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Wednesday, May 25, 2022

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Holiday letting in residential complexes remains a complicated – and emotional – issue

Many residents resent short-term lets in their complexes. Photo: Pixabay

Many residents resent short-term lets in their complexes. Photo: Pixabay

Published May 12, 2022


The issue of short-term rentals in residential complexes is a thorny one, and for permanent residents, units rented out on a short-term basis – whether through Airbnb or other channels – can be bad news.

They can jeopardise the development’s reputation, property values, and security, says BBM Law director Marina Constas.

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“However, for many property investors, short-term rentals are their bread and butter.”

While the travel ban imposed in South Africa in November 2021 due to the discovery of the Omicron variant initially decreased the international demand for luxury accommodation over the festive season, Grant Smee, property investor and managing director of Only Realty Group, says those who had invested in affordable short-term letting properties in coastal areas remained relatively unscathed.

“Surprisingly, while large hotels across the country still had many rooms empty, it was almost impossible to get an Airbnb in hotspot areas such as Cape Town, Kenton and Plettenberg Bay during this time.”

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Smee attributes the success of short-term letting during the holiday period to shifting consumer preferences.

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“Since the onset of the COVID-19 pandemic, many travellers feel that short-term lets are safer than a hotel because you have control over your entire living environment, which isn’t possible in a hotel where you are sharing common areas and lifts with many other guests.

“Short-term letting has also become increasingly affordable, and you can often get an entire flat for the same price as a single room in an upmarket hotel. Desires for privacy and convenience are also contributing factors.”

Citing a recent Airbnb report, he says domestic travel on the platform grew almost six-fold from 2016 to 2019 even though domestic travel decreased by 9% during the same period. Airbnb contributed R10.97 billion to South Africa’s GDP in 2019 and R8.1 billion in 2020.

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“It’s clear that locals are embracing Airbnb when travelling domestically and that owners with desirable properties are cashing in.”

However, Constas says, a recent adjudication award by the Community Schemes Ombud Service (CSOS) illustrates the importance of having a clear, well-considered policy, and rules on short-term rentals when a complex or an estate is first developed. This award also delivers an important lesson on following the correct procedures to change the rules in a residential community scheme.

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She cites the case of 86 owners at The Blyde Riverwalk Estate in Pretoria who took on the trustees of the homeowners association and the developers, Landsdowne Property Group and Balwin Properties.

“The issue was that the trustees and developers withdrew the owners’ right to rent out their units on Airbnb by changing the rules of the scheme.”

According to the CSOS statement, the applicants explained that they invested in The Blyde development specifically because it was promoted as one where owners could place their flats on short-term letting platforms like Airbnd, for occupation by weekend and holiday guests. They noted that if it were not for this benefit, they would not have bought the properties, and wanted the reversal of this benefit set aside because they believed it was grossly unfair.

In response to the dispute brought by the owners, Constas says, the trustees and developers stated that the homeowners association had been forced to incur exorbitant expenses for security, lifeguards, and for the maintenance and upkeep of the lagoon and other common areas in the estate. This was due to ongoing complaints about short-term residents contravening the rules.

They alleged that the short-term visitors showed no respect for full-time residents, security staff, and estate management, and that they were drinking alcohol on common property, making excessive noise, and dressing scantily in a “family-friendly estate”. The respondents argued that the short-term visitors had “caused havoc within the estate”.

After considering both sides, Constas says the CSOS adjudicator found in favour of the applicants, and the trustees and developers were compelled to reverse their ruling prohibiting short-term letting at The Blyde.

Among the many reasons given for the decision, CSOS adjudicator Khosi Mabaso also referred to section 25 of the Constitution in her order and confirmed that each owner has a right to property which cannot be interfered with arbitrarily. Such property rights come with the ability to generate income and wealth.

However, while this may be the case, Constas says this does not mean that short-term letting can never be prohibited.

“The High Court in Gauteng, in the case of the body corporate of the Paddock sectional title scheme and Sally Nicholl, held that the members of a body corporate could prohibit short-term letting in their rules as long as the rules had been legally amended with the correct special resolution passed, being 75% in number and value at a quorate meeting.

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“The moral of this story is that trustees and developers should seek legal advice prior to taking decisions which could affect owners detrimentally.”

Know what to expect

Short-term let investors must also be aware of the “headaches” that come with renting a property out on hosting platforms like Airbnb, such as “damage to, or theft of your property and goods”, says Tarina Vlok, managing director at Elite Risk Acceptances.

“It is not uncommon to hear about losses and personal financial setbacks that occur as a result of short-term rental arrangements. This includes anything from damage to furniture from pets to injuries to people staying on the property as a result of faulty goods. So it is best that homeowners plan to deal with these.”

In response to the many complaints from property owners, Vlok says Airbnb recently announced free top-to-bottom protection for every host against risks from guests behaving badly.

“If you are hiring out your property through Airbnb, familiarise yourself with their exclusions as listed on the site. Airbnb Aircover has many exclusions and is not meant to replace your personal insurance.”

She adds that you need to check whether you have cover that protects you from being held liable for accidents or injuries that happened on the property.

“Often, specialist insurers will offer comprehensive insurance to policyholders, but you do need to indicate to your insurer what the property will be used for.”

Smee states that other important factors to consider before becoming a short-term let investor include:

  • Check your complex/building rules: To protect the safety of other residents and reduce noise disturbances, the Body Corporate rules of apartment buildings and complexes will sometimes prohibit short-term letting, particularly in touristy areas such as Sea Point in Cape Town.
  • Consider location: If you’re buying a property purely for the purposes of short-term letting, make sure it’s in an area that people will actually want to visit.
  • Price it according to what you’re offering: If you’re listing a property at top-end prices – in the R2 500 to R7 000 per night range – make sure that you’re offering luxury accommodation. Domestic travellers are still shopping around for good deals so it’s strongly advised not to out-price your property and risk losing income.

He says owners should also remember that demand won’t be the same year-round.

“Make sure you can afford to cover the quiet months when you may only have one or two guests. If you’re in a coastal area, consider different pricing for summer and winter.”

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