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In what is expected to be an ongoing and controversial decision, the NSW Civil & Administrative Tribunal (NCAT) recently ruled that an owners corporation's by-law prohibiting short-term letting was invalid.

Strata plan 11825 is a five-lot residential strata scheme in Sydney's eastern suburb of Woollahra. One of the owners in the scheme, Ms Estens, enjoyed travelling and rented out her unit on Airbnb while she was overseas. Another owner in the scheme, Ms Tesoriero, complained of Ms Estens' Airbnb guests using the common laundry and drinking beer on Ms Estens' deck. Shortly afterwards, the owners corporation passed a by-law prohibiting short-term letting at a general meeting and the by-law was registered with NSW Land & Property Information.

Ms Estens challenged the by-law for contravening s 139(1) and (2) of the Strata Schemes Management Act 2015, which provides that a by-law must not be harsh, unconscionable or oppressive and must not prohibit or restrict transfers, leases, mortgages or other dealings related to a lot. The Tribunal found that short-term letting sufficiently falls within the definition of a lease for the purposes of the Act and, therefore, the by-law passed by the owners corporation was invalid.

What makes this decision so significant? This is the first time a short-term letting by-law has been overturned in favour of lessors and could have major repercussions for apartments or strata schemes that have introduced by-laws prohibiting short-term letting.

While it's uncertain whether the owners corporation will appeal NCAT's decision, this is unlikely to be the end of the long debate surrounding short-term letting in NSW. 

Sparke Helmore recently wrote an article about the NSW Government's plan to address the regulation of short-term holiday letting and its Options Paper, which you can read here. You can also find NCAT's full decision here.

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