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Legal issues with short term letting of Sydney property

Do you own a property in Sydney (or considering buying one ) and been considering short term letting through Airbnb or one of the similar short term letting websites? If so, it pays to fully investigate the legal issues with short term letting of Sydney property before you start.

With over 10,000 homes now listed across Sydney, short-term letting via websites such as Airbnb has proven to be incredibly popular amongst Sydney property owners.
Advertisements on Airbnb would indicate that the Eastern suburbs of Sydney are particularly popular for short-term property letting.

Bondi Beach is the most popular location with nearly 1,000 lodgings advertised in December 2015 (source: ‘How Airbnb is taking over Sydney, one beach at a time’ Inga Ting , Sydney Morning Herald 5th January 2016). Manly, Coogee, Darlinghurst and Randwick are the next most popular suburbs “with between 430 and 580 places listed in December 2015” (source: ‘How Airbnb is taking over Sydney, one beach at a time’).

Before jumping on this bandwagon though, we urge you to take a step back and ensure you have a thorough understanding of the legal issues for short term letting of Sydney property, the potential council regulations and other risks associated with it.

The Potential for Fines for Illegal Property Rental

One major concern with this new form of property rental is that, in a lot of cases, short-term letting may be breaching council regulations, potentially making owners liable to exceptionally high fines. For example, in a recent Sydney Morning Herald Domain article, Wally Salinger received a notice threatening a $1.1 million fine following a neighbour complaint regarding his Annandale home listed on Airbnb (source: “NSW Governement Investigating Airbnb rentals“Jennifer Duke and Stephen Nicholls Sydney Morning Herald Domain article 4th July 2015).

The key issue is that, under most council regulations, ‘tourist and visitor accommodation’ is generally not allowed in residential areas. While ‘Bed and Breakfast accommodation’ may be permitted under council regulations in councils such as Woollahra Council and Manly Council, consent is generally required. Consent generally comes with a number of complications such as insurance, various fees and lengthy application processes.

Property Law for short term letting of Sydney property is not concrete and changes are unpredictable
In addition to the large fines, property law in this area is uncertain. Indeed, it is difficult to predict when or if, council regulations as well as planning and strata laws will be amended to enable owners to choose how they want their buildings to operate.
A further complication is that council regulations may well soon be re-configured as a result of proposed council amalgamations. The one thing which is clear is that the NSW (and even Federal) Government is under pressure to clarify rules governing short term letting.

Insurance Issues with Short Term Letting of Sydney Property
There have been concerns raised that insurance on properties that are used for short term letting may be voided.
Prior to considering short term letting it would be prudent to check with your insurer to ascertain their position.

What does this mean for you?
As a general rule, bed and breakfasts may be allowed with consent of the council. Such is the case in the Woollahra Council district. However, tourist and visitor accommodation is not permitted in residential zones or residential apartment buildings.

Before committing to a long-term investment on a property for intended Airbnb purposes, we recommend you seek advice on the applicable council regulations which may impact your ability to utilise your property for short-term letting.

For apartments, in addition to your Council regulations, you will need to check the strata by-laws. These will give you an indication of whether bed and breakfasts or short-term letting are permitted in your building. If your apartment is on a company title rather than a strata title, the articles of association may clarify such questions.

For houses, the first place to check should you be council for the area where your property is located.

For any property it is critical to check with your insurer about whether you are covered and indeed whether the level of protection is adequate for your proposed use of the property.

Are you considering buying a property in the Eastern Suburbs of Sydney?
If you are considering a property investment in the Eastern Suburbs of Sydney we recommend that you download our report “Five Things You Need to Know Before You Buy an Eastern Suburbs Property”. To get a copy of the report simply “Click Here“.

Disclaimer: Information contained in this article is of a general nature only and does not purport to be advice tailored for your specific circumstances. Before you act on anything contained in this article you should obtain professional advice.

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