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Owners Corporation update: Regulating short stay accommodation

Jun 8, 2016

Short stay accommodation is a growing worldwide phenomenon.

To date owners corporations have largely been unable to manage the use of lots within their owners corporations relating to short stay accommodation.  This is an issue of substantial concern when the behaviour of the short stay occupants is unruly.

Recently VCAT ruled that an Owners Corporation rule prohibiting short stay accommodation was invalid.

In February 2015, an independent panel was appointed by the State Government to investigate this issue and make recommendations.

Owners Corporation Amendment (Short Stay Accommodation) Bill 2016 (the Bill)

Coming out of that process the State Government has introduced the Bill.

At present the Bill states that it is to come into effect on 1 July 2017.

The effect of this Bill is to extend the dispute resolution procedures in the Owners Corporation Act to include short stay accommodation disputes.

A lot owner, occupier of a lot or an owners corporation manager will be able to lodge a complaint with the owners corporation about breaches of the required ‘standards of conduct‘ by a short stay occupant if the Bill is passed.

Standards of conduct

The standards of conduct set out in the Bill are:

  • Not to unreasonably create any noise likely to substantially interfere with the peaceful enjoyment of an occupier or a guest of an occupier of another lot in the building except noise where the Owners Corporation has given written permission for the relevant noise to be made;
  • Not to behave in a manner likely to unreasonably and substantially interfere with the peaceful enjoyment of an occupier or a guest of an occupier of another lot in the building;
  • Not to use a lot in, or the common property of, the building, or permit a lot or the common property to be used so as to cause a substantial hazard to the health, safety and security to any person or an occupier of the building;
  • Not to unreasonably and substantially obstruct the lawful use and enjoyment of the common property of the building by an occupier or a guest of an occupier of the building; and

Not to substantially damage or alter, intentionally or negligently, a lot or the common property of the building or a structure that forms part of a lot or the common property.

Once a complaint is received by the OC, what must it do?

Once a complaint has been lodged with an owners corporation, it must decide to either do nothing or serve a notice on the lot owner and the short stay provider (if the short stay provider is not the lot owner) and the short stay occupants.

An owners corporation may decide to apply to VCAT to resolve the short stay accommodation dispute if the breach is not cured after a noticer has been served. In doing so, an owners corporation can seek one or more of the following orders:

  • a prohibition order;
  • an order for a civil penalty; or
  • a compensation order.

These orders can be issued against either or both the short stay provider and the short stay occupants.

prohibition order can be granted if a breach notice has been served on a short stay provider on at least 3 separate occasions within a 2 year period. (A prohibition order will cease to have effect if the relevant lot is sold).

VCAT may also impose a civil penalty not exceeding $1,000.

The penalty is to be paid into the Victorian Property Fund.

VCAT may make an order for compensation in favour of occupiers who resides in the same building to a maximum of $2,000 each.  An application for an order for compensation will have to be made within 60 days of the date of breach of breach the standards of conduct.

This is a strange requirement given that as a pre-condition to issuing the proceeding at VCAT, the Act requires a breach notice and a final notice to be served on the wrongdoer allowing 28 days under each of those notices for rectification.

That means that almost in every instance the 60 day requirement for bringing the application to VCAT will not be able to be complied with.

This issue may be fixed by amendment to the Bill before it is passed.

What’s next?

This Bill is a good start to addressing the issues.

However, the process by which breaches are to be notified to the short stay provider and/or short stay occupant needs to be reviewed because an owners corporation or other lot owner or occupier is unlikely to know the details of the short stay and by the time a dispute notice is actually served, let alone the application being brought before VCAT, that short stay occupant will have left the building. 

Accordingly, the real target of this process must be the short stay provider whether it is a lot owner or not.

A short stay provider may seek to join its short stay occupant to any VCAT proceedings taken against it for breach of the standards of conduct to have the short stay occupant  pay in full or contribute to any penalty or compensation order made by VCAT.

The reality is, however, that probably in most cases the short stay provider will bear the full brunt of the compensation order and/or penalty because the relevant short stay occupant is from overseas or interstate or difficult to locate.

Current status of the Bill

The second reading speech took place on 25 May 2016.

The debate on the Act was adjourned until 8 June 2016 and the Bill may yet be amended before being passed.

We will issue further bulletins as the Bill proceeds through Parliament.

For more advice and assistance, please contact Anton Block, Principal Lawyer, on (03) 8600 8888 or ablock@kcllaw.com.au.

Note: This update is a guide only and is not intended to constitute legal advice.