CHECK STRATA BY-LAWS BEFORE RENTING OR LETTING
There are no provisions in our by-laws that restrict short-term rental, but there are certain conditions imposed on the owner
WHEN I first wrote on this issue a year ago, I had said that the Airbnb story is that familiar story of “innovative sharing” of your residential space with others for purposes of earning a side income.
If Malaysian car owners can become part-time drivers for Uber or Grab, why can’t property owners become part-time landlords (hosts) for Airbnb’s guests?
The problem is that in many jurisdictions Airbnb hosts face difficulties not because of their national landlord and tenant law but their local authorities’ zoning legislation. In 2014 the New York Attorney General’s office stated that many landlords operating Airbnb rentals in the city were in violation of zoning and tax law.
In Canada, Vancouver’s zoning by-law prohibits short term rental. It said that: “No person shall use or permit to be used any dwelling unit for a period of less than one month unless such unit forms part of a hotel or is used for bed and breakfast accommodation.”
The legal officer of Kuala Lumpur City Hall’s valuation and property management department, Md Azmi Mohd Shari, told participants at a dialogue organised by the REHDA Institute in August 2017 that according to a Federal Government circular, the management corporation’s bylaws can provide whether or not strata units can be rented out via Airbnb.
Azmi said: “Residents must check their apartment or condominium by-laws. If the management allows it, then it’s okay. If they don’t, then residents should abide by the relevant by-laws on the matter.” He said if residents at the condominium are aware that other parcel owners are flouting the by-laws, they should lodge a complaint with the management. He added that the management can then impose a fine of up to RM200 on the delinquent parcel owners.
In New South Wales (the largest market for Airbnb in Australia), the legal position (according to the NSW Fair Trading’s Strata Living fact sheet) is as follows: “Strata laws cannot prevent an owners’ corporation restricting an owner from letting their lot, including short-term letting. The only way short-term letting can be restricted is by council planning regulations.”
This permissive stand by the authorities is based on section 139(2) of the Strata Schemes Management Act 2015 (NSW), which states: “No by-law is capable of operating to prohibit or restrict the devolution of a lot or a transfer, lease, mortgage or other dealing relating to a lot”.
The law was applied in Estens v Owners Corporation SP 11825 [2017] NSWCATCD 63 where in line with the interpretation adopted by the NSW Fair Trading office, the tribunal struck down by-laws restricting short-term letting.
The same position is found in Victoria where the Supreme Court held in Owners Corp PS 510391P vs Balcombe [2016] VSC 384 that owners’ corporations do not have the power to restrict short-term letting.
However, in Western Australia, the Court of Appeal held in Byrne v The Owners of Ceresa River Apartments Strata Plan 55597 [2017] WASCA 104, that owners’ corporations by-laws can restrict short-term lettings (that is, not more than three months). The Court of Appeal found that the by-laws did not present a restriction on disposal of units in the strata scheme, but only a restriction on how the units could be used. In the face of this uncertainty, whether strata by-laws can effectively restrict shortterm rentals or not, the recent decision of the Privy Council was indeed welcomed by many quarters.
In O’Connor (Senior) and others v The Proprietors, Strata Plan No. 51 [2017] UKPC 45 (21 December 2017), it upheld a strata by-law banning holiday lettings of less than one month. The case was on appeal from the Court of Appeal of the Turks and Caicos Islands, where its law states that, “No by-law shall operate to prohibit or restrict the devolution of strata lots or any transfer, lease, mortgage or other dealing therewith or to destroy or modify any easement implied or created by this Ordinance”.
The Privy Council relied extensively on Australian decisions to find that it was possible for strata by-laws to impose reasonable restrictions on the use of an apartment. It held that, “It is clear that statutes prohibiting restrictions on dealing in strata lots do not prevent reasonable restrictions on the uses of the property, even though such restrictions may have the inevitable effect of restricting the potential market for the property”.
What about our own strata bylaws? Do they allow or they prohibit short-term rentals via Airbnb?
The Third Schedule of our Strata Management (Maintenance and Management) Regulations 2015 (P.U.(A) 107) sets out the bylaws of our strata properties. There are certain prohibitions imposed on the proprietor of the parcels, but I do not see any provision prohibiting or restricting a short-term rental or letting.
It should be mentioned, however, that section 70(2) of the Strata Management Act 2015 (Act 757) empowers a management corporation (MC), by a special resolution, to make additional by-laws to that effect, should it wish to do so.
If you live in a strata community and do not wish the parcel owners to become short-term rental landlords for Airbnb, remember to take another look at the community strata by-laws.
Azmi said: ‘Residents must check their apartment or condominium bylaws. If the management allows it, then it’s okay. If they don’t, then residents should abide by the relevant by-laws on the matter.’
The writer formerly served the Attorney-General’s Chambers before he left for private practice, the corporate sector and academia