The Supreme Court has overturned a decision by the building industry regulator that banned short-term tenants from occupying apartments in residential buildings.
The regulator's decision banning short-stay occupants - such as holidaymakers, schoolies or hen and bucks nights - had been welcomed by aggrieved apartment residents who commonly blamed them for rowdy behaviour and property damage.
On Thursday the Supreme Court overturned the Building Appeals Board's decision after Paul Salter, the owner of short-stay business Docklands Executive Apartments, appealed.
In 2011, the City of Melbourne issued Mr Salter with a contravention notice because he was leasing three units in Melbourne's 350-apartment Watergate building to short-stay occupants, typically for four days or less.
He was banned by the board in March from renting out the units after he was found to be breaching The Building Code of Australia (BCA). The BCA is a national code so the decision set a national precedent.
The board ruled that short-term leasing was a change in the building's use and not allowed in residential buildings described as class two under the building code.
It said short-stay apartments fell within the class-three building classification, usually reserved for hotels and rooming houses.
But in his decision, Supreme Court Justice David Beach said there was no evidence short-term stays constituted a "change of use" in a building.
"The decision of the Building Appeals Board made on 22 March 2013 must be quashed and the appeals remitted for rehearing and determination in accordance with law," Justice Beach said.
It was not the court's function to determine "the desirability of apartments, in apartment complexes, being let out for short-term use," he said.
Short-stays are an ongoing point of conflict between dwelling owners and nearby residents.
At least four owners' corporations across Australia were looking to take action against short-stay operators in the wake of the board's decision.
Justice Beach ordered the appeals to be reheard by a differently constituted Building Appeals Board and awarded costs against the City of Melbourne.