Introduction

Short-term rental accommodation (STRA), facilitated by platforms like Airbnb and Stayz, has become increasingly common in New South Wales (NSW) strata schemes, offering income opportunities but also presenting unique challenges for community living. The regulatory landscape governing STRA is currently under review by the NSW Government, signalling potential changes in 2025 that strata owners, Owners Corporations (OCs), and strata managers must prepare for.

This guide provides essential information on the current STRA framework within NSW strata schemes, including registration, safety standards, and the crucial role of by-laws. Furthermore, it explores the potential amendments being considered for 2025 and outlines practical steps stakeholders can take now to navigate the evolving regulations, ensuring compliance and maintaining harmony within their strata community.

Understanding the Current NSW Short-Term Rental Accommodation Framework for Strata Schemes

Defining STRA in NSW (Hosted vs Non-Hosted)

STRA in NSW is legally defined as a commercial arrangement giving a person the right to occupy residential premises for a period of not more than three months at any one time. This definition is established under Section 54A of the Fair Trading Act 1987 (NSW). Arrangements exceeding this three-month threshold typically fall under the Residential Tenancies Act 2010 (NSW) and are not considered STRA.

The regulatory framework distinguishes between two types of STRA, which are crucial for understanding how specific rules apply within a strata scheme:

• Hosted STRA: This occurs when the host (typically the owner or resident) lives on the premises during the guest’s stay. This includes renting out a spare room or even the entire dwelling while the host remains present on the property (e.g., in a granny flat on the same lot).
• Non-hosted STRA: This applies when the host does not reside on the premises during the guest’s stay. This category generally covers investment properties used exclusively for short-term rentals.

Meeting STRA Register & Fire Safety Standards

Operating a STRA property legally in NSW necessitates compliance with registration and fire safety requirements. All properties intended for STRA must be registered on the official NSW Government STRA Register, accessible via the NSW Planning Portal, before they can be advertised or offered for rent.

Registration involves:

• An initial fee of $65 for the first year
• An annual renewal fee of $25 thereafter

Crucially, hosts must confirm compliance with minimum fire safety standards when registering their property. These standards, outlined in the Environmental Planning and Assessment (Development Certification and Fire Safety) Regulation 2021 (NSW), are designed to protect guests who may be unfamiliar with the property.

Key fire safety requirements include:

• Interconnected Smoke Alarms: Must be installed in hallways near bedrooms and on each storey, meeting Australian Standard AS 3786.
• Heat Alarms: Required in attached private garages and interconnected with smoke alarms.
• Evacuation Diagrams: Clear diagrams showing exits, equipment, and assembly points must be displayed in each bedroom and near the main entrance.
• Fire Extinguishers and Blankets: For properties in Class 2 buildings (like apartments), a portable fire extinguisher and fire blanket must be installed in the kitchen.
• Egress Doors: Main entrance doors in Class 2 buildings must be openable from the inside without a key.

Failure to register or comply with these safety standards can lead to penalties and enforcement action by the local council or NSW Fair Trading.

 STRA Code of Conduct Obligations for Hosts & Guests

A mandatory Code of Conduct governs the behaviour of all participants involved in the STRA industry in NSW, including hosts, guests, booking platforms, and letting agents. This Code, which commenced on 18 December 2020, sets minimum standards aimed at ensuring responsible and respectful conduct, particularly important within the close confines of strata living.

Key obligations under the Code include:

• For Hosts:
  • Maintaining a safe property
  • Providing contact details to neighbours and the OCs
  • Taking reasonable steps to ensure guests comply with the Code and strata by-laws
  • Managing noise and amenity impacts
  • Holding appropriate insurance covering liability for third-party injury or death
• For Guests:
  • Behaving lawfully
  • Avoiding unreasonable noise or disruption to neighbours
  • Respecting the property and common areas
  • Being responsible for their visitors’ actions

Breaches of the Code can result in disciplinary actions administered by NSW Fair Trading. These actions range from warning notices and fines (up to $1.1 million for corporations and $220,000 for individuals for serious contraventions) to listing on the public Exclusion Register. Being placed on the Exclusion Register effectively bans individuals or corporations from participating in the STRA industry in NSW for five years, following a ‘two strikes’ policy for serious breaches within a two-year period.

NSW STRA Day Limits Hosted & Non-Hosted Rules

The NSW STRA framework includes specific limits on the number of days certain properties can be rented out, primarily affecting non-hosted arrangements in designated areas. These day limits are tracked via the mandatory STRA Register.

The key day limit rules are:

• 180-Day Cap for Non-Hosted STRA: In the Greater Sydney region, Ballina Local Government Area (LGA), parts of Clarence Valley LGA, and parts of Muswellbrook LGA, non-hosted STRA (where the owner does not live on-site) is restricted to a maximum of 180 days per calendar year.
• Stricter Cap in Byron Shire: Most of the Byron Shire LGA has an even lower cap of 60 days per year for non-hosted STRA, effective from 23 September 2024 (though specific precincts retain a 365-day limit).
• No Cap for Hosted STRA: Generally, hosted STRA (where the host resides on the premises) is not subject to these day limits and can operate year-round across NSW.
• Exemption for Longer Bookings: Bookings of 21 consecutive days or more are exempt and do not count towards the non-hosted day limits in capped areas.

Local councils monitor compliance with these day limits using data from the STRA Register. Operating a non-hosted STRA beyond the applicable cap constitutes unauthorised development and can lead to council investigation and enforcement action.

Owners Corporation Power to Regulate STRA via By-Laws (Section 137A)

A critical aspect of STRA regulation within strata schemes is the power granted to OCs under Section 137A of the Strata Schemes Management Act 2015 (NSW). This provision allows an OC to adopt a specific by-law that prohibits the use of a lot for STRA if that lot is not the owner’s principal place of residence.

This means strata communities can decide, through a formal process, to ban non-hosted STRA (investment properties used for Airbnb-style letting) within their building. To pass such a by-law:

• A special resolution is required at a general meeting
• At least 75% of the votes cast must be in favour

However, Section 137A explicitly limits this power: an OC cannot adopt a by-law that prevents a lot from being used for STRA if the lot is the owner’s principal place of residence. This protects the rights of owner-occupiers to engage in hosted STRA, such as renting out a spare room or letting their home while away on holiday.

Therefore, while strata schemes can regulate or ban investment-based STRA, they cannot completely prohibit owner-occupier STRA activity. Any by-law passed must be registered with NSW Land Registry Services (NSW LRS) within six months to be enforceable.

What Potential 2025 STRA Rule Amendments Are Under Review in NSW?

Potential Reduction of 180-Night Cap (Non-Hosted STRA)

The NSW Government is actively reviewing the current 180-night annual limit for non-hosted STRA in specific areas like Greater Sydney. A significant reduction in this cap is being considered, potentially lowering it to 90 nights per year.

Proposals for even stricter limits are also part of the discussion, including a 60-night cap similar to that advocated by certain local councils, like Byron Bay Shire Council. These potential changes primarily target non-hosted STRA, which typically involves investment properties rather than the owner’s principal place of residence.

Stronger Enforcement Mechanisms & Increased Penalties

Consideration is being given to implementing more stringent enforcement measures for STRA regulations. This includes the possibility of increased financial penalties for non-compliance.

Areas targeted for tougher enforcement may include:

• Failure to register a property on the NSW STRA Register
• Exceeding the permissible annual day limits for non-hosted STRA
• Breaches of the mandatory minimum fire safety standards

Additionally, an increase in proactive compliance audits by authorities is anticipated, heightening the risk for operators who are not adhering to the rules.

Enhanced Local Council Powers Over STRA Regulation

A potential outcome of the ongoing review is granting local councils greater discretionary authority over STRA within their specific LGAs. This could empower councils to determine and enforce their own STRA limitations or restrictions.

Such a shift could lead to significant variations in STRA rules across different regions of NSW. Regulations might range from outright prohibitions in certain zones to more permissive frameworks, thereby creating a more complex and potentially fragmented regulatory landscape for property owners and managers operating across multiple council areas.

Potential New Levies or Taxes on STRA Properties

The introduction of a new levy or tax specifically aimed at STRA properties is under serious consideration by NSW policymakers. This approach mirrors initiatives in other jurisdictions, such as Brisbane’s differential council rating for STRA properties.

The primary policy goal behind proposing such a levy is to create a financial incentive for property owners. It aims to encourage the transition of properties from the short-term rental market back into the long-term residential rental market, addressing housing supply concerns.

Potential 2025 Impacts on NSW Strata Owners & Schemes

Financial Impacts Reduced Revenue Costs & Profitability

Potential changes to NSW STRA rules could significantly affect the financial returns for strata owners. These impacts may include:

• Reduced rental income: Tighter annual day caps, particularly the potential reduction from 180 days to 90 or even 60 days for non-hosted STRA, would directly limit the number of bookable nights, substantially curtailing potential rental income.
• Higher operational costs: Stricter enforcement mechanisms and enhanced compliance requirements could lead to increased expenses for hosts, including:
  • Compliance checks
  • Necessary property upgrades to meet potentially higher standards
  • Increased management fees if professional help is sought
• New financial burdens: The possible introduction of STRA-specific levies or taxes, similar to differential council rates seen elsewhere, would directly diminish the net profitability of short-term letting ventures.

The cumulative effect of potentially lower revenues combined with higher costs and new taxes could significantly erode the financial viability of the non-hosted STRA model. Additionally, owners should remain mindful that using a property for income generation like STRA can impact Capital Gains Tax (CGT) upon sale, potentially reducing the main residence exemption.

Hosted STRA arrangements, where the owner resides on-site, are anticipated to be less financially impacted by proposals targeting non-hosted operations.

Operational Impacts Increased Compliance Burden & Complexity

The potential regulatory shifts are likely to increase the operational workload and complexity for those managing STRA properties in strata schemes. These challenges include:

• Enhanced record-keeping requirements: Anticipated stricter enforcement necessitates more meticulous tracking, particularly for booked nights against potentially lower annual caps.
• Stricter compliance standards: Rigorous adherence to all registration, safety, and Code of Conduct requirements becomes even more critical.
• Fragmented regulatory landscape: If local councils are granted enhanced regulatory powers, owners operating properties across different LGAs could face varying local rules, adding layers of complexity to managing compliance across state, council, and strata scheme by-law levels.

The potential for increased complexity and the heightened risk associated with non-compliance may encourage more owners to engage professional STRA property managers, adding another cost layer.

Effectively, these potential changes could transform STRA hosting from a relatively straightforward activity into one requiring more active, business-like management with diligent attention to regulatory detail and robust compliance systems.

Strategic Impacts Reassessing STRA Viability & Alternatives

Current and prospective STRA investors in NSW strata properties need to strategically reassess their approach in light of potential regulatory changes. Owners heavily reliant on the non-hosted STRA model must critically evaluate its continued financial viability, especially under scenarios involving tighter day caps and new levies.

Potential alternatives include:

• Transitioning to long-term leasing: Moving the property onto the traditional long-term rental market, although owners must consider the implications of recent tenancy law reforms, such as the end of ‘no grounds’ terminations.
• Focusing on longer bookings: Marketing efforts could target stays of 21 consecutive days or more, as these are exempt from the non-hosted day limits.
• Considering hosted models: If feasible, shifting to a hosted STRA model (where the owner resides on the property) could be advantageous, as this model is expected to be less affected by the proposed changes.
• Divestment: For some investors, selling the property might become the most strategically sound decision if the regulatory changes significantly impact profitability or operational feasibility.

The uncertainty surrounding the final regulations, particularly the potential for varying council rules, could also introduce market hesitancy. This may deter new investment specifically aimed at STRA in certain areas and potentially impact property values, challenging previous assumptions about STRA capability always adding value.

Community Impacts Amenity & Potential Conflict

Changes to STRA regulations could influence the living environment and social dynamics within NSW strata schemes in several ways:

• Potential benefits of reduced STRA intensity:
  • A more stable, long-term resident population
  • Alleviation of common amenity issues often associated with high guest turnover, such as:
    • Noise complaints
    • Security concerns
    • Overuse of common facilities
  • Reduced management burden on OCs
• Potential sources of conflict:
  • Owners financially impacted by new restrictions might resist further limitations, such as stricter strata by-laws
  • Residents prioritising quiet enjoyment and stability might advocate strongly for additional restrictions
  • This divergence of interests can strain community relations and make achieving the consensus needed for decisions like by-law changes (requiring a 75% majority) more challenging

Regardless of external regulations, proactive internal management remains crucial. Fostering clear communication between hosts, the OC, and other residents, along with implementing responsible management practices like guest vetting and clear house rules, can significantly help mitigate potential conflicts and maintain a more harmonious strata living environment.

Interaction with Broader 2025 Strata & Tenancy Law Reforms

Mandatory Strata By-Law Review Impacting STRA Rules

Significant strata law reforms, separate from the specific STRA review, are commencing in NSW. A key change under these reforms requires existing strata schemes to undertake a comprehensive review of all their by-laws, beginning from mid-2025.

OCs must examine their current by-laws within 12 months of the commencement of section 134 of the updated Strata Schemes Management Act 2015 (NSW). This review process must ensure that:

• All by-laws, including those governing STRA within the strata scheme, are valid
• All by-laws comply with the amended legislation

This presents an important opportunity for schemes to ensure their governance framework aligns with current laws.

New Tenancy Rules How They Affect STRA Property Owners

Broader changes to NSW tenancy laws, taking effect in 2024 and 2025, also intersect with the management of properties sometimes used for STRA. While STRA arrangements under three months are generally excluded from the Residential Tenancies Act 2010 (NSW), owners who switch between long-term tenancies and STRA, or consider long-term leasing as an alternative, need to be aware of relevant updates.

Key changes affecting property owners include:

• Termination Notice Requirements: When ending a residential tenancy specifically because the property will be used for STRA, the Residential Tenancies Amendment Regulation 2025 (NSW) requires landlords to provide evidence of the property’s registration on the NSW STRA Register (the property ID) along with the termination notice.
• Bond Claim Reporting: From 1 July 2025, landlords or agents lodging bond claims or refunds through Rental Bonds Online must specify the reason for the tenancy termination. This increases transparency around lease endings, including those potentially related to converting a property to STRA use.
• Pet Rules: New rules commencing 19 May 2025 make it significantly harder for landlords to refuse a tenant’s request to keep a pet. Landlords can only refuse for specific, prescribed reasons, and strata by-laws that impose a blanket ban on all pets are considered invalid under these tenancy laws. This means an OC cannot rely on a ‘no pets’ by-law as grounds to compel a landlord to refuse a tenant’s pet request.

Preparing Your Strata Scheme Practical Steps for 2025

Monitoring Official Government Channels

Keeping up-to-date with the dynamic regulatory landscape for STRA is essential. Strata owners, OCs, and strata managers should regularly monitor official government sources for accurate information on potential changes and existing requirements.

Key channels to follow include:

• NSW Fair Trading: Check their website and subscribe to the ‘Property Matters’ e-Newsletter for updates on the Code of Conduct, strata law amendments, and general rental regulations.
• NSW Department of Planning: Monitor their website for information regarding the statewide planning framework, the STRA Register, fire safety standards, and any regional variations or reviews.
• NSW Government Portal (nsw.gov.au): Look for official press releases, legislative updates, and announcements regarding housing policy and STRA reviews.

Relying on these primary sources ensures decisions are based on factual information rather than speculation, which is crucial during periods of regulatory review.

Ensuring Current STRA Regulatory Compliance

Proactive compliance with existing STRA rules is crucial, especially with the potential for increased enforcement focus. Conducting a thorough audit of current practices helps mitigate risks and prepares the scheme for any future adjustments.

Key compliance areas to verify include:

• STRA Registration: Confirm every property used for STRA is actively registered on the NSW Government’s STRA Register via the NSW Planning Portal. Ensure the registration number is correctly displayed on all online advertisements and listings. Verify that annual renewals are completed on time to avoid suspension or deregistration.
• Fire Safety Standards: Conduct regular checks to ensure full compliance with the mandatory fire safety standards outlined in the Environmental Planning and Assessment (Development Certification and Fire Safety) Regulation 2021 (NSW). This includes verifying the installation, placement, and functionality of:
  • Interconnected smoke alarms
  • Heat alarms (where required)
  • Evacuation diagrams
  • Fire extinguishers
  • Fire blankets
  • Keyless egress doors, as applicable to the building class

Maintain records of these compliance checks for future reference.

• Code of Conduct Adherence: Review host practices to ensure alignment with the mandatory Code of Conduct. This involves confirming procedures for informing guests about the Code and relevant by-laws, managing noise effectively, and providing necessary contact details to neighbours and the OC.
• By-Law Compliance: Ensure all STRA operations strictly adhere to any specific by-laws the strata scheme has adopted regarding short-term letting, particularly restrictions on non-hosted STRA under Section 137A of the Strata Schemes Management Act 2015 (NSW).

Addressing any compliance gaps now reduces immediate risks and demonstrates responsible management.

Reviewing Financial Viability & Investment Strategies

Owners utilising strata properties for STRA, particularly non-hosted investment lots, should evaluate the potential financial impacts of proposed regulatory changes. This involves assessing current profitability and considering alternative strategies.

Recommended actions include:

• Financial Modelling: Analyse how potential changes, such as reduced day caps (e.g., 90 or 60 days) or the introduction of new levies or taxes, could affect rental income and overall profitability. Create different financial scenarios to understand the potential range of outcomes.
• Evaluate Alternatives: Based on the financial modelling, consider the viability of other options:
  • Transitioning to the long-term rental market, carefully considering the implications of recent tenancy law reforms
  • Focusing marketing efforts on securing bookings of 21 consecutive days or longer, which are exempt from non-hosted day limits
  • Adjusting pricing strategies to maintain profitability under potential new constraints
  • Shifting to a hosted STRA model if the owner resides on the property, as this is less likely to be affected by proposed changes
  • Considering divestment if the financial viability is significantly compromised

This proactive financial review allows for informed strategic decisions rather than reactive adjustments after new rules might be implemented.

Assessing Updating & Enforcing STRA-Related By-Laws

OCs have significant power to regulate STRA within their scheme through by-laws, particularly concerning non-hosted arrangements. Reviewing and potentially updating these by-laws is a key preparatory step.

OCs and strata managers should consider:

• Reviewing Current By-Laws: Examine existing by-laws to determine if they adequately address STRA. Check if a by-law restricting non-hosted STRA under Section 137A of the Strata Schemes Management Act 2015 (NSW) exists, if it was passed correctly (special resolution), and if it has been registered with NSW LRS.
• Considering Amendments or New By-Laws: Decide if the scheme wishes to adopt or amend by-laws related to STRA. This could involve prohibiting non-hosted STRA (if the lot is not a principal place of residence) or implementing rules to manage impacts like noise, common property use, or security. Legal advice is recommended for drafting to ensure validity and enforceability.
• Following Correct Procedures: Remember that passing or changing by-laws requires a special resolution (at least 75% support based on unit entitlements) at a general meeting and must be registered with NSW LRS within six months to become effective.
• Understanding Enforcement: Familiarise the strata committee with the process for enforcing by-laws, which may involve issuing notices to comply and potentially applying to the NSW Civil and Administrative Tribunal (NCAT) for orders if breaches persist.

Using by-laws effectively allows the strata community to set tailored rules that reflect the owners’ collective preferences within the bounds of the law.

Fostering Communication & Responsible Management

Clear communication and responsible management practices are essential for minimising conflict and maintaining harmony within the strata community, regardless of external regulations.

Effective strategies include:

• Establishing Clear Protocols: The OC should inform all owners about the scheme’s by-laws regarding STRA and the requirements of the NSW Code of Conduct. Additionally, implement a clear, accessible process for residents to report concerns or suspected breaches.
• Host Transparency and Availability: Hosts should provide their contact details (or those of a designated manager) to the strata committee and neighbours for prompt issue resolution. Being responsive demonstrates accountability and helps build trust within the community.
• Implementing Responsible Practices: Encourage or require hosts to use robust guest vetting procedures, establish clear house rules addressing noise and behaviour, and manage security aspects like key exchange carefully.
• Addressing Concerns Proactively: Open dialogue between hosts, the committee, and other residents can help address potential issues before they escalate into formal disputes, creating a more harmonious living environment for all.

Seeking Professional Legal & Financial Advice

Navigating the complexities of STRA regulations, strata law, tenancy rules, and financial implications requires careful consideration. Seeking tailored advice from qualified professionals is highly recommended.

Consider consulting:

• Strata Lawyers: Engage lawyers specialising in NSW strata law for guidance on:
  • Interpreting regulations
  • Ensuring compliance
  • Drafting or reviewing by-laws for legal validity
  • Understanding enforcement options
  • Navigating disputes
• Financial Advisors/Accountants: Seek advice on:
  • The financial viability of STRA under different regulatory scenarios
  • Tax implications (income tax, CGT)
  • Investment strategies
  • The potential impact of levies

Expert advice tailored to the specific circumstances of an individual owner or a particular strata scheme provides clarity and helps mitigate legal and financial risks effectively.

Conclusion

Navigating the existing STRA framework in NSW requires diligence from strata stakeholders, encompassing registration, safety standards, day limits, the Code of Conduct, and the crucial role of strata by-laws under Section 137A of the Strata Schemes Management Act 2015 (NSW). With potential 2025 amendments under review—including tighter caps, stricter enforcement, enhanced local council powers, and possible levies—proactive preparation and understanding the interplay with broader strata and tenancy reforms are essential for compliance and strategic planning.

To effectively manage these evolving regulations and protect your interests within your strata scheme, consider seeking specialised legal support from PBL Law Group. Contact our expert strata law team today for tailored advice and proactive solutions to ensure your compliance and navigate the complexities of the NSW STRA landscape with confidence.

Frequently Asked Questions (FAQ)