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To the best of our knowledge this issue has yet to be dealt with by the New Zealand courts, which makes it a grey area for body corporates. The Australians (certainly Victoria) have grappled with the issue, and seem to have ruled that making a flat out prohibition against short term rentals conflicts with the intention behind their legislation. The question isn’t whether such a rule is reasonable, but whether the rule is permitted by the legislation.

Body corporate rules in New Zealand must comply with s106 of the Unit Titles Act 2010 (the Act). As such, all rules: 

1. must relate to the control, management, administration, use, or enjoyment of the units or common property, or the regulation of the body corporate; and 
2. must be incidental to the powers and duties conferred or imposed on the body corporate under the Act; and 
3. must not be inconsistent with any provision of the Act or any other enactment or rule of law.

Any rule that does not comply with the requirements above will likely be deemed “ultra vires” or invalid by our courts if challenged. Of course when considering whether a rule is appropriate for a particular body corporate it is appropriate to consider the particular idiosyncrasies of that body corporate. In light of the above, the ‘gut feel’ is that restricting peoples fundamental property rights, such as the ability to rent their property on a short term basis, is questionable. Notwithstanding this, if the body corporate elects to register such a rule, then the owners need to be aware that it could be challenged, and could be ruled ultra vires by the courts.

Other things to consider:

• Does the resource consent for the property place any prohibition against short term rentals (which may be considered to be business activities)?

• Do the current body corporate rules prohibit business activities being operated from the units? If so, are the short term rentals considered business activities?

• Does the insurance for the property (buildings) allow for short term rentals? A commercial level of insurance is generally required for the operation of short term rentals.

It goes without saying that the above is intended for information only, it is not legal advice and is not to be construed as such. If you wish to discuss this article, short term rentals, or any other body corporate issue you are having, please contact us.