After a complex legal case, in July 2016 The Supreme Court of Victoria handed down an important decision that the relevant legislation did not give the Owners Corporations power to make a rule prohibiting the use of residential lots for ‘any trade or business’.

This was based on the role of an Owners Corporation as principally managing common areas of a joint property, and not as having the power to interfere with owners’ proprietary rights.

The apartments in question are part of a multi-building, multi-storey apartment complex, some used as short term serviced apartments. This use was opposed by the Owners Corporation, who argued that any such ‘trade or business’ was against its rules and created nuisance and increased safety risks to other owner occupiers. An order was made for building upgrades, as the short-term use stopped the building being a ‘dwelling’, turning it from a Class 2 to Class 3 classification thereby requiring stricter safety measures; but this was appealed.

The case went before the Supreme Court, which found the Class 2 nature of the apartments did not prevent their use for short-lease arrangements, nor require the apartments to be reclassified as Class 3. This decision was then appealed to the Full Court of the Supreme Court of Victoria by the City of Melbourne where it was was again dismissed, although all aparties have agreed there will be internal and common area inspections on apartments with change of use.

The outcome may have longer-term implications for apartments being used as short-term accommodation, since as long as an apartment owner has obtained any required planning permission to use their apartment for short term letting, they do not require the permission from the Owners Corporation to enter into such arrangements.

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