It has become very common for vendors to advertise properties as ‘perfect for AirBnB or short-term rental’. But very often this is being done without a proper understanding of the legal position of short-term letting in NSW. In short, there is much uncertainty and complexity surrounding the issue. The NSW Government is presently considering feedback it has received and is expected to publish a response soon which may address this problem.
Technically, Local Councils regulate short-term holiday rentals under their respective Local Environment Plans (LEPs), an authority delegated to them under section 72 of the Environmental Planning and Assessment Act 1979. Most LEPs are fairly uniform however the way that the individual Councils interpret a particular ‘AirBnB use’ will vary from Council to Council, as outlined below.
(a) Renting rooms or part of the house
Where the AirBnB advertisement is for a particular room(s) within a house or part a house, the question is likely to be whether the use is as ‘bed and breakfast‘ or ‘short-term tourist accommodation‘ – either use for which may be:
- permitted without need for consent; or.
- permitted with consent; or
- prohibited all together.
For example, we have seen some Councils regard AirBnB as ‘Bed and Breakfast’ which, depending on the zoning, is often permitted without consent but, more regularly, is permitted only with consent i.e. requiring a development application.
However we are aware of other Councils who have applied a strict definition to the term ‘Bed and Breakfast‘ as requiring the supply of breakfast (or at least common cooking facilities) and an onsite manager. Most AirBnBs do not fit this criteria and so are deemed ‘short-term tourist or visitor accommodation on a commercial basis‘. Generally speaking, this particular deemed use of properties is more likely to require Council approval and sometimes is prohibited all together.
It is important to note that, even if the classification that Council gives to a particular use means that AirBnB is permitted with consent, the actual process of obtaining that consent can be expensive and, occasionally it can be withheld in any event.
(b) Renting whole house or apartments
Where the AirBnB advertisement is for whole houses or apartments, the relevant question is more likely to be whether or not the use is for a ‘serviced apartment‘ (as defined in the LEP) and whether such use is permitted. Again that will vary from zoning to zoning and from Council to Council.
There is an added layer of complexity with apartment buildings in that, even if the zoning/Council permits an apartment being used as an (AirBnB) serviced apartment, the Body Corporate may prohibit such use as part of the strata by-laws. We ourselves have seen many by-laws containing this exact prohibition.
There has been question as to whether or not a private body like a Body Corporate could lawfully impose such a restriction on a unitholders’ use of their property. Perhaps weighing against unitholders who take this view is a recent announcement by the City of Sydney (the Council with the largest concentration of AirBnB apartments) that, in their view, a Body Corporate should be entitled to such veto rights. A spokesperson said:
“Our most recent submission [to the NSW Government Inquiry into Short-Term Letting] suggested consideration be given under strata title laws for strata communities to have a greater say in whether short-term holiday letting should occur in their own strata buildings. Short-term letting of whole homes present a range of challenges to strata communities, particularly regarding waste and the use of common spaces”
The question of whether or not short-term letting is legal is a complex one and will often depend on an individual Council’s interpretation of their own LEP. An eagerly-awaited policy response from the NSW Government should address some of this uncertainty however in the meantime, vendor’s should be cautious of advertising their properties as fit for AirBnB use.