Court ruling prompts warning for unit investors

Court ruling prompts warning for unit investors

Posted on Wednesday, June 05 2013 at 4:06 PM

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

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

“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

“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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