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Appeal tribunal upholds a by-law banning short term letting

The Fairway Island appeal

You have been told time and time again that a body corporate cannot make a by-law banning short term letting or Airbnb within its strata community.

But a strata community we have been working with closely for almost two years put in place a by-law prohibiting lettings of less than one month as a means of protecting the special residential amenity of their community.

The by-law was overturned when the lot owner challenged it in the Commissioner’s Office. The strata community was successful in its appeal, and its by-law has been validated.

The reasons given by the appeal tribunal give a most compelling case for why a body corporate’s power to make by-laws is robust, and rightly so.

What happened?

The by-law relevantly provided:

“…each proprietor shall not use or permit his lot to be used other than as a private residence of the proprietor or for accommodation of the proprietor’s guests and visitors. Notwithstanding the foregoing, the proprietor may rent out his lot from time to time provided that in no event shall any individual rental for be a period of less than one (1) month.

The by-law was made by one of those rare bodies corporate, Fairway Island, still governed by the Building Units and Group Titles Act 1980 (Qld) (BUGTA).

Similar to the position under the Body Corporate and Community Management Act 1997 (Qld) (BCCMA), a BUGTA body corporate has the power to make by-laws to regulate the use and enjoyment of a lot.

The fundamental focus for this body corporate was to impose restrictions on the use of lots in order to protect the special residential amenity of its community.

At first instance, a referee (the BUGTA equivalent of an adjudicator) simply found that the by-law offended a provision of BUGTA that provided that a by-law cannot prohibit or restrict a lease or other dealing with a lot.  The referee followed the way that many other referees and adjudicators had applied the same provision in the BCCMA, such as in Washingtonia [2018] QBCCMCmr 256:

“…a by-law that purports to prevent a lot from being rented for a term of less than 6 months, or more than twice in one year to different tenants, would operate to ‘restrict’ a ‘lease’ of that lot.

The body corporate argued that the referee’s interpretation of this statutory provision was wrong, and that short term letting did not amount to a ‘lease’ that would be protected by that provision.  The appeal tribunal, presided over by a Magistrate, agreed.

The real task for judging the validity of a by-law is to consider what its true intent is and the purpose for its creation in the context in which it was made, when deciding whether it is within power. The Magistrate said:

Here the lots are undoubtedly established with a view to privacy and amenity. That much can be gleaned by the presence of a security gate to the entry of a luxury cluster of houses effectively surrounded by a moat and acres of private golf course. Presumably this inspired the name – Fairway Island. The true character of the by-law is to ensure that only people who have some longer term commitment to the premises occupy them. That is, they are residents there and subject to some longer term control over their behaviour.

Impact on the strata industry

This does not mean that every body corporate is in the clear to make a by-law banning short term letting – that approach would misapply the reasoning of the Magistrate and the other authorities he was persuaded by. Great care must be taken on how this decision can be applied to community titles schemes subject to the BCCMA.

What is exciting about this decision is the considered views the Magistrate gave to why Parliament has given bodies corporate the power to make by-laws, and the purpose that by-laws are intended to achieve.

Adjudicators, and even QCAT when dealing with appeals, have adopted conservative approaches to the power to make by-laws. By-laws are often invalidated for being unreasonable, and many strata communities are left with a sense of futility in making a by-law that can be of any meaningful effect.

Committees are regularly told that it is unreasonable to assume that a dog will cause a nuisance by barking, or that the creation of a large deck will be used to hold noisy parties. The Magistrate made these helpful and common sense statements:

It appears to me that BUGTA intended to allow the BC to pass by-laws to protect lot owners from even a hypothetical nuisance of the occupier of a lot. They need not wait until a marching band starts rehearsals at midnight in one lot to ban such an activity. The requirement to get approval for a pet is a standard by-law. This is based on no evidence whatsoever that any particular animal is a problem but on the potential for one to be…

Regulation is not just about stopping proven past behaviours from repeating but also about preventing anticipated breaches based on experience elsewhere or common sense. Likewise regulations need not be limited to just preventing certain noise during certain hours but may in principle act to eliminate the source of some potential problems altogether. The response must be appropriate but there is no need to wait until a problem has actually manifested before addressing it.

The Magistrate looked abroad to other ways that laws are made to mitigate the risk of problems occurring, even if there is no guarantee that the problem will in fact occur:

A simple example from the traffic laws illustrates the regulatory response to some problems can be aimed at certainty and ease of enforcement rather than a case-by-case nuanced application of a broader law. Not all drivers at 0.05% BAC will be affected the same way. But it is having that concentration in the blood that is made an offence, not driving badly. Parliament targets the risk that the use of the road by such persons is best regulated by keeping them off the road.

Parliament gave bodies corporate the power to make by-laws for good reason: local, state and federal governments do not want to decide what the pool opening and closing hours will be for a particular strata community. It’s a matter that lot owners can decide upon amongst themselves.

That is why bodies corporate are regularly referred to as the fourth tier of government. A body corporate is responsible for the management and administration of the lots and common property within their community, and they are given the power to make by-laws to discharge that responsibility effectively.

Lessons to be learnt

One of my biggest criticisms of the BCCMA is the way in which it gave bodies corporate the power to make by-laws with one hand, but then with the other hand seemingly ‘watered down’ that power by imposing so many restrictions on what a by-law cannot do.[1]

This has been compounded by more than two decades of adjudications out of the Commissioner’s Office in which a decision-maker that has never visited the strata community, let alone made the significant decision to purchase or reside in a lot within that community, decides whether the by-law is reasonable.

If an overwhelming majority of voters decide to impose a particular by-law upon their community, why should adjudicators, referees or a minority of owners be empowered to invalidate it? The circumstances should be very limited.

Bodies corporate should be able to make by-laws to set and enforce the values, expectations and rules that the majority consider to be appropriate to properly define their community. The Magistrate made these salient comments:

In principle there is no reason why a group of people could not set up a highly regulated small community in a way that made it attractive to themselves or likeminded purchasers.

A group of allergy suffers might want to establish a community in which certain plants or animals are prohibited. The ability of a community to govern itself (requiring a 75% majority) would enable the benefits of group titles to extend beyond simply being small lots that share common property.

[1] For example, see section 180 of the BCCMA: a by-law cannot restrict the type of residential use of a lot, it cannot discriminate between types of occupiers, it cannot impose a monetary liability on owners or occupiers, and it cannot be oppressive or unreasonable.

Where to from here?

This decision is still within the period in which it could be appealed. But irrespective of whether it is appealed, the Magistrate’s robust decision should influence how referees, adjudicators and strata communities view the power to make by-laws and the limited circumstances in which they should be invalidated.

This case has so far turned on the considered way Fairway Island crafted the by-law that was ultimately challenged, and the purpose the by-law was intended to serve. This was not a body corporate that commissioned a law firm to cheaply provide it with a by-law from a suite of precedents in the hope that what was seemingly suitable for hundreds of other communities might be suitable for theirs.

This considered approach to managing a unique strata community stands as best practice within the industry.  It also reflects one of our core values: we want to help create and foster harmonious communities, even though it will not always be smooth sailing. Please watch this video if you would like to learn more on this.

Article published with permission from Grace Lawyers. Author: Jason Carlson, Partner, Grace Lawyers Queensland
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