NSW Govt short stay holiday accommodation policy – planning and compliance update  

NSW Govt short stay holiday accommodation policy – planning and compliance update
The NSW Government’s Short-term Rental Accommodation (STRA) framework is a step closer to implementation with the release of three new policies for discussion: a draft Planning Policy, a Code of Conduct and a proposed Industry Register.

This is a guide for hosts, booking platforms, letting agents and property managers.

Regulation through Planning Policy

Under the draft State Environmental Planning Policy (Short-term Rental Accommodation) 2019 (NSW), ‘short-term rental accommodation’ will become a new approved planning use to be included in residential zonings in Local Environmental Plans across NSW, alongside uses such as ‘Bed and breakfast accommodation’ and ‘Eco-tourist facilities’.

Short-term rental accommodation is defined as an existing dwelling –

1. that is used by a host (an owner, tenant or permanent resident) to provide accommodation on a commercial basis for a temporary or short-term period, and
2. the dwelling is of the type used predominantly as a place of residence.

At what point does a short-term rental become a residential tenancy?

Under section 52A of the Fair Trading Act 1987 (NSW):

Short-term rental accommodation arrangement is defined as a commercial arrangement for giving a person the right to occupy residential premises for a period of not more than 3 months at any one time.

If the arrangement is for three months or more it is a residential tenancy under the Residential Tenancies Act 2010 (NSW), and different planning laws apply.

Planning policy - When will Local Council permission be needed?

No Local Council permission (development consent) will be needed if it is hosted short-term rental accommodation. It is an exempt development. These are the rules:

• the host (the owner, tenant or permanent resident) of the dwelling resides in it while it is used for short-term rental accommodation;
• The dwelling must have been lawfully constructed to be used for the purpose of residential accommodation,
• the dwelling is built on land zoned for dwellings of that kind;
• there are no more than 2 persons for each bedroom (or 12 in total for the dwelling);
• it is a detached dwelling, or is a terrace house, town house or villa unit, separated by a fire-resisting wall;
• it is not a boarding house, a group home, a hostel, seniors housing, an eco-tourist facility, tourist and visitor accommodation, a camping ground or a caravan park;

This is ‘traditional’ model of home stay accommodation where guests stay in ‘the spare room’. In fact, the name ‘Airbnb’ is an abbreviation of ‘Air Bed and Breakfast’.

Restrictions apply if it is non-hosted short-term rental accommodation, that is, if the host does not reside on the premises:

• If the dwelling is located in the Greater Sydney Region, the Ballina area, the City of Lake Macquarie area, or in parts of the Clarence Valley or Muswellbrook areas, a day limit applies of 180 days* in a calendar year. In Byron Shire, the limit is lower – 90 days*. Elsewhere, in regional NSW, no day limit applies;
• If the dwelling is in a strata scheme anywhere in NSW – a home unit/apartment or a town house or villa unit, the right to rent short-term is limited to 180 days provided it is the host’s principal place of residence. If not, the right to rent can be removed completely by a strata by-law which is passed by special resolution (a 75% majority);
• If the dwelling is situated on bush fire prone land or is on a flood control lot, it cannot be used without development consent.

* The 180 day / 90 day limits do not include any period of 21 consecutive days or more for which accommodation is provided to the same person or persons – these are often called executive rentals.

This is the ‘investment’ model of short-term rental accommodation, where the whole dwelling is rented out.

Local Council permission is needed as a full development application for non-hosted short-term rental accommodation (development consent) if:

• the dwelling is situated on bush fire prone land less than bush fire attack level-40 (BAL-40) or is not in the flame zone (BAL-FZ); and if it is situated in Zone RU5 (Village), there is a reticulated water supply connection to the lot and a fire hydrant within 60m of any part of the dwelling and a 10,000 L capacity water tank;
• the dwelling is situated on a flood control lot, a hydraulic engineer certifies it is not in a floodway area, flow path, high hazard or high risk area.

This is called a complying development.

Source: draft State Environmental Planning Policy (Short-term Rental Accommodation) 2019

Compliances for short-term rental accommodation

Three compliances are proposed:

1. A Fire Safety Standard
2. A Code of Conduct
3. An Industry Register

Fire Safety Standard

In rented residential property, landlords are required to install at least one smoke alarm in a hallway outside a bedroom or other suitable location in each storey of a rented home.

The proposed Short-term Rental Accommodation Fire Safety Standard is more stringent. It requires:

• Smoke alarms located in each bedroom, in every corridor or hallway associated with a bedroom, and in each other storey in the dwelling not containing bedrooms. The smoke alarms must be connected to mains power, be interconnected, and be installed on or near the ceiling;
• A heat alarm must be installed in any private garage attached to the dwelling and a durable notice displayed;
• Evacuation lighting must be installed in corridors, hallways or the like that is activated by the smoke alarms.

These requirements apply to all detached dwellings, and terrace houses, town houses or villa units, separated by a fire-resisting wall as well as to strata units / apartments.

In multi-dwelling buildings such as strata apartment buildings or in commercial buildings which have a dwelling, there are additional requirements to provide for the safety of users who may be less familiar with the dwelling, namely:

• A heat alarm located in the kitchen;
• The entrance door must be capable of being opened from inside the dwelling without a key;
• Doors opening on to a corridor or hallway must be self-closing and fitted with medium temperature smoke seals;
• A portable fire extinguisher and a fire blanket must be installed in the kitchen;
• An evacuation diagram must be installed within the dwelling on or adjacent to the entrance door and to each bedroom door.

An annual fire safety inspection certificate will be required. It will be an offence to use a dwelling for short-term rental accommodation unless the fire safety standards are complied with.

A Code of Conduct

The proposed Code of Conduct is intended to address amenity impacts on residential neighbours resulting from inconsiderate or anti-social behaviour by some short-term rental occupants by:

• setting out the rights and obligations of short-term rental accommodation industry participants;
• providing for resolution of disputes and complaints
• outlining the compliance and enforcement approach for contraventions
• facilitating the oversight of the short-term rental accommodation industry

The Code will apply to short-term rental accommodation industry participants, namely online booking platforms, letting agents, property managers (creating listings, rental pricing, guest vetting and communications and check in services), hosts and guests.

The Commissioner for Fair Trading (NSW) will administer the Code. Complainants may be made to the Commissioner by industry participants or non-industry participants such as neighbours and strata owners corporations.

The Commissioner has the power to issue a warning notice, a direction to act or stop acting, or a ‘strike’, and to record a host as being in contravention of the Code in relation to specific premises or a guest on the exclusion register where they have received two ‘strikes’ within a two-year period. The Commissioner may also issue penalty notices and impose civil penalties.

Booking platforms and letting agents are required to prevent participation in the industry by a host or guest who is listed on the exclusion register. A listing lasts for five years.

An Industry Register

The NSW proposals for a mandatory short-term rental accommodation registration system to apply to all properties are only in their infancy because the introduction of a register was a late amendment to the legislation.

Industry participants will be required to register their properties and keep rental records for at least 5 years.

The NSW Government sees the register as having the potential to greatly strengthen responses to complaints about short-term rental accommodation because it would consolidate data about the properties including compliance with Local Council regulations and the exclusions register.

At this stage, it considers that the industry is best placed to administer the register. It also considers that it may be inappropriate for the register to be publicly available.

Comments

The NSW Government is aware of the economic significance of short-term rentals in NSW, which represent approximately 50% of the $31.3 billion industry in Australia. Short term rentals are used not only for holidays, short-term rentals but also for business travel, emergency accommodation and special events.

The NSW Government has decided to regulate short-term rentals with a mixture of planning policy and consumer / fair trading policy, while imposing special restrictions in strata schemes.

In particular:

It differentiates between hosted short-term rentals – spare room rentals – which are relatively unregulated, and non-hosted whole property rentals – investment rentals – which are regulated as to planning permission and a 180 day limit for stays. Short-term investment rentals remain viable because the 180 day limit does not include rentals of 21 days or more.

The Fire Safety requirements will require updates for all properties, more so where the host is not present and in strata apartments. The cost to upgrade and annual inspection certificates will make some properties unviable for short-term rental.

The proposed register of properties is welcome, but it should be administered by the Commissioner for Fair Trading and be accessible to the public. This will assist the Commissioner in dealing with complaints and the public in making complaints.

Industry participants will need to update their websites, terms and conditions, safety standards and possibly public liability insurance to comply with the Code of Conduct.

The discussion paper states that the policy will not commence until 2020. It is worth noting that the legislation to allow by-laws to be passed to ban short-term rentals in strata schemes in home units / apartments which are not used as a principal place of residence has not yet been proclaimed as law.

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