Watergate Ruling Impacts Short-Term Lets

© Copyright TEYS Lawyers 2013 www.teyslawyers.com.au
Watergate
The Decision & Its Implications
April 2013

Tom Bacon on the Watergate Decision
Michael Teys on the Wider Implications
Tonight’s Presentations

About Tom Bacon
Tom joined TEYS Lawyers in June 2010 from Auckland, New
Zealand, with five years' experience in dispute resolution, local
government/ town planning and civil litigation. Tom advises on all
aspects of strata community disputes in the Australian states, with
current matters in NSW, Victoria and the ACT.
Tom is an accredited LEADR mediator, and places a high emphasis on resolving disputes
without the need for protracted litigation. In his previous roles, Tom acted on numerous high-
value local government and environment appeals, and public indemnity insurance claims.
Tom has regularly appeared for clients in both mediations and hearings in the
District, Environment and High Courts of New Zealand, and in NSW in the Consumer, Trader
& Tenancy Tribunal (CTTT) ,the Local Courts and Supreme Courts.

The Problem at Partygate
 5 operators 40 units
 Average stay less than 3
nights
 Cost of additional security
and cleaning
 Diminution of valuable
units
 Owners moving out

Powers Under the OC Act 2006
S.138 – Power to make Rules of the
Owners Corporation – ie, to restrict or
prohibit lot owners from letting units
for commercial use, or for periods of
less than 30 days
S.140 – a Rule will be deemed to
be of no effect if inconsistent
with another Act or Law
(ie, Residential Tenancies Act
1997)

Docklands Zoning / Planning
Controls
No town planning permit required for
commercial activities in prescribed Docklands
areas
Docklands is a mixed-use zone, designed to cater
to a variety of residential and commercial needs
in close proximity to each other

City of Melbourne Enforcement
S. 106 Building Act 1993
– the use of the units
contravenes the
occupancy permit for
the building
The occupant
characteristic, fire safety
needs and reaction to a
fire or other emergences
have varied from that for
which the building was
originally
designed, approved and
intended to be used

Building Code of Australia
Class 2 - a building
containing 2 or more sole-
occupancy units each being
a separate dwelling
Class 3 – a residential
building, other than Class 1
or 2, which is a common
place of long term or
transient living for a number
of unrelated persons,
including (b) a residential part
of a hotel or motel…

Meaning of Dwelling
Derring Lane P/L v Port Phillip City Council (No. 2)
(1998) 108 LGERA 129
“A building constructed for the purposes of people
dwelling there permanently or for a considerable
period of time, or having in that building their settled
or usual abode”

BAB Findings
The building‟s fire safety and construction design never
contemplated this commercial use, and may trigger the building‟s
fire safety systems to be reviewed and re-designed
The use of a hotel business is not permitted within Class 2
buildings and is considered a change of use
The Appellants were using the apartments like a „hotel‟ business

Michael Teys is the Founder and Principal Lawyer of TEYS Lawyers. He
has a Bachelor of Laws and practices exclusively in the area of strata title
law. He is a Fellow of the Australian College of Community Association
Lawyers. He was formerly an Adjunct Lecturer with Charles Sturt University.
He appears weekly on SKY News Business Channel's Property Success
with Margaret Lomas and is a regular panellist for the property edition of
Your Money, Your Call for the same channel. You can read Michael‟s blog
at www.michaelteys.com and follow him on Twitter at @MichaelTeys.com
Teys Lawyers practice nationally in strata title law representing owners corporations, bodies
corporate and apartment owners. The firm‟s practice groups include building defects, strata
community disputes, strata titles property law, by-laws and levy collection.
Subscribe for their free e-newsletter StrataSpace and find out more about them at
www.teyslawyers.com.au
About Michael Teys

Watergate‟s Wider Implications
Residential Class 2 dwelling
does not include the use by
short term guests with
hotel-style services
All strata owners
and managers
where lots are
used this way
Breaches Building
Act and vitiates
insurance policies
Docklands, Vic
toria, Australia

The Fundamental Strata Duties
To act honestly
and in good faith
To exercise due
care and skill

The Chain of Legal Liability
OC (S.5)
Committee
(S.117)
Managers
(S.122)

The Statutory Duty to Insure Strata
 S.59 building insurance
 S.60 public liability
 Insurance Contracts Act
(1984) (Cth) duty of
disclosure

Alteration of Risk Exclusion
You must promptly advise
us…….. if the nature of the
occupation or other
circumstance affecting your
insured property is changed in
such a way as to increase the
risk of loss or damage or the
likelihood of liability losses

Strata Bodies Have Unlimited Liability
 An uninsured owners
corporation or body
corporate must still pay a
damages award
 Unlike shareholders and
club members, lot owners
do not have limited liability
 An administrator will be
appointed to strike a levy to
cover damages and costs

Recommended Action
Make enquiries about use
Report improper use to local authorities
Notify insurer
Join appeals / prosecutions
1.
3.
2.
4.

About Nicole Wilde
Nicole joined TEYS Lawyers in September 2012 having previously
practised for four years as a Barrister and Solicitor in Auckland, New
Zealand. Nicole advises both owners corporations and lot owners in
respect of all types of Strata Community disputes throughout Australia.
Nicole has advocacy experience in a range of Courts and Tribunals and is dedicated to
providing clear, quality legal advice and representation. In her previous roles, Nicole acted on
high-value construction defect proceedings on behalf of plaintiffs against local government
and contractors. She has been involved in all stages of the litigation process. In her role as a
solicitor for the Office of the Crown Solicitor in Auckland, Nicole provided advice and
prosecutorial representation to the regulator of the property agents industry.

Watergate Ruling Impacts Short-Term Lets

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Watergate Ruling Impacts Short-Term Lets