The changing landscape of Owners Corporations - Built Environment or Behaviour? The contentious issue of Class 2 and Class 3 Building Classifications
A contentious issue for many Owners Corporations has always been the use of some apartments by owner/investors for ‘short term letting’ such as weekend or holiday accommodation. While such operations allow investors to use their apartments for financial return, it is often the owner occupiers who raise concerns regarding safety, the upkeep and maintenance of the common areas and whether such operations improve or reduce the value of their apartments and or the building as a whole.
The recent decision by the Victorian Building Appeals Board in City of Melbourne v Paul Salter and others delivered on 22 March 2013 has thrown this issue back into mainstream debate.
The case between the Melbourne City Council and Docklands Executive Apartments may have far reaching implications for the use of short-term residential apartments.
The Watergate building in question at Docklands is classified as a Class 2 residential building according to the Building Code of Australia (BCA).
Therefore, at issue was whether serviced-apartments, which operate within this building, fall within the scope of a Class 3 classification thereby breaching the BCA.
The BCA defines a Class 2 Building as ‘a building containing 2 or more sole-occupancy units each being a separate dwelling’.
Whilst a Class 3 Building is described as a ‘residential building, other than a building of Class 1 or 2, which is a common place of long term or transient living for a number of unrelated persons’.
For years, there has been confusion as to the classification of residential apartments which mirrored long-term apartments in many ways, yet only were occupied for a short period of time.
Watergate Owners Corporation was opposed to the short-term apartments due to concerns about noise, abusive behaviour, damage and increased safety and security risks.
Dockland Executive Apartment Owners argued that the use of the word ‘dwelling’ did not impose a qualification as to time. Whilst the Respondents argued that duration of stay was a factor in building classifications and a building used transiently was more closely aligned with a Class 3 building than a Class 2.
At the heart of the dispute between the parties was whether the classification should be determined based on the built environment or the behaviour.
Ultimately the Victorian Building Appeals Board determined that short-term apartments ought to be classified as Class 3 apartments and thus were not permitted within a Class 2 building.
Although there are technical differences between the classification of a Class 2 and a Class 3 building, for the most part, the difference between the buildings was held to be a definitional one.
It was determined that a ‘dwelling’ is not only defined by the physical characteristics required by the building codes, but also by a sense of connection by the occupants.
Previous Authority on the issue
The conjecture over the definition and distinction issue between a Class 2 and Class 3 Building is not a new one. Wilcox J in Hafza v Director-General of Social Security (1985) 6 FCR 444 considered that an important element of residence includes ‘the intention to treat that place as home; at least for the time being, not necessarily for ever.’
In Derring Lane Pty Ltd v Port Phillip City Council  VSC 269 it was considered that whilst a ‘residential building’ is constructed for the purpose of people dwelling there permanently, or for a considerable period of time, reference to a ‘hotel’ included the notion that it was a place to ‘entertain’ strangers.
Further in Armato v Hepburn Shire  VCAT 603 (18 April 2007) it was said;
‘The use of land for planning purposes is not determined by the style of development but the purpose for which the land is actually used. Thus it is fallacious to say that because there is a house on the land ipso facto the land is being used as a dwelling.’
In Armato it was also considered that a ‘big picture’ interpretation should be used, so that the purposes of planning and objectives are not frustrated by unduly restrictive interpretations of land use terms.
The previous discussion and interpretation of Class 2 and 3 building definitions reflect that although it is important that buildings meet the requisite requirements under the BCA, courts also place great importance on the behaviour of occupants.
Technical Differences per the Building Code
Despite the definitional hurdle as per the BCA, there are also other important technical differences that Owners Corporations and Apartment Owners ought to be aware of.
For example, for Class 3 buildings there are far more stringent disability access requirements, energy efficiency requirements, fire safety obligations and car parking ratios. The impact of the BAB decision is that buildings wishing to host short term letting will be required to comply with these requirements and have the building re-classified as a Class 3 Building or face being in breach of the legal requirements.
It is material to note that pursuant to Clause A3.4 of the Building Code of Australia, a building can receive both a Class 2 and a Class 3 classification. That said, there appears to be a demonstrated reluctance to classify buildings in this manner, as Councils are no doubt hesitant to renounce their control over this area.
When deciphering the classification of a building, it is important to be aware of both the definitional concept of a ‘dwelling’ and the technical requirements.
At the time of this article we understand that the Building Appeals Board decision is to be appealed to the Supreme Court of Victoria. No doubt further “clarity” is therefore just around the corner.
Andrew Whitelaw, Partner