Property

Driving through Cape Town and the areas surrounding our beautiful Mother City, you are greeted with an entirely different picture than a few years ago. Various buildings, sectional title schemes and new developments have appeared overnight and more keep coming.

With this vast array of new property investment opportunities in and around the City, investors and first time buyers alike are pounding on estate Agents’ doors, to try and get a foot into the door of the very popular Cape Town property market. A large number of sectional title properties (“flats”) are now being purchased with the sole purpose of renting them out as an investment. Apart from occupying the flat themselves, such new owners have two options: they either enter into a long term lease with a tenant (usually at least 6 months to a year) or they let their property via short term rentals to holiday makers or tourists visiting Cape Town. Accommodation sites such as lekkeslaap.co.za, Airbnb.com, booking.com & safarinow.com have made the process of finding short-term tenants and securing payment for their stay in your apartment hassle free and more importantly, very profitable.

This information piece, investigates the rules, possible hurdles and procedural requirements relating to the letting of investment property to tourists and holiday makers – especially focusing on the short-term letting of property in sectional title schemes.

The concepts “short-term letting”, “holiday rentals” and/or “tourist accommodation” are not defined in the Sectional Titles Scheme Management Act, No. 8 of 2011 or the Sectional Titles Act, No. 95 of 1986. Both the aforementioned acts and the Prescribed Management Rules simply refer to “owners” and “occupiers”. The word “occupier” is, however, defined in the Community Schemes Ombud Service Act, No. 9 of 2011 as “A person who legally occupies a private area”. The comments herein are based on the assumption that such occupier includes a short-term tenant.

The first important thing to look at if you want to rent out your flat on a short term basis is the property itself:

Contacting the Municipality will be very useful as the ‘use’ of different properties depend entirely on their zoning and so called ‘land use management applications’ to the City of Cape Town are dealt with on a case to case basis. The City of Cape Town Municipal Planning By-Law of 2015 (“planning By-Law”) is a good place to start – chapter 3 deals with zoning and the specific use of a property. The planning By-Law includes a zoning map, which depicts the specific zoning for each erf in the City.

Owners need to consider the specific zoning of their properties as each zoning gives specific rights to a property such as the parameters within which land may be developed (height of buildings, floor factor, building lines etc), and specific- and consent use rights of the property. Zoning rights can also be restricted by overlay zones (Clifton, Bishops Court etc), additional rights (Cape Town CBD) and heritage protection overlay zones.

In addition to the above zoning restrictions, the following further restrictions may also apply to your property:

• Conditions and/or restrictions on the title deed of the property;
• Heritage Western Cape Restrictions (buildings older than 60 years);
• Environmental issues; and
• Scheme Rules and rules made by the specific Body Corporate.

It is important to consult the planning By-Law and to contact a municipality representative should an owner have any uncertainty as to what is or is not allowed on a specific property. Certain actions on a property would require a Land Use Management Application to be submitted to the Municipality and others would not. Contacting the Town Planner employed by the Municipality for a specific area will be the best place to start.

The City’s planning By-law does not contain references to the concepts of Airbnb and/or short-term letting at present. One can only assume that Airbnb will fall into the same category as ‘a block of flats’ referenced in the Planning By-Law or ‘self-catering apartments’ as referenced in the City of Cape Town Guest Accommodation Policy of 2009. One would thus need to find out under which specific zoning your property falls and if such zoning permits the letting of a flat or self-catering apartment without consent from the City’s Land Use Management Department. Being proactive instead of reactive is much better, therefore our advice would be to consult the City or at least its planning By-Law ensuring that you are not in contravention of any land use laws and regulations.

Sectional Titles Schemes Management Act, No. 8 of 2011 “STSMA”

Section 10 of the STSMA refers to Rules of a Sectional Title Scheme. In particular, Section 10(4) of the STSMA[1] makes it clear that the body corporate, owners and any other persons occupying the flat are bound by the prescribed management and conduct rules. In addition owners & occupiers are also bound by the rules of that specific scheme. The body corporate therefore needs to make it clear to all owners that any person occupying the flat, whether such person is the owner or not, is bound by the management & conduct rules as well as any additional body corporate or scheme rules.

Furthermore, Section 13 of the STSMA[2] sets out the so called duties of owners. It is the clear intention of the legislator that owners should keep the body corporate informed as to any change in ownership or occupation. If an owner, for example, has a different person staying in his or her flat each night of the week – the owner technically needs to inform the body corporate of each change in occupancy, as controlling security is one reason for the aforementioned.  This is something body corporates and owners would need to work out together – perhaps a standard form with the conduct rules attached could be drafted and handed to each owner. The owner, in turn could then hand this to any short-term tenant and return the signed form to the body corporate. An online forum or a ‘click wrap agreement’ option can be considered. In this way the body corporate and owners can keep track of the occupiers staying in the building at all times and can also enforce the conduct rules better as owners and any occupiers acknowledge that they received copy of the rules. If the rental agreement is concluded on a forum such as Airbnb, the scheme rules should also be provided and compliance therewith should be made a condition for renting the property.

Prescribed Management & Conduct Rules:

Prescribed Management Rule 3(2) –  “A member must take all reasonable steps to ensure compliance with the conduct rules in force in terms of section 10(2)(b) of the Act by any tenant or other occupant of any section or exclusive use area, including the member’s employees, guests, visitors and family members.”

Prescribed Conduct Rule 7(4) – “The owner or occupier of a section is obliged to comply with these conduct rules, notwithstanding any provision to the contrary contained in any lease or any other grant of rights of occupancy.”

Furthermore prescribed management rule 69 places the duty on owners to ensure their tenants comply with the scheme rules.

It is thus clear from the prescribed rules above that there is a duty on the owner to ensure that tenants, and other occupiers, including their guests, employees and their family members, comply with the conduct rules. This greatest headache for a body corporate is ensuring every owner and especially occupier not only has a copy of the conduct rules, but are compliant therewith.

Adapting the scheme rules or adopting new rules introducing rules for both the owners and occupiers with regard to short-term letting might be another good solution. One can consider adopting rules regarding behaviour, noise and security specifically aimed at the short-term tenant and rules regarding fines to tenants for misbehaviour and the owner’s responsibility to enforce rules and the consequences of not enforcing such rules aimed at all owners who wish to let their property on a short-term basis.

The role of the Community Schemes Ombud Service (“CSOS”):

A Community Schemes Ombud Service now exists and deals specifically with disputes in community schemes and other sectional title properties.

The CSOS was established in terms of the Community Schemes Ombud Service Act, No 9 0f 2011 to regulate the conduct of parties within community schemes and to ensure their good governance. Such a community scheme includes a sectional title property and a block of flats.

Chapter 3 of the CSOS ACT deals with applications to the Ombud as well as the prayers for relief that should be included in such application. Should an owner be unhappy with a decision made by the body corporate or if a dispute regarding short-term rentals, noisy neighbours etc. arises between neighbours in a sectional title scheme – this is now a great cost effective and easily accessible forum to consult. More information on the Ombud can be found on www.csos.org.za.

The way forward:

As one can see, various factors need to be considered in order to successfully comply and succeed with short-term holiday rental investments on your sectional title property. Being aware of the abovementioned factors may improve your chances on success. Make sure of the zoning of your property and should you require the consent of the Municipality, make sure that it is valid and that you get it in writing. Communicate with your body corporate and more importantly, try to work with them to find solutions. They have strict rules in place to try and keep control over safety, to promote harmonious living in the scheme and to ensure that all of the owners/occupiers get the best possible use and enjoyment out of their property.

Please feel free to contact us should you have any questions regarding the above and we will gladly aim to assist you in your short term rental success-story.

[1] Section 10(4) –”The management or conduct rules referred to in subsection (2) take effect from the date of establishment of the body corporate in respect of the building or buildings and land concerned, and bind the body corporate and the owners of the sections and any persons occupying a section (own emphasis).”

[2] Section 13(1) An owner must – (e) “not use his or her section or exclusive use area, or permit it to be used, in a manner or       for a purpose which may cause a nuisance to any occupier of a section…”

(f)  “notify the body corporate forthwith of any change in ownership or occupancy in his or her  section and of any mortgage…”