Property owners are increasingly turning to websites like Airbnb.co.nz and couchsurfing.com to earn extra income and offset their cost of living. Airbnb and Couch Surfing services connect people to a global community, allowing anyone to share their homes with travellers. The popularity of this short term letting was most recently highlighted during the British and Irish Lions rugby tour. In some situations, Airbnb has become so profitable that properties are being purchased for the sole purpose of being used as short term rentals. If you’re renting your apartment however, your body corporate might have something to say about it…
What’s a Body Corporate?
Apartment blocks are generally held under a type of ownership called a ‘unit title.’ This is where the unit owner owns a defined part of the building but also shares the ownership of common property with the other unit owners.
The unit title owners in a development form what is called a Body Corporate, a group which collectively makes decisions about certain aspects of the units and common property. Body corporates often become inherently concerned with maintaining the integrity of the apartment complex. Short term letting has potential risks for other occupants in the apartment block as use of one apartment can easily have a direct impact on other tenants and owners. These risks include things like security compromises, increased noise, nuisance issues and shared property damage.
Who makes the rules?
Unit titles are governed by the Unit Titles Act 2010, which currently does not prohibit or restrict occupational use. While body corporates have some limited powers to restrict short term stay arrangements, it would be unlawful under the Unit Titles Act for a body corporate to say you cannot operate as an Airbnb. A body corporate’s principal role is to manage and administer common property, not dictate use of units.
Power to restrict occupational use lies with either the relevant Council or the original developer. These restrictions would be clear at the outset of purchasing the apartment, so that a purchaser could make an informed decision before buying.
However, this said, there are other points to take into consideration if you want to take advantage of Airbnb or Couch Surfing.
There’s always a ‘but’…
Even though a body corporate is likely to be acting beyond its powers if it seeks to prevent Airbnb style letting, there is often pressure from other unit owners for them to do so. Additionally, body corporates may need to update fire evacuation plans and other security considerations to accommodate for the extra temporary tenants.
Some body corporates are attempting to find ways around the rules or even defying them completely, banking on the likelihood that no one will challenge them in front of the Tenancy Tribunal.
Your Body Corporate isn’t all you need to worry about:
Even if your body corporate has no issues with you letting your unit or Airbnb, there are still a number of other factors you should probably take into consideration before you do so.
Check the Title: Before you buy, check if the developer or relevant Council has placed restrictions on short term letting. Taking the time to be informed early can save costly disappointment in the end.
Tax implications: Airbnb rental income is taxable and you should read our recent article on this: https://www.wakefieldslaw.com/tax/
Change of use: If short term letting becomes seen as a quasi-hotel situation, then the relevant Council may deem the AirBnB as a ‘change of use’, which would require consideration of additional building compliance requirements. For example, more smoke alarms and installation of disability toilets.
Insurance impacts: Frequent use of short term stay rentals could create potential insurance issues on an entire apartment block, raising premiums for the body corporate and other unit owners. As a unit owner, it is important to discuss short term letting with your insurance company as standard house and contents insurance may not cover you.
Registration, rates or consent: Local councils may have specific requirements for visitor accommodations that may require you to register, pay increased rates or apply for resource consent.
Have you thought about putting your unit on Airbnb? We’d love to hear your story or answer any questions you’ve got – we can help you navigate the sometimes tricky body corporate rules to find the best outcome for all. Give us a call on 04 970 3600 or flick us an email, firstname.lastname@example.org