January 28, 2020

NSW introduces new laws for short-term leasing

Heard the news? There’s new short-term renting laws in NSW coming soon that will affect a lot of people. Owners, tenants, hosts, guests and even online platforms like Airbnb and potentially even Cubbi are all in the firing line.

Just to be crystal clear and not scare anyone, the new laws haven’t passed parliament yet so the exact changes are still a bit unclear but we’re here to keep you in the loop, here’s the big 3 changes at a glance:

So WHY the changes?

It all started with Airbnb. What was once was a platform for homeowners to occasionally rent out an extra room for a bit of extra cash, has totally changed the way we rent and holiday around the world.

The first problem was with guests, they can sometimes behave badly and use rentals as party houses with zero respect for the people living their daily lives around them. Think properties getting trashed and neighbours having nowhere to turn.

The second problem that’s popped up since short-term renting has become the flavour of the month is with commercial operators, they’ve started taking over a good chunk of apartment buildings in the city which has now hugely affected the long term rental market. We’re talking rent prices rising and taking housing off the rental market all together. It’s simple really, holidaymakers are prepared to pay more than someone wanting to rent the property for 6 months plus.

The laws are made to mostly target people who are renting out city apartments that they don’t live in, but strata owners will be given the powers to ban short-term renting. The government has spent 2 years planning these changes and I think they’re fairly reasonable to most people. In short, the framework will include new planning laws, an industry Code of Conduct and new provisions for strata scheme by-laws.

New Planning Laws - 180 days per year

In the Greater Sydney (including Newcastle and Wollongong apparently) if you don’t live in the apartment that you’re renting on airbnb (eg. you’re renting the entire home) you can only rent it out up to 180 days per year. However if you (the host) is there you can rent out a room all year round. You still have the option of submitting a development application to the council if you want to rent the property out 365 days of the year without living there, too. For all regional areas the default will be 365 days but the local council can also reduce that down to 180 days if they want as well.

Code of Conduct

This mandatory Code of Conduct will apply to anyone involved in providing or using short-term holiday letting including hosts, guests, online platforms, and letting agents. We don’t know what is written in the Code of Conduct just yet, there hasn’t been information given about the wording, essentially it’s a complaint system where neighbours of short-term houses and apartments can make a complaint that will be individually assessed by adjudicators part of the NSW Fair Trading. If anyone (a host or guest) receives 2 strikes they will be banned for 5 years. And if you think offenders will just be able to just platform hop, think again. Online platforms (airbnb) as well as letting agents (maybe even Cubbi) will need to check if the host or guest is on the register. If a platform allows someone who is banned (according to the register) to short-term rent, they can be fined up to $1.1million so there’ll be automatic checks on all hosts and guests!

New Strata Laws

What are Strata by-laws?

Every strata scheme (eg apartment building) has its own by-laws, these are a set of rules that govern the behaviour of residents and the use of common property. For example no pets, or specific times you can use the pool! The by-laws apply to anyone who lives in or owns an apartment. Right now it’s not clear in the current legislation if an Owners Corporation (who create and administer the by-laws for a strata scheme) can stop short-term letting in their apartment buildings. The new laws will clarify that an Owners Corporation can amend their strata by-laws to ban short-term letting where the host of the place being rented does not live there (eg commercial operators).

This is huge news - it essentially wipes out the bigger more commercial operators renting out apartments in the city (that’s if the building/strata scheme by-laws prohibit short-term letting). For an owners corporations to adopt this by-law they will need a 75% majority. On the other hand if we were to flip it around, it would mean strata by-laws can’t stop tenants and owners renting out a room of a property they live in as well as renting out the entire place while they are away on holidays (eg up to 180 days - see first big change).

If you’re a tenant reading this and you intend to/are renting out your place, check your lease agreement and get approval from the owner before you place the property on Airbnb. All that said, there are still two big questions here:

What is classified as short-term?

There is no definition - yet! But I believe if it’s anything less than 3 months and the guest is there on holiday’s it could be classified as short-term. I say this because the Residential Tenancy Act NSW does not cover agreements made for the purpose of giving a person the right to occupy residential premises for a period of not more than 3 months for the purpose of a holiday. I have also contacted the Short-term Holiday Letting (STHL) team from the NSW Fair Trading twice and they were not able to provide me with an answer, all they did give me was a link to their website which doesn’t answer the question either.

When will it take effect?

We don’t know yet, the first step is to have the new laws approved by Parliament and the Code of Conduct is being developed this year. With all that information it’s reasonable to estimate later in 2019, until we know more that’s our best guess.

Action from here

I rent out my rooms in the house I live in (your main place of residence)

You’re not affected, continue as you were! But if you're a tenant, remember you need approval from your landlord before renting out any rooms.

Renting out apartments short-term is my business

You can still take advantage of the short-term stays for up to 6 months a year if there is no strata by-law preventing you from doing so. Here’s a suggestion, rent the place out short-term on airbnb from December to May to take advantage of the peak season and in the colder months rent it out on a 6 month lease or even month-to-month (to employees contracted to the area) on Cubbi. We already have a lot of landlords on Cubbi doing the same right now.

Everyone else

If you’re currently like Talia Besser - renting out one or multiple properties on Airbnb - the time may have come for you to really look into what other options you have to avoid being affected by the new proposed laws. In Talias case, she quickly realised that the time and effort she was putting into her fathers properties was more than it was worth. Difficult hands-on management, less-than-ideal profits and a saturated market, we can see why she moved to longer term leasing - food for thought for those of you who are in the same boat right now!

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