The legal issues to be aware of when purchasing a boarding house

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Purchasing a boarding house may seem an attractive investment opportunity for those eager to get into the property market. Potential buyers should be aware, however, that this is a highly regulated industry, designed to protect residents from unscrupulous landlords and neighbourhoods from unwanted development. Unwary owners can be caught in the uncomfortable middle.

A boarding house may be a good investment, in the right neighbourhood with the right tenant mix. But potential boarding house purchasers should pursue this option only with a full understanding of the legal issues involved. Forewarned is forearmed.

What is a modern boarding house and who lives there?

Contrary to popular misconception, today’s boarding houses are not dens of down-and-outers. Think of boarding houses as another form of affordable housing – micro-apartments, if you will. Renters may include working people, retirees, students looking for alternative student housing, and young couples. Assisted boarding houses accommodate those with additional needs like disability. That is a different category.

In Sydney, developers are building high-end boarding houses with rents as high as $500 per week. Elsewhere, rents may run in the mid-$200s and up. Accommodations typically include a furnished room and a communal kitchen, laundry and living room. Some offer rooms with kitchenettes. There are often limited parking facilities. There were 1,062 registered boarding houses in NSW as of May 2019, according to the Department of Fair Trading.

Boarding Houses Act 2012

To ensure that boarding houses are maintained to high standards, the Boarding Houses Act 2012:

  • establishes a public register of boarding houses in NSW;
  • increases inspection powers for local councils;
  • introduces occupancy rights for people living in boarding houses; and
  • modernises laws that apply to boarding houses accommodating people with ‘additional needs”.

Under the Act, there are two kinds of boarding houses that may be publically registered. “General boarding houses” accommodate five or more paying guests for three months or more, but do not include hotels, motels, hostels, Airbnbs, or aged-care facilities.

“Assisted boarding houses” accommodate two or more individuals who have additional needs, including age-related frailty, physical or intellectual disability and those who need support or supervision with daily tasks and personal care. Assisted boarding houses must be licensed by NSW Ageing, Disability and Home Care.

Local councils are responsible for approving new boarding houses and enforcing safety and accommodation standards in existing boarding houses. They also have the power to fine operators if they are unregistered and order them to meet building, safety and accommodation standards.

Residents have a variety of rights, including rights to safe and secure housing, adequate kitchen and bathroom facilities, minimum room size and access to sunlight in common rooms. Tenants must have either a rental agreement or an occupancy agreement. They may not be evicted without written notice.

 Recent changes in the law

Recent changes in the law have affected the income-producing potential for boarding houses in what many see as an effort to increase the power of local councils to regulate housing density.

An amendment to NSW’s Affordable Rental Housing State Environmental Planning Policy requires that boarding houses offer one parking spot per two rooms, up from one parking spot per five rooms.

A 2019 amendment in NSW sets a 12 room maximum for boarding houses in low-density R2 zones.  Some speculate that the limits make boarding houses economically unfeasible in some areas of Sydney.

Other changes to the Act may be forthcoming, as it is now under review to assess whether it continues to be fit for purpose.

If you are thinking about purchasing a boarding house and are concerned about the legal issues, please call the attorneys at Owen Hodge Lawyers at 1800 770 780 to schedule a consultation. We look forward to working with you.

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