Can your strata stop you letting short-term in NSW?

What the Act actually permits

Section 137A of the Strata Schemes Management Act 2015 lets an owners corporation adopt a by-law prohibiting short-term rental accommodation in a lot where that lot is not the principal place of residence of the person letting it. A scheme can stop an investor letting nightly. Where the lot is that person’s principal place of residence, subsection (2) says a by-law purporting to prevent it "has no force or effect" — not merely that the scheme should not, but that the by-law does not work.

That one distinction decides a great many Sydney apartments, and it is why two owners in the same building can be given opposite answers and both be right.

The by-law is passed by special resolution, which in NSW means no more than 25% of votes are cast against it — not, as it is usually written, 75% in favour.

The part owners miss: a permitted ban can sit inside an invalid by-law

Two separate sections do different work here, and conflating them is where owners and committees both go wrong. Section 137A says what a scheme is allowed to prohibit. Section 139(1) says what any by-law must not be: harsh, unconscionable or oppressive. Section 150 gives the Tribunal power to declare a by-law invalid and order it removed from the strata register.

So a scheme can be entirely within its rights to ban short-term letting in investor-owned lots, and still lose the by-law — because of the machinery it bolted on to enforce the ban. That is not a theoretical risk. It is what has happened, twice.

What the Tribunal has actually struck down

In the 2022 appeal, decided 5 January 2022, two adjoining residential towers at Sydney Olympic Park had passed a by-law whose clause 3 did exactly what section 137A allows. Nobody successfully attacked that clause. What failed were two enforcement provisions: one letting the owners corporation deactivate an owner's access devices on a finding of breach, which was held harsh, unconscionable or oppressive; and one letting it recover enforcement costs from an owner as a levy debt, which was held beyond power, because levies must be shared by unit entitlement and the Act's only exception concerns insurance.

The 2025 decision followed the same shape with gentler facts. That scheme had chosen to regulate short-term letting rather than prohibit it, and its by-law required a bond of $1,000 or "another amount reasonably determined", plus administration fees. On the fees the Tribunal found that an open-ended liability for any other costs and expenses, recoverable as a debt, placed an unreasonable burden on the lot owner and shifted the financial risk of the owners corporation’s administrative decisions onto them without independent oversight. On the bond it found that a mandatory bond, particularly one with a variable amount set by the committee, was oppressive — a financial barrier to the exercise of a property right beyond what protecting the scheme required.

In both cases the Tribunal declined to sever the bad parts and save the rest, and the reasoning is the part worth remembering. In 2022 it held there is no power in section 150 to redraft or "tamper" with parts of a by-law, because the by-law without the invalid parts is not the same instrument the meeting passed by special resolution and might never have been passed in that form. In 2025 the Tribunal applied the same test — whether the residue would operate in a manner wholly different from the original — and found the bond and the fees were "integral protections upon which the Owners Corporation relied in determining to regulate, rather than prohibiting" the use. The whole by-law went with them.

It is worth noting what the same owner did not win. She also asked the Tribunal to appoint a compulsory strata managing agent, and that application was dismissed: the Tribunal was not satisfied the high threshold for removing the democratic management of a scheme had been met, and said the scheme appeared to be functioning satisfactorily in all other respects. These are not decisions by a tribunal looking for reasons to side with owners.

What to read when a by-law lands in your building

Most owners read the first clause, find the prohibition, and stop. The decisions above say the first clause is usually the one the scheme is entitled to pass. Read to the end instead, and read the enforcement provisions hardest: what happens on an alleged breach, who decides that a breach occurred, what it costs you, whether any of it is recovered as a levy, and whether the owners corporation can switch off your access to the building.

A by-law that gives the committee an open-ended power to set and recover amounts from you is the pattern that has failed twice. That is worth knowing before you accept it as settled, and worth raising at the meeting rather than after the furniture arrives.

None of this makes challenging a by-law a strategy. Litigation is slow, costs money and is nobody's investment plan. It does mean a by-law on the register is not automatically the last word, and that is a different thing from assuming it is.

What a restriction still does not mean

A by-law against short-term letting is not a by-law against every furnished arrangement, but the line is further out than most people assume. Section 137A borrows its definition from section 54A of the Fair Trading Act 1987, where a short-term rental accommodation arrangement is a commercial arrangement giving someone the right to occupy residential premises "for a period of not more than 3 months at any one time". A six-week corporate booking is still short-term rental accommodation, and a by-law prohibiting it still bites. Only stays longer than three months fall outside the definition altogether.

It also does not mean the apartment is a poor investment. It means the strategy has to match the building, which is a far better problem to have before you buy the furniture than after.

Do this before you spend anything

Get the registered by-laws from the strata manager — they are also attached to the strata search a buyer's conveyancer orders. Search them for short-term rental accommodation, short-term letting, holiday letting and minimum occupancy. Then ask the strata manager in writing whether the scheme has such a by-law and whether the owners corporation has resolved to adopt one. Written matters; a neighbour's verbal "should be fine" is not a defence and will not be remembered the same way in six months.

Then check the practical rules that decide whether the building can be operated at all: registration, keys, lift bookings, and the fire safety requirements for your building type. Price the furniture last.