In this difficult time caused by the Covid-19 pandemic where most people’s incomes have inevitably taken a hit, many homeowners are looking for innovative methods to create an additional stream of income. Short-term lodging through various online platforms like Airbnb, booking.com, agoda.com, klsuites.com and other services is one of the obvious options in this digital age.
This means anyone who owns or rents a home can sublet the whole or part of the home short-term for profit. Quick and easy!
However, things have not been easy since 2018 when the High Court in the case of Innab Salil & Ors v Verve Suites Mont Kiara Management Corp ruled that management corporation bodies of residential strata buildings can through the establishment of house rules to disallow short-term rental commercial activities. In other words, neither the owner nor tenant can run short-term rental business through the various online platforms for profit if the management has prohibited it.
In this case, Mr. Innab Salil, a Swedish citizen, formed a company operating business of leasing units in Verve Suites on short-term and long-term rental. The management corporation of Verve Suites held an extraordinary general meeting and by a 96-4 overwhelming majority, passed a house rule prohibiting the use of the units for business or short-term rental. Mr Innab Salil and his company however continued
to defy the house rule and the management corporation commenced proceedings in the High Court and named Mr Innab Salil, his company and a few parcel owners as the defendants in a bid to stop them from violating the rule.
The High Court ruled in favour of the corporation management. Dissatisfied with the judgement, the defendants appealed but their appeal was dismissed by the Court of Appeal. The defendants continued their appeal at the Federal Court.
On 5 November 2020, in recognizing the importance of the interest of the community over the interest of the individual, the Federal Court released its judgement which affirms the ruling of the two lower courts.
Therefore, until there is a specific regulation governing the business activities of short-term rental, these businesses can only operate if they have the approval of the majority.
Harsh winter indeed on top of these unprecedented times for short-term rental operators.
