Supreme Court Decision on use of Class 2 Apartments for Short Term Accommodation
On 30 May 2013 in the case of Paul Salter v Building Appeals Board, Giuseppe Genco and City of Melbourne  VSC 279, the Supreme Court of Victoria handed down a decision concerning the use of apartments in multi-storey buildings for short term holiday accommodation.
The use by apartment owners of apartments in multi-storey buildings for short term hotel style accommodation is an issue which has been arising on several sites in Melbourne's CBD area, and causing concern for the building departments of relevant Councils, and also for body corporates in situations where other apartment owners in the same building are unhappy about this type of use.
The concern arises because frequently during the building process these buildings have been classified as Class 2 buildings, and the design and approval of essential safety measures (such as the required fire safety features) for the apartments have been carried out on the basis that occupants will be longer term occupants who will be familiar with their apartments. When apartments are then used for short term hotel style accommodation a concern arises as to whether the essential safety measures are sufficient for short term occupants who are not familiar with the apartments.
In the Salter case, the municipal building surveyor for the City of Melbourne (Council) responded to such a concern by issuing building notices and building orders under the Building Act 1993 (Act) to the owner of 3 apartments in the Docklands area. These had been classified as Class 2 in the occupancy permits. The notices and orders were issued on the basis that the apartments were being used for short term accommodation as a hotel (Class 3) which was contrary to the occupancy permits, and also on the basis that the buildings were a danger to the life and safety of any person using the building in that the occupant characteristics, fire safety needs and reaction to a fire or other emergencies have varied from that for which the building was originally designed, approved and intended to be used.
The owner of the apartments appealed to the Building Appeals Board (Board) against the issuing of the building notices and building orders. The Board dismissed the owner's appeals. The owner then applied to the Supreme Court seeking judicial review of the Board's decision. The Supreme Court decided to quash the decision of the Board and remitted the appeals to the Board for re-hearing.
In reaching its decision the Court considered the meaning of the word 'dwelling' in clause A3.2 of the Building Code of Australia (BCA). The Board had found that the reference to 'dwelling' in the definition of a Class 2 building in clause A3.2 does not include the use by short term guests resulting from a commercial enterprise which is conducted in a hotel style. The Court found that the Board had misconstrued the BCA when it imported into the word 'dwelling' a temporal requirement.
The Court's decision was partly based on the fact that, in the definition of Class 1b buildings in the same part of the BCA, the term 'dwelling' is specifically used in the context of short term holiday accommodation. The Court concluded that there was no rational basis for giving the word 'dwelling' a more limited meaning in the Class 2 definition. The Court also took into account that importing a temporal requirement into the construction of the word 'dwelling' would result in difficult classification questions where, for example, hypothetically, apartments leased for a minimum of 30 days would be classified as Class 2 buildings but apartments leased for 29 days would be classified as Class 3 buildings.
The Court also refused to accept the alternative basis for the building notices and orders, because it did not accept that the buildings were a danger to life, safety or health, as required by section 106(d) of the Act. In making this decision, the Court compared the wording in section 106 with that in section 102. It expressed the view that Emergency Orders could be issued under section 102 where the condition or use of a building gave rise to a life safety risk whereas section 106 called for the building itself to be a life safety risk. This distinction potentially significantly limits the basis for issuing a notice under section 106.
The Salter decision is currently under appeal to the Court of Appeal. The decision of the Court of Appeal will provide clearer guidance as to whether building notices and orders can be used to address the use of Class 2 apartments in multi-storey buildings as short term holiday accommodation. If the Court of Appeal upholds the Court's decision at first instance, councils, regulatory authorities and other concerned parties (such as body corporates) will need to consider alternative ways of dealing with their concerns about this kind of use of Class 2 buildings.
The Salter case calls into question the definitions in the classification of buildings under the NCC. At the very least, it seems imperative that the NCC be amended to clarify the difference between uses of class 2 and 3 buildings. This discussion will necessarily require the states to reach an agreed position of the need for a distinction between class 2 and 3 buildings and if there is such a need, what the differences should be.
The case also highlights the ongoing difficulty faced by councils in effectively carrying out enforcement where there has been a change of use. Dealing with the administration and enforcement of changes of use from Class 2 to 3 as well as the changes from Class 1a to Class 1b or Class 3 (in the context of rooming houses and shared accommodation) has proven to be difficult for councils. It would seem that the community and the regulators would mutually benefit from increased clarity around the standards that should reasonably apply when the use of an existing building is changed. In the Class 2 and 3 scenario, the commercial factors created by a thriving short term accommodation industry will be at play in reaching agreement on the way forward. In the area of rooming houses and shared accommodation, the important social issues around affordable housing will be important considerations.
Bronwyn Weir | Partner
61 3 9258 3604
Kylie Lightman | Senior Associate
61 3 9258 3368