As Airbnb turns into a nightmare for apartment owners, body corporates ask 'Can we ban it?'

A city building has been forced to launch monthly drug dog patrols due to busts at Airbnb apartments. File photo / Getty Images

Hallways clogged with cleaners, all-night parties and strangers in the corridors - these are some of the downsides of Airbnb in large apartment buildings. Body corporates that try to take action have found they are in a legal grey area, and lawyers say the first legal challenges against Airbnb are not far away.

At a central Auckland apartment building, the managers have begun monthly patrols with drug-sniffing dogs.

The routine began after two major drug busts at the 190-apartment building in the CBD. The units police targeted were sub-let through Airbnb.

Property manager Lisa Mak - who won't name the building - said one of the apartments was booked for three months by a man who manufactured meth while his partner ran a brothel.

"They like the appeal of an Airbnb because they can hide very easily," she said. "He would cook and she would sell her wares and his meth - until the police caught up with them.

"Prostitution isn't illegal but she's having construction workers coming through in their muddy boots three or four at a time. That is horrible for anybody, let alone a lady staying with her kids next door."

The drug cases are at the extreme end of what apartment owners are dealing with, as online accommodation providers like Airbnb grow in popularity in New Zealand.

People who rent out their properties on Airbnb love it - those who don't hate it.

Mak said specialised Airbnb companies had turned some Auckland apartment buildings into quasi-hotels, and often rented a ground-floor apartment to use as a reception area. Owner-occupiers in the central city faced a constant stream of cleaners, loud parties and strangers in their corridors.

The growth of Airbnb has also led to thorny issues for body corporates. Tanya Wood, special counsel at law firm Duncan Cotterill, said short-term use of units meant increased wear and tear in common areas, security concerns and potentially higher insurance costs for all apartment owners.

All of this was in a legal grey area, and Wood said she expected the first legal challenges to start arriving in New Zealand courts soon, as body corporates tested their rights.

In Los Angeles, where short-term letting is hugely popular, bylaws have capped the number of days properties can be rented on Airbnb a year. In New Zealand, Queenstown is introducing stricter rules for people wanting to rent their property online.

Under current New Zealand law, body corporates cannot block people from renting their apartments on Airbnb. Wood said they also could not pass on the higher costs of short-term letting - like maintenance costs - to the Airbnb hosts in the building.

Lawyer Tanya Wood said the growth of short-term renting has led to more wear and tear in common areas in apartment buildings - which all apartment owners end up paying for. Photo / Supplied 

The solution could be giving body corporates the ability to pass on costs related to increased wear and tear, Wood said. Another option could be a register of how each apartment was used, which prospective buyers could view.

Lockhart Legal director Josh Muir said Airbnb had been polarising for apartment owners.

"Generally speaking, in a body corporate scenario, those who are doing it love it. Those who aren't doing it hate it."

He said although body corporates could not directly ban people from renting on Airbnb, they could set rules that made it almost impossible to operate compliant short-term accommodation.

"Body corporates could have discussions about complying with insurance and security rules, zoning requirements, not operating businesses in a residential area.

"Put rules in place around those, and when someone is running an Airbnb, which is quite clearly breaching rules, the body corporate or any of the owners could go 'Hold up a second, you are breaching the body corporate rules'."

BED TAX EVASION

Nearly half of Airbnb hosts in Auckland have avoided paying a new bed tax.

Since last August, homeowners who rented their whole property or a guest-house on websites like Airbnb or Bookabach for more than a month each year were charged the new targeted rate, also known as a bed tax.

The council said the targeted rate would capture about 3800 of the approximately 8000 Airbnb properties in Auckland. But in the latest figures, just 1923 Auckland properties had been charged the tax.

The main obstacle has been finding the properties that are being leased online. Airbnb and other websites refused to share information about hosts on privacy grounds, and council officials have been forced to scour the sites manually.

So far, $537,500 had been collected through the bed tax - an average of $280 per accommodation provider.

The council said the failure to track down all liable taxpayers did not mean there was a budget shortfall.

"We do not collect any additional rates revenue from identifying new online providers," a spokesman said. "Rates are a sharing mechanism. Finding more online providers results in existing providers, online and other, being charged less rates."

Data released by the council showed that nearly 200 Auckland Airbnb hosts were renting out their properties for more than half the year. At the average rate of $213 a night, these hosts would be making about $38,000 a year from their property.