​Are your strata bylaws ready for the return of Airbnb?

The visitor economy was hit hard in 2020, and now, the government is encouraging Australians to pack their bags and spend their dollars holidaying nationally. The return of the tourist is imminent, and with an increase in tourism comes an uptick in available short-term rental accommodation (STRA).

If you live in a building controlled by body corporate bylaws, navigating the legality of leasing a room or your entire property on websites like Airbnb, which is considered a short-term rental platform, can be difficult. Similarly, acting on your concerns about others looking to capitalise on the growing number of overnight visitors may not be straightforward – or amicable.

The questions beg: Is Airbnb worth it? Does STRA really yield a higher return on investment? And can body corporate bylaws ban STRA?

Airbnb vs long-term tenancies

Before examining strata bylaws’ short-term rentals approaches, it’s worth investigating why a unit or townhouse owner would choose to set up an Airbnb over committing to a long-term tenancy.

In most cases, the answer lies with the financials. STRA generates higher rates per night and week than long-term tenancies, especially during peak times. However, a higher annual income is not guaranteed. Desirability and seasonality play significant roles in determining the profit of an Airbnb, subjecting owners to an unavoidable layer of uncertainty.

If you are tossing up between the two, here are four vital questions to ask yourself.

Is your property desirable to tourists?

Your unit might make an exceptional home, but does it cater to the unique needs of visitors? Consider the following:

• Is your property close to public transport? Is it suitable for someone without a vehicle? Does it have easy access to nearby airports?
• Are you located in a popular tourist destination?
• Are visitor numbers to your area seasonal?
• What kind of people live in your building? Singles and couples or families?
• Does your property offer privacy? If you rent out a single room, will the guest feel safe and comfortable?

Typically, inner-city locations are more desirable and less impacted by the seasons. Coastal destinations are most popular during the warmer months.

How do you hope to use your property?

Renting an investment property long-term is, more or less, a set-and-forget operation. There is little ongoing management required, especially if you use a property manager. STRA, on the other hand, demands active participation.

However, if you consider your property to be a holiday home that you, friends, or family can use on occasion, Airbnb empowers you to block out periods of availability.

How much time do you have?

Operating a successful Airbnb takes time. The property must be well furnished, equipped with basic necessities (soap, coffee, milk, etc.), and cleaned thoroughly between stays.

Alongside the practical, there are customer service requirements to consider. As host, you must respond to inquiries, meet your guests at check-in (or set up a lockbox and provide instructions), and be on-call and ready to respond to issues as they occur.

You can hire an STRA property manager to take over the hard work, but that reduces your profit.

Have you crunched the numbers?

In peak times, you might be able to charge half a week's rent for a one-night stay, if not more. But there are significant costs involved in running an Airbnb that do not apply to long-term tenancies.

Here is a comparison of costs associated with long-term tenancies and STRA:

Legal obligations for Airbnb hosts

Airbnb is not the Wild West – hosts are subject to legal obligations.

Laws

As of March 2021, there is no Australia-wide regulation governing STRA. Individual states are implementing their own legislation to protect the interests of property owners, communities, and visitors.

For example, a New South Wales policy caps the number of days per year an investment property can be leased via home-sharing platforms like Airbnb at 180. This does not apply to owner-occupiers that lease out a spare room in their homes.

The Northern Territory has not released any reforms in the STRA sector.

Tax obligations

According to the ATO, any money earned through home-sharing platforms like Airbnb must be declared. You must also keep records of income and register for GST if your turnover is higher than $75,000 per year. You will need an Australian business number (ABN) to register for GST.

You can claim deductions for some expenses associated with your STRA. However, check with the ATO or a registered tax agent to ensure you are only claiming what you are entitled to.

Although money earned from the sale of your main residence is generally exempt from capital gains tax (CGT), if you use that residence to earn income – including income from renting out a part or all of the residence on Airbnb – you must pay CGT if you sell your property.

If you use a home-sharing platform to rent out a property that does not belong to you (sub-leasing your rental, for example), you are not liable for CGT.

Consumer protections

You do not need a business license to run an Airbnb. However, the Australian Competition & Consumer Commission (ACCC) considers you to be a ‘trader’ if you regularly rent out part or all of your property. That means your guests are entitled to protections outlined in the Australian Consumer Law.

Under this law, you are not permitted to make false statements or publish deceptive representations of your property, such as posting fake reviews or photos of other properties. You must also comply with safety obligations applicable to your property, such as fire safety obligations.

If you fail to meet these consumer protections, you may be liable for a penalty.

Body corporate bylaws and short-term rental accommodation

If your property is suitable and you are aware of and prepared to meet your legal and consumer protection obligations, you have one more hurdle to cross: body corporate bylaws.

Strata-controlled buildings are subject to bylaws, a set of rules that tenants, owners, and even visitors must follow. Bylaws protect the quality of life and common property and relate to issues like smoking regulations, pets, noise levels, and car parking.

A copy of your building’s bylaws is held on the strata roll. If you would like to view your bylaws, you can request a copy from the scheme’s secretary, your landlord, or your property manager.

Can a body corporate stop short-term letting?

Sometimes.

In specific circumstances, bylaws can be passed that restrict or prohibit owners and renters from leasing their properties short-term through home-sharing platforms like Airbnb and Home Away.

For example, in New South Wales, owners’ corporations can introduce bylaws that ban STRA only when the property is not the host’s primary place of residence. If a host lives in the building, they can rent out part of their home or all of their home temporarily without notifying their body corporate.

Further, bylaws can limit the number of guests per bedroom, reducing the risk of overcrowding.

However, in most cases, body corporates are more focused on passing and upholding rules that concern residents and guests' behaviour, not who they are or how long they stay for.

Remember, the types of bylaws body corporates can introduce are restricted. For example:

• Bylaws cannot be overly harsh or limit residents’ activities to an oppressive extent.
• Bylaws cannot stop children from occupying a building.
• Bylaws cannot prohibit residents from keeping assistance animals.

If legally permissible, a body corporate must still have good reason to ban STRA altogether. For residents that are staunchly against welcoming Airbnb guests into their buildings, their stance is about much more than loud parties (Airbnb actually banned parties worldwide) or a lost sense of community:

• STRA can reduce a building's security. Keys and swipe cards can be copied, lockboxes broken into, and residents identified. While property managers or owners typically vet long-term tenants, Airbnb guests are, more or less, total unknowns. In an extreme instance, an Airbnb guest transformed a home in New Zealand into a two-week pop-up brothel.
• A scheme’s insurance may not cover damage to common property caused by STRA guests. Why? Because the property was being used for commercial, not residential purposes. To cover extra risks, insurers seek higher premiums.
• Tourists typically cause more wear and tear to properties than long-term residents, inflicting extra costs and risks on the body corporate and other owners.

Some body corporates may see the benefits of STRA:

• All residents can take advantage of rules that enable STRA. For example, occupants can earn extra cash by renting out their property while taking a holiday or leasing their spare room during peak seasons.
• Visitors support local businesses. Tourism plays a significant role in keeping many of Australia’s most vibrant communities afloat. By enabling Airbnb and other STRA, residents encourage out-of-towners to visit and enjoy the best their region has to offer.
• Some believe that property owners have the right to use their property as they see fit. Rules that restrict the use of their property infringe on the owner’s rights.

Whether or not your strata supports or stands against short-term letting, it is crucial that you find out about your scheme’s bylaws before you list your property on Airbnb. Strata bylaws are not just guidelines – they are enforceable.

Creating and changing strata bylaws

A body corporate can create or change bylaws at any time, although the process and precedents vary by state and often by the local council. If you would like to investigate the possibility of introducing a bylaw that restricts or enables short-term rentals, the best approach is to seek legal advice.

If you are looking to prohibit occupants of your scheme from renting their properties on Airbnb or a similar platform, you may have better luck implementing a bylaw that requires residents to follow council regulations. If an owner disobeys residential- or commercial-use restrictions, you can turn to the council to enforce the rules.

Airbnb’s Friendly Building program

Airbnb recognises the concerns of residents of strata-controlled schemes. To ease worries and maximise visibility, the home-sharing platform introduced the Friendly Building program.

The program is designed to help property managers, landlords, and body corporates support residents that want to lease out part or all of their property through Airbnb. In collaboration with building owners and hosts, Airbnb assists with:

• The creation of hosting rules that cater to the needs of guests, hosts, and permanent residents
• Updates to leases and other legal documentation that set out hosts’ obligations
• The sharing of reservation profits among both landlords and residents

Through the program, building owners, body corporates, and associations can access a personalised dashboard that details currently listed properties, the number of guests staying, and the amount of money earned. They can also define home-sharing rules, blackout dates, and pet policies.

The future of STRA regulation

The impact of short-term rental accommodation on residents, communities, and other accommodation providers is being investigated in cities and regional areas across Australia. While Airbnb hosts are pushing to contribute to their area’s post-pandemic economic recovery, locals are feeling the pinch of increasingly competitive rental markets.

With hundreds of Airbnbs in Sydney, Darwin, Melbourne, and other capital cities, balancing tourism support and rental affordability may require input from local and state governments. New South Wales is leading the way, with several policies restricting short-term rental accommodation and empowering body corporates to govern the practice within their scheme. Whether or not other Aussie states and territories will follow suit is yet to be seen.

If you do decide to lease your property on a home-sharing platform, do your research. Determine whether or not your property is suitable, crunch the numbers, be aware of your obligations, and consult your scheme’s bylaws. You certainly do not want to start World War III with your neighbour.