are present and are sharing their home. However, it will allow owners’ corporations to prevent short-term letting that is carried out on a year-round basis as a primary purpose of a property.

While the proposed provision should not prohibit owners corporations from implementing other measures relating to the governance and management of STRA within their strata properties, it indicates that the Bill aims to preserve, if not enhance, the ability of owner-occupiers of strata lots to participate in the STRA industry.

We will keep you informed in relation to developments in the larger regulatory framework, particularly the proposed measures under planning laws.

To discuss this blog, please contact Carlo Zoppo, Partner on 8235 9705 or Sophia Urlich on 8235 9708.