Over the last few years, we have seen increasing anxiety among body corporates about Airbnb activity in their developments. In particular, they are worried about the behaviour of guests, the potential for damage, and disturbance of other residents. Many are also concerned about the impact on security, as new people are regularly given access to the complex. On the other hand owners are asking can strata really block Airbnb.
This has led to a crackdown by body corporates on Airbnb and other short-term leasing arrangements. Most significantly, a growing number have introduced rules that prohibit the short-term renting of individual lots. While this may provide other residents with peace of mind, it can be a real headache for investors.
Acknowledging this, we want to take a closer look at the relationship between body corporates and Airbnb. As part of this, we will examine the power body corporates have to control short term leasing activity. We will also explore your options if your body corporate does not allow properties to be listed on Airbnb.
Can a strata body corporate block Airbnb?
Put simply, yes, in Sydney, strata body corporates can block Airbnb and are able to put rules in place prohibiting short-term leasing. This power was granted by Section 137A of the Strata Schemes Management Act 2015, which was introduced 10 April 2020. However, there are a few important caveats to note here:
- To block Airbnb, a body corporate must first introduce a By-Law which specifically prohibits short-term leasing of individual lots. To do this, the matter must be raised at a general meeting and the special resolution must receive 75% support.
- Once introduced, such a By-Law applies only to properties that are not used as a “principal place of residence”. While the legislation doesn’t further define this term, most organisations use the ATO’s definition of “main residence” as a guide.
- For the purpose of such By-Laws, a short-term lease is for a period of 90 days or less.
These measures are specifically targeted at investors who are attempting to maximise their returns through Airbnb and other similar sites. They are apparently designed to avoid issues for neighbours relating to noise, security, anti-social behaviour, and access to common areas. They are also founded on the belief that the risk of inconsiderate guest behaviour is greater when they are unsupervised.
What can you do if your body corporate does not allow Airbnb?
Unfortunately, short of lobbying your body corporate to remove the By-Law, there’s no mechanism to challenge these rules. As such, if they are introduced, you will need to consider your situation and adjust your investment strategy accordingly. Thankfully, if you do need to do this, you will still have a couple of options available to you.
Switching to a longer term lease
You could consider changing the property from a short term rental to a more traditional longer term lease. This would bring you in line with the body corporate’s rules, while still allowing you to realise a reasonable return.
Importantly, depending on how you have managed your Airbnb, a longer term rental should be less stressful to own. Once you have found a tenant and they have signed a lease, there isn’t much more you need to do. You can also engage a professional property manager to look after the ongoing administration (inspections, maintenance requests, etc.) for you.
The very nature of a longer term rental also means that you should have significantly less turnover of tenants. This should mean a lower vacancy rate and a much more stable stream of income. It should also mean less risk of damage, as tenants are more likely to treat the property as their home.
That being said, while a longer term lease should provide more consistent returns, the rate will usually be lower. As such, before making the switch, you should get a rental appraisal done by an experienced local property manager. This will help you understand what income you are likely to receive and if this is workable for you.
You will also need to decide whether to keep the property furnished or rent it out unfurnished. While most longer term rentals are offered unfurnished, there is demand for furnished properties, particularly in inner city suburbs. Furnished properties also tend to achieve higher rent rates as tenants are willing to pay a premium for the convenience.
Selling the property
Alternatively, you may decide that you would prefer to sell the property and pursue other investment opportunities. This may be because you are uncertain about your future plans and prefer the flexibility of a short-term rental. Or it could be that your investment strategy is focused on the higher returns short-term rentals can achieve.
Either way, this will be a particularly attractive option if you have owned the property for a while. As properties generally appreciate in value over time, selling will allow you to realise the growth you have achieved. Whether you choose to reinvest in another property such as a house or terrace to avoid dealing with Body Corporates restrictions, or to treat yourself, releasing the additional capital gives you options.
However, before you commit to selling, it’s important to understand the price you are likely to achieve. While property values tend to trend upward over the longer term, the market is cyclical and goes through down periods. As such, it’s worth speaking to an experienced local sales agent about your plans and getting a detailed valuation done.
Want to discuss this further?
If you would like more information on the evolving relationship between body corporates and Airbnb, contact Local Agency Co. Our property management experts are across all the latest laws and can help you understand what they mean to you. We can also assist you to assess your options and plan the best approach for your situation and investment goals.