A ruling in Britain's highest court on a holiday letting dispute in a tiny group of Caribbean islands could lead to bans on Airbnb in unit blocks here in Australia.
Four law lords in Britain's Privy Council, once also the highest court of appeal for Australia, on Friday morning unanimously ruled that strata corporations can enforce bylaws to restrict short-term letting for stays of less than 30 days.
And they did so by overturning a provision, copied word for word from NSW strata law, which has previously been used to dissuade apartment owners from passing bylaws to restrict Airbnb and other holiday lets in their buildings.
"The Privy Council ruled that the bylaw making power of a strata corporation [body corporate] is very wide, and any bylaw that restricts the use of a lot for 'residential purposes' would be valid," says leading Australian strata lawyer Tom Bacon, who travelled to London this year to observe the case.
He says this ruling, although not binding in Australian courts, would be considered "persuasive" in any legal action to enforce anti-short term letting bylaws here, especially because it was originally an Australian law.
Until now, it has been held that bylaws can't prevent holiday letting, even in buildings that are zoned "residential only", because of the section of strata law that forbids bylaws that interfere with a lot owner's right to "deal" with their property.
That section of the law was cited in last year's parliamentary report into holiday letting in NSW. But the report was shelved after loud protests from apartment owners, and recently completed public consultations canvassed the idea of individual buildings being given the power to restrict short-term letting.
The Privy Council ruling can only strengthen the case of those in favour of individual buildings, already zoned residential only, being able to set their own rules.
The Turks and Caicos Islands are a British Overseas Territory near the Bahamas and site of the world famous Grace Bay Beach. In 1971, the islands lifted the entire NSW Conveyancing (Strata Titles) Act 1961, and renamed it their Strata Titles Ordinance.
Because of the strong Australian connection, Tom Bacon was contacted by a legal firm in the Turks and Caicos to advise on their appeals relating to the Pinnacle Resort on Grace Bay. In the intervening four years, the case has gone up through their Supreme Court and Court of Appeal, ending up before the Privy Council.
He travelled to London this year to observe when Lord Kerr, Lord Wilson, Lord Sumption, Lord Carnwath and Lord Briggs heard the matter.
"They gave both sides a grilling, and were fairly critical of all of the Australian decisions issued in regards to short-term letting to date," he says.
"While the Privy Council decision is not binding here in Australia, it should be viewed as persuasive, and should not be set aside without a principled reason to distinguish it."
The Privy Council, set up in 1708 to advise the king or queen of England on legal matters, ceased to be Australia's highest court of appeal in 1986.
"Perhaps before every owners' corporation rushes off to pass these bylaws, zoning ought to be considered here in Sydney. Buildings in mixed-use zones might find that they can't enforce bylaws to uphold the residential nature of a lot."
However, he says, if apartment owners carefully draft their bylaws to match the Pinnacle's, they will have a legal ruling made at the highest level to strengthen their case should they be challenged at a tribunal or in court.
That caution is echoed by Dr Cathy Sherry, associate professor of law at UNSW, and author of the new book Strata Title Property Rights.
"The oral argument and questions from the bench in the appeal very much focused on the wording of the bylaws in question," says Dr Sherry, who adds that the ruling may have limited application elsewhere.
Airbnb's head of public policy in Australia and New Zealnd Brent Thomas said the decision would have no impact here.
"A decision of an overseas court has no impact on the future of home sharing laws in NSW. Both NSW Fair Trading and the NSW Civil and Administrative Tribunal have confirmed any restrictive by-laws which attempt to ban home sharing are invalid in NSW.
"However, the fact remains that current rules for home sharing in NSW are complex, confusing and need to be brought into the 21st century."