Short stay under threat

Renting out an investment property as short stay accommodation can be lucrative, but has its risks as well as its rewards.

Furniture, games consoles, cutlery and crockery can be broken or stolen – making inventory management and insurance designed for short stay letting a must.

Being on holidays, guests are more likely to enjoy a drink or three, raising the prospects of them injuring themselves, damaging your furniture and annoying the neighbours.

Short stay lets in properties zoned “residential” are very common but, surprisingly, may be in legally murky waters.

In two recent landmark court decisions, authorities ruled that short stays did not constitute “dwelling” and were not permitted under a residential zoning – although one of the rulings has been overturned.

The first case – heard by the Building Appeals Board but overturned by the Supreme Court of Victoria – related to an apartment block in the Watergate Complex in Melbourne’s Docklands which was nicknamed “Partygate”.
The Docklands Executive Apartments charges about $250 a night for a two-bedroom apartment on short lets while similar apartments on conventional leases cost around $500—600 a week.

In the second case, the owner of a six-bedroom holiday home in Central NSW was banned from renting it for periods of less than three months.

The NSW Land and Environment Court was told the Terrigal property was used for short stays for bucks and hens parties, with late-night noise and strippers disturbing a family who lived year-round next door.

Gosford City Council is preparing to address the ruling by specifically allowing holiday lets in certain types of residential-zoned properties. This would follow the lead set by other proactive coastal areas where such business is an important source of revenue.

EBM Insurance Brokers RentCover General Manager Sharon Fox-Slater said the decisions potentially had ramifications in every state in Australia.

“The common thread here is that action was taken because the holidaymakers caused problems,” Sharon said.
“Short-stay accommodation requires more work than a regular rental arrangement. Professional property management is key in making sure your investment isn’t occupied by troublemakers,” she said.

“Regular landlord insurance is not appropriate for guests staying only a day or two. Owners need an insurance specific to the industry, such as RentCoverShortTerm.”

Conflicts between long-term residents and holidaymakers have prompted the Real Estate Institute of New South Wales to develop a Holiday Rental Code of Conduct, launched in March.