NCAT has declared a short-term letting by-law invalid because the bond and administrative fee provisions gave the owners corporation an "unfettered discretion" to recover money from owners. A useful reminder that even sensible-sounding by-laws can be struck down if they go too far.
The case
Nicholson v The Owners – Strata Plan No 104042 [2025] NSWCATCD 202
Decided in NSW Civil and Administrative Tribunal — Consumer and Commercial Division.
What the by-law tried to do
The owners corporation passed a by-law regulating short-term rental accommodation in the scheme. Among other things, it required any lot owner engaging in short-term letting to:
- Pay a $1,000 security bond
- Pay various administrative fees
The owners corporation said this was to protect itself against the increased wear, complaints and administration that come with short-term letting.
What NCAT found
The Tribunal looked at the bond and admin fee provisions and found they gave the owners corporation an "unfettered discretion" to determine and recover costs from lot owners. That, the Tribunal decided, was "harsh, unconscionable and oppressive" — and therefore invalid under Section 150 of the Strata Schemes Management Act 2015.
Could the bad parts be cut out?
The Tribunal then asked: can we strike out just the offending parts (bond + fees) and keep the rest of the by-law? Following the earlier authority The Owners – SP No 91684 v Liu [2022] NSWCATAP 1, the Tribunal noted it shouldn't "tamper" with a by-law to make it effective if the result would be something the owners corporation never intended to pass.
The Tribunal decided the bond and fees were integral to why the owners corporation passed the by-law in the first place — they were the financial protections the owners relied on when choosing to regulate (rather than ban) short-term letting. Strip those out, and what's left isn't what was approved.
So the whole by-law was declared invalid.
The key principle
By-laws must strike a balance between regulation and fairness. Even where an owners corporation has a legitimate objective — like managing short-term letting — it can't be pursued in a way that hands the owners corporation excessive discretionary power over individual owners.
"We can charge whatever bond we decide and whatever fee we decide" is too broad. A by-law needs clear, fair limits.
What this means for your scheme
If your scheme has a short-term letting by-law (or is considering one), it's worth a review against this decision. Key things to check:
- Is the bond a fixed amount, or open-ended?
- Are admin fees clearly capped, or do they give the committee discretion to set them?
- Are recovery mechanisms tied to actual loss, or are they punitive?
The fix is usually drafting — specific dollar amounts, clear triggers, and limited discretion. We can review a by-law and suggest changes, or refer you to specialist by-law lawyers if a redraft is needed.
Why this matters for townhouse and villa schemes
Short-term letting can be a contentious topic in smaller schemes — a single Airbnb operator can change the feel of a tight-knit complex. The temptation to push back hard with bonds and fees is understandable, but the by-law has to stand up to scrutiny. A by-law that gets struck down protects nobody.
Better to invest in good drafting up front than to find out at NCAT that your by-law is unenforceable.
Sources
Bannermans Lawyers — "Short term by-law ruled invalid again by NCAT" (24 April 2026): bannermans.com.au/library/short-term-by-law-ruled-invalid-again-by-ncat-overreach-with-bonds-and-administrative-fees
Decision citation: Nicholson v The Owners – Strata Plan No 104042 [2025] NSWCATCD 202. Full text via NSW Caselaw: caselaw.nsw.gov.au