The "Pinnacle" is an exclusive residential condominium on Grace Bay Beach in the Turks and Caicos Islands.
The developer aimed to attract buyers looking for an exclusive place to live, not the holidaymakers along the beach. So the developer included a strata by-law which banned owners from renting out their apartment for less than one (1) month.
This ban was ignored by the owners of apartment 102, who rented to holidaymakers, usually with one week stays. The body corporate sued the owners for breaching the strata by-law. The owners countered by arguing that the strata by-law was invalid because the Strata Law did not permit any restriction on a strata owner’s right to rent out their apartment. The Strata Law is the same in Turks and Caicos as it is in Australia.
The case was fiercely fought, all the way to Judicial Committee of the Privy Council in London, which was also Australia's final court of appeal until 1986.
In the last year or two, the topic of Airbnb style holiday lettings in strata apartments has been hugely controversial in Australia. NSW Fair Trading has advised and the NSW Civil and Administrative Tribunal has ruled that a strata by-law cannot restrict the rights of an owner to rent out their apartment in any way.
The Privy Council rejected this strict interpretation. It ruled on 21 December 2017 that it was possible that the owner’s rights be restricted, if the restrictions were reasonable. In this case, the strata by-law was a reasonable restriction on the right to lease because it was aimed at preserving the residential use of the building. It was reasonable to draw the line at 30 days to distinguish a residential use from a holiday letting use. Therefore the strata by-law was valid.
The ruling is a game changer. This is the new game plan (in my view):
- The NSW Fair Trading advisory and the Tribunal ruling can be ignored as they are both wrong to reject any restriction on the right to lease.
- If a strata scheme wants to restrict Airbnb style holiday lettings, it passes a strata by-law with a one (1) month minimum stay requirement, just like in the "Pinnacle"!
- If an owner is unhappy with the strata by-law restriction, they can apply to the Local Council or Planning Authority for an approval or permit to use their apartment or villa as a serviced apartment or as a bed and breakfast establishment. If an approval or permit is granted, it will override the strata by-law.
- If the strata scheme does not pass a strata by-law, then the owner can continue with their Airbnb style holiday lettings.
For a detailed analysis read my case note: