10 December 2020

Tremors for serviced apartments: ACAT finds Knightsbridge in breach of lease

| Ian Bushnell
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The Knightsbridge apartment complex

The Knightsbridge apartment complex in Kingston was found to be a commercial operation in a residential zone. Photo: Knightsbridge.

The owner of Kingston’s upmarket Knightsbridge apartment complex, which had been accused of running a quasi-hotel, will have to revamp the business after being found to be in breach of the Crown lease.

The Australian Hotels Association went to the ACT Civil and Administrative Tribunal seeking a control order against Josip Zivko’s Quanton property group, arguing it was running a commercial accommodation premises in a residential zone.

The AHA had made numerous complaints to the ACT Government, before taking the matter to Access Canberra in August last year, only to have the ACT Planning and Land Authority dismiss the concerns.

It then took the Authority to ACAT, with Quanton as a party to the proceedings.

But in a decision that tidies up an unclear area of law, and may have ramifications for similar enterprises in residential areas, ACAT found that Knightsbridge was a commercial operation and the use of the land was not for residential purposes.

Built in 2017, the Leichardt Street complex offers serviced apartments as well as amenities such as a gym and a pool, and advertises on accommodation sites such as Trivago.

The ACT Government granted the owners a Crown lease in March 2015 to use the land for “the purpose of multi-unit housing”, and the block is zoned for high-density residential use, which bans commercial accommodation uses.

ACAT, which called the Authority’s investigation of the AHA’s complaint ”minimal”, rejected arguments that the Crown lease should not be interpreted in the context of the Territory Plan under which ”multi-unit housing” is deemed residential or that because the definition of ”short-term” accommodation was unclear the AHA’s action should be dismissed.

It found that under the Territory Plan ”residential” refers to occupation that must have a degree of permanence to it.

”There is no direct evidence that any guest considered their stay to be in the nature of a more permanent living or ‘home’ arrangement, or that any stay was put on such a legal footing through the parties entering into a residency or occupancy agreement,” ACAT said.

”The evidence overwhelmingly supports the inference that KFA [Knightsbridge Furnished Apartments] operates some kind of commercial accommodation enterprise, probably in the nature of serviced apartments, upon the land. The exact nature of that operation need not be determined in these proceedings. It is enough that the use is clearly not predominately residential.”

While ACAT agreed that it was not a case of blatant defiance of the lease, it said ”it is difficult to avoid the impression that the lessee has acted to take advantage of a drafting error in the Crown lease issued by the Authority, although we note that it was an error no action appears to have been taken by the Authority to rectify it”.

It said the lessee had provided evidence of many other serviced apartments operating on residential zoned land, which ACAT called the ”’everybody else is doing it’ defence”.

But this only confirmed the need for action to curtail the occurrence as a matter of public policy and to support orderly development in the Territory, ACAT said.

ACAT also rejected the Authority’s argument that because of the possible consequences for other businesses it would be better to await a policy solution rather than impose a controlled activity order.

”There is strong public interest in ensuring Crown leases throughout the Territory are aware that compliance with the scheme for land use in the Territory will be enforced,” it said.

ACAT said it would direct the Authority to prepare a draft controlled activity order, suggesting it should allow a short period of time for the lessee to reorganise its operation.

The AHA declined to comment on the case.

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It’s a pity they probably won’t take action against boarding houses in the suburbs either. Ordinary houses have partitions put up in the rooms so that they can house 8 or 10 people. The amount of rubbish these places produce is astounding. And each occupant has a car, so they are parked on the nature strip and footpath. But the owner just pays normal residential rates.

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