Posted on April 12, 2021 by Sophia Urlich and Carlo Zoppo

NSW Government Finalises Regulatory Framework for Short-term Rental Accommodation

UPDATE 14 April 2021 – Following its receipt of significant feedback from key stakeholders, including local Councils, regarding the timeline for the introduction of the new regulatory framework for short-term rental accommodation discussed in this post, the State government has delayed the date for implementation by 3 months to 1 November 2021. We will keep you informed of any further changes.

Following some delay relating to the COVID-19 pandemic, the State government has finalised its regulatory framework for the short-term rental accommodation industry (STRA Industry).

The framework is proposed to come into force in full throughout NSW by the end of January 2022.

On 18 December 2020, the mandatory Code of Conduct for the Short-term Rental Accommodation Industry (Code of Conduct) commenced. On 9 April 2021, the Environmental Planning and Assessment Amendment (Short-term Rental Accommodation) Regulation 2021 (EPA Amendment Regulation) and the State Environmental Planning Policy (Affordable Rental Housing) Amendment (Short-term Rental Accommodation) 2021 (STRA SEPP) were published, with each set to commence on 30 July 2021.

Code of Conduct

The Fair Trading Amendment (Code of Conduct for Short-term Rental Accommodation Industry) Regulation (No 2) 2020 (STRA Regulation) was published on 28 October 2020, and commenced on 18 December 2020. It declared the Code of Conduct for the purposes of s54B of the Fair Trading Act 1987 (Fair Trading Act).

Application of the Code of Conduct

The Code of Conduct applies to ‘short-term rental accommodation industry participants’ as defined in s54A of the Fair Trading Act.

The STRA Regulation prescribes an additional class of persons to whom the Code of Conduct applies, being persons who provide ‘property management services’ for residential premises subject to a ‘short-term rental accommodation arrangement‘. Such services are defined to include creating listings, rental pricing, guest vetting, and communications and check-in services: see cl11B(2), STRA Regulation.

Short-term rental accommodation arrangements‘ are defined in s54A of the Fair Trading Act. However, the STRA Regulation clarifies that the Code of Conduct will not apply to the following arrangements, which are expressly excluded from the definition of a ‘short-term rental accommodation arrangement‘:

  • tourist and visitor accommodation, including backpackers’ accommodation, hotel or motel accommodation and serviced apartments;
  • registrable boarding houses;
  • holiday parks;
  • refuge or crisis accommodation;
  • disability accommodation; and
  • temporary accommodation provided or funded wholly or partly by the Department of Communities and Justice.

Appeals against listings on exclusion register

The Code of Conduct enables the Commissioner for NSW Fair Trading to record the details of a host, their premises, or a guest on a publicly accessible exclusion register if they fail to comply with the Code of Conduct. When a person’s details are listed on the exclusion register, that person will be prohibited or restricted from participating in the STRA Industry (see cl4.2, Code of Conduct).

The STRA Regulation allows for a person whose details are listed on the exclusion register to appeal to the Secretary of the Department of Customer Service to have their details removed from the register: see cl11D, STRA Regulation.

Imposition of fees and penalties 

The STRA Regulation provides that the Secretary of the Department of Customer Service may impose fees on STRA Industry participants, for the purposes of recovering the costs incurred in connection with the enforcement and administration of the Code of Conduct.

In relation to penalties, the STRA Regulation specifies that:

  • the maximum monetary amount that may be imposed on a short-term rental accommodation industry participant who breaches a civil penalty provision of the Code of Conduct is 10,000 penalty units (equal to $1,100,000) for a corporation, and 2,000 penalty units (equal to $220,000) in any other case; and
  • the contravention of an offence provision of the Code of Conduct may be dealt with by way of penalty notice.

Section 54C of the Fair Trading Act further provides that the maximum monetary amount that may be imposed for the contravention of an offence provision of the Code of Conduct is 1,000 penalty units (equal to $110,000) for a corporation, and 200 penalty units (equal to $22,000) in any other case.

Register of residential premises used by STRA Industry

Section 54B(2)(c) of the Fair Trading Act provides that a code of conduct may ‘provide for the registration of residential premises used for the purposes of short-term rental accommodation arrangements and for the registration system to include details about when residential premises are used for those purposes‘.

In the Code of Conduct, ‘short term rental accommodation premises register’ or ‘premises register’ means ‘the register of short-term rental accommodation hosts and premises administered by the Department of Planning, Industry and Environment’. 

EPA Amendment Regulation

The EPA Amendment Regulation amends the Environmental Planning and Assessment Regulation 2000.

It introduces a new Short-term Rental Accommodation Fire Safety Standard which sets out the minimum fire safety and evacuation requirements for dwellings used for the purpose of short-term rental accommodation, and requires the Planning Secretary to establish and maintain on the NSW Planning Portal a register of dwellings used for the purpose of short-term rental accommodation, as provided for in the Code of Conduct. In particular, the register is to include a description of how a dwelling used for the purpose of short-term rental accommodation complies with the new fire safety standard: see cl186X(2)(e), EPA Amendment Regulation.

A person who proposes to provide a dwelling for the purposes of short-term rental accommodation must apply to the Planning Secretary for the dwelling to be registered on the register and pay a $65 registration fee: see cl186X(4), EPA Amendment Regulation.

The registration of a dwelling may also be renewed for a fee of $25: see cl186X(7), EPA Amendment Regulation.

Registration, including the renewal of a registration, will remain in force for a period of 1 year: see cl186X(6), EPA Amendment Regulation.

A maximum penalty of 20 penalty units (equal to $2,200) will apply if a person provides a dwelling for the purpose of short-term rental accommodation, but the dwelling is not included on the register and the registration is not in force: see cl186X(3), EPA Amendment Regulation.

STRA SEPP

The STRA SEPP inserts a new Part3A in the State Environmental Planning Policy (Affordable Rental Housing) 2009. 

In cl51B of the  STRA SEPP, ‘hosted short-term rental accommodation‘ is defined as where the host resides on the premises during the provision of accommodation and ‘non-hosted short-term rental accommodation‘ is defined as where the host does not reside on the premises during the provision of accommodation.

Under the STRA SEPP, development for the purpose of:

  • hosted short-term rental accommodation‘ is classified as exempt development if meets the requirements under cl51E, and
  • non-hosted short-term rental accommodation‘ is classified as exempt development if it meets the requirements under cl51D and cl51E.

The general requirements for short-term rental accommodation under cl51E are:

  • the dwelling must have been lawfully constructed to be used for the purpose of residential accommodation; and
  • the dwelling must comprise or be part of residential accommodation other than a boarding house, group home, hostel, rural workers’ dwelling or seniors housing; and
  • the type of residential accommodation the dwelling comprises or is part of must be permitted with or without development consent on the land the dwelling is located on; and
  • the dwelling must be registered on the register established under cl186X of the EPA Amendment Regulation; and
  • the dwelling must not be or be part of refuge or crisis accommodation provided by a public or local authority (including the Department of Communities and Justice, the New South Wales Land and Housing Corporation or the Aboriginal Housing Office) or any other body funded wholly or partly by the Commonwealth or the State; and
  • if the dwelling is classified as class 1b or 2-9 under the Building Code of Australia, the dwelling must have a current fire safety certificate or fire safety statement, or have no fire safety measures currently implemented, required or proposed; and
  • the use of the dwelling for the purposes of short-term rental accommodation must otherwise be lawful (it is noted in particular that adjoining owners’ property rights, the applicable common law and other legislative requirements for approvals, licences, permits and authorities still apply); and
  • the dwelling must not be a moveable dwelling within the meaning of the Local Government Act 1993. 

In addition to the requirements under cl51E, a dwelling in a prescribed area must not be used for ‘non-hosted short-term rental accommodation’ for more than 180 days in any 365 day period; however, any period of 21 consecutive days or more for which ‘non-hosted short-term rental accommodation‘ is provided to the same person(s) is not to be counted in calculating the number of days the dwelling is used for that purpose: see cl51D(1)(b) and (c), STRA SEPP.

It is noted that Part3A will not apply to the Byron local government area until 31 January 2022: see cl51F, STRA SEPP.

We have previously blogged about the introduction and passing of the Fair Trading Amendment (Short-term Rental Accommodation) Bill here and here, the passing of the Fair Trading Amendment (Code of Conduct for Short-term Rental Accommodation Industry) Repeal Regulation 2020 here, and proposed amendments to relevant planning legislation and regulatory instruments here and here.

The STRA Regulation can be viewed here, the Code of Conduct can be viewed here, the EPA Amendment Regulation can be viewed here, and the STRA SEPP can be viewed here.

To discuss this post, please contact Carlo Zoppo on 02 8235 9705 or Sophia Urlich on 02 8235 9708.