Sydney teacher Peta Estens took her apartment building to a NSW tribunal when she was told its bylaws didn’t allow her to rent out her unit on Airbnb during her school holidays – and won.

The landmark decision, the first time strata bylaws have been overturned in favour of Airbnb in NSW, will have major repercussions for every apartment building that has tried to restrict short-term lets.

“I think it stops people running apartments like their own fiefdoms and trying to prevent people doing what they want with their own homes,” says Ms Estens, 38, a former rower for Australia.

“I made $13,000 last year on Airbnb by renting out my unit when I was away. Getting into the Sydney property market is so tough, especially knowing that interest rates will go up next year, so this really helps, and it’s good to know our rights are protected.”

But the ruling by the NSW Civil Administration Tribunal (NCAT) that bylaws, even when they’re in line with local council residential-only zoning, are secondary to the strata law principle that they cannot “prohibit or restrict” the operation of a lot, has ignited a fresh row about the future of short-term rentals in units.

With just a month left for residents to make representations to the NSW government’s inquiry into short-term lettings, the pro-Airbnb lobby is hailing the verdict as a victory for common sense and those who want to restrict lets are slamming it as terminally flawed.

Carlo Fini, of specialist strata lawyers J.S.Mueller & Co, says the tribunal wrongly ignored a legal precedent from the WA Court of Appeal that upheld a bylaw on short-term letting, as well as planning law which often prohibits short-term tourist and visitor accommodation without development consent.

“It remains to be seen whether there will be an appeal,” he said. “However, given the brevity of NCAT’s decision and its failure to deal with the issues in any depth, this decision is unlikely to be the end of the dispute about whether an owners corporation can pass a bylaw that bans short-term letting.”

Airbnb Australian head of public policy Brent Thomas, however, said the company was pleased the tribunal had reaffirmed the right of people living in apartments to home share.

“But people shouldn’t need to get lawyers, tribunals or courts involved just to respectfully share their own homes,” he said. “The fact this case had to go all the way to court proves the current rules for home sharing in NSW are broken.

“We urgently need fair rules for home sharing in NSW, just like there are in South Australia and Tasmania, to give our host community and their guests the clarity and certainty they need.”

Ms Estens took her five-unit block in Woollahra to NCAT after she was ordered to stop renting out her apartment on Airbnb in accordance with a new bylaw. One of her neighbours had complained about strangers using the common laundry and of men sitting on Ms Estens’ deck and allegedly watching her, making her feel uncomfortable.

She argued that the ban on short-term lets was in contravention of the Strata Schemes Management Act, which says that a bylaw must not be harsh, unconscionable or oppressive and that it shouldn’t prohibit or restrict dealings with a lot.

“I’m very considerate and won’t let it out to families with children, or to four adults – although with queen beds in the bedroom and lounge it’s big enough – and I don’t allow barbecues on the deck,” says Ms Estens.

“I know guests do use common areas and I would support some of the profits from letting going into a sinking fund to help maintain those facilities.”

But lawyer Stephen Goddard, spokesperson for the Owners Corporation Network and Our Strata Community, Our Choice, campaigning for the right of buildings to decide their own stance on whether to permit short-term lets, has slammed the judgment as “appalling”.

“This is an appallingly predictable outcome from a very confused position of law, and it requires government intervention to stop the disempowerment of apartment residents,” he says. “Strata schemes should have the democratic right to decide for themselves how they want their buildings to be used.

“They all need to have a say. The people who share the inconvenience of hosting discount tourists in their buildings and the costs of managing the repairs after the damage and wear and tear to common property need also to share the ability to regulate whether those tourists should be there in the first place.”