Court ruling prompts warning for unit investors

A Victorian Supreme Court ruling has upheld a property owner’s right to rent out his unit to short-term occupants in a long-stay complex.

Action was brought against an owner in a Melbourne residential tower who’s renting out his units for short-stay accommodation.

In the action, it was argued that this use of the units contravened the occupancy permit that had been issued for the premises by the local council.

In its decision to overturn a previous Building Appeals Board ruling, the Supreme Court didn’t regard the short-term stay of people in the units as relevant to the classification.

Dr Kristy Richardson from CQUniversity’s property program says theBuilding Code of Australia operates nationally so the court finding has implications in other states.

“Indeed, sitting behind the recent court appeal were complaints made by permanent residents about the noise and other issues of the short-term residents in the building. Those complaints were unable to be resolved through body corporate governance mechanisms.

“Inspection of the body corporate by-laws are a necessity to ascertain whether there are any restrictions on the use or the minimum term for which the unit may be rented out.

“On the other hand, if a person is seeking to buy a unit in an apartment complex for investment purposes, they need to take care to ensure that the by-laws permit this and that the management of the complex together with any disputes that might arise over any use of the apartment can be effectively dealt with.”

Robert Johnson, a Queensland-based body corporate manager with Matthews Real Estate, says that under their state’s laws, it isn’t possible to restrict an owner’s use with body corporate by-laws as long as the use complies with it’s council classification.

“A building is issued with a certificate of classification by, or on behalf of, a local authority which says what usage there may be at that building.

“You can’t discriminate how an owner of a lot uses that lot as long as that owner is using the lot in accordance with the certificate of classification.”

Matthew Ganter, a property valuer with Herron Todd White, says some long-term residents will find having short-term neighbours a detriment.

“There’s often no sense of community for the permanent residents when there’s neighbours coming and going.”

Ganter says while the effect on a property’s value would be negligible in many cases, there will be a percentage of potential buyers turned off by having short-stay neighbours.

“Some people will be put off. When it comes to values, you really are guided by the other sales in the building. That evidence should factor in any detriments.

“The impact on a property from neighbours would depend very much on the nature of the short-term residents in relation to noise and interruption to the normal use of the property.”


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