A recent VCAT decision has clarified the powers of Owners Corporations to regulate short term leasing. 

It is common for Owners Corporation Rules to restrict certain activities that can be done in a multi-unit complex.  However, Owners Corporations should be aware their rules can only exercise powers granted under the Owners Corporation Act or Subdivision Act - any rule that goes beyond the powers granted under these acts will be unenforceable.

This principle was applied in a recent unsuccessful VCAT application.  The proceeding was brought by Owners Corporation of the Docklands Watergate building. The Owners Corporation Rules stated that no apartment was to be let for less than one month and, in an apparent breach, 11 of the buildings 348 apartments were being let for periods averaging 2 to 7 days.

Despite this, the Owners Corporation was unsuccessful.  The Tribunal found that Owners Corporations do not have the power to regulate the length of time for which an apartment may be let. 

As Member Rowland observed, under the Subdivision Act there is ‘no specific function or power conferred on bodies corporate to regulate the use of a private lot’.  While an Owners Corporation may validly regulate the conduct of occupiers on matters such as noise, this power does not extend to allow a prohibition on a particular use or particular occupation.

The Tribunal also found that the Owners Corporation Act also does not give the Owners Corporation the power to prevent short stays.  Statutory powers relating to changes of use, health safety and security, and common property were insufficient to allow the Owners Corporation Rules to make what it described as ‘town planning decisions’. 

This decision highlights the importance of properly drafted Owners Corporation rules and the enforcement consequences, which include direct and indirect costs, of any rule going beyond what is authorised under the relevant legislation. 

For more information please contact:

Greg Tobin
Harwood Andrews
T: 03 5225 5252
E: gtobin@harwoodandrews.com.au

Sophie McGuinness
Senior Associate
Harwood Andrews
T: 03 9611 0117
E: smcguinness@harwoodandrews.com.au