Can you let your Sectional Title property on a Short-term basis?

Introduction

I was recently asked by a client whether they could let their sectional title unit on a on a short-term basis when the scheme’s rules expressly prohibited short-term renting of units within the scheme.

Not all property owners purchase units as residential owners. Owning units within sectional title schemes could be for investment purposes. They purchase the unit, and fund the cost by letting the unit out. Obtaining the maximum rental income is the goal in these cases. In these circumstances obtaining the maximum rental income is the goal. In schemes that are located in holiday destination hotspots such as city centres and seaside locations, the property has the potential to ask higher rental fees on a short-term basis as compared to longer-term rental lease agreements.

What is short-term letting?

The concept “short-term letting” is not defined in the Sectional Titles Act 95 of 1986 (“the STA”) or the Sectional Titles Schemes Management Act 8 of 2011 (“the STSMA”). Various provisions of the STSMA, Prescribed Management Rules (“PMRs”), and Prescribed Conduct Rules (“PCRs”) refer to and bind owners and occupiers. “Occupiers” is also not a defined term, but would include short-term tenants.

The concept of short-term letting is usually dealt with in amended conduct rules that prohibit letting your unit out for periods shorter than a specified period of time.

The perceived problem with short-term rentals

There is a perception (which can in some cases be based on factual circumstances) that holiday tenants are more likely to breach the conduct rules. The primary concern are breaches of security protocols and noise nuisance caused by rowdy holiday tenants. Ultimately this can jeopardise the scheme’s reputation, security and the property values of the units.

Can trustees restrict short-term rentals?

It is not the trustees who make scheme rules, but rather the body corporate. The prescribed rules do not contain restrictions on short-term rentals. If a body corporate amends the management rules (by unanimous resolution) or the conduct rules (by special resolution) the amended rules need to be lodged with the Chief Ombud in terms of section 10(5)(a) of the STSM Act. The Chief Ombud must then approve the amended rules and issue a certificate to that effect in terms of section 10(5)(b) of the STSM Act. Only approved rules are enforceable. All potential investment purchasers should therefore request a copy of the scheme’s rules along with the certificate of approval by the Chief Ombud to establish whether the rules are binding and enforceable.

Section 10(3) of the STSM Act requires that the management or conduct rules must be reasonable and apply equally to all owners of units. Based on this provision and, in my interpretation of it, the rules should not unreasonably restrict or regulate the manner in which owners use or let their section, and should not limit the rental pool of tenants that the owner could let the unit to, and make it difficult for owners to obtain the maximum rental return for their section. This would adversely affect investment owners and be an unfair limitation of the proprietary rights of investment owners.

How should trustees deal with short-term tenants?

In terms of section 2(5) of the STSM Act the trustees are tasked with the duty to control, manage, and administer the common property, and do all things reasonably necessary for the enforcement of the rules of the scheme.

Tenants are not members of the body corporate, but are members of the community residing in the scheme. The lease agreement establishes a contractual relationship between the owners of the unit (the “landlord”) and the tenant residing in the unit. Tenants need to adhere to the same rules that deal with occupation issues, for example the rules relating to the keeping of pets; parking vehicles on common property; and noise and nuisance provisions.

PMR 3(2) states that a member must take all reasonable steps to ensure compliance with the conduct rules by any tenant or other occupant of any section or exclusive use area, including the member’s employees, tenants, guests, visitors and family members. It is the duty of an owner to ensure that his or her tenants and other occupiers, including employees, guests and their family members, comply with the rules. This is a partial re-statement of section 10(4) of the STSMA, which provides that a scheme’s rules bind the body corporate and the owners of the sections and any person occupying a section. PCR 7(4) states that 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.

The trustees will enforce the rules against the owner of the unit on the basis of the owner being a member of the body corporate. The owner of the unit will then need to ensure the tenant’s compliance with the rules on the basis of their rental lease agreement (contractual relationship). It is therefore ultimately the owner who is responsible for the actions of their tenant.

Duty on owner to notify body corporate of changes of occupancy

Section 13(1)(f) of the STSMA imposes an obligation on the owner of a unit to notify the body corporate when they let out their units.

Requirement to give the tenant a copy of the scheme’s rules

Section 5(8) read with section 5(9) of the Rental Housing Act 50 of 1999 requires that the landlord must ensure that a copy of any House Rules applicable to a dwelling must be attached as an annexure to the lease. The Rental housing Act defines “House Rules” to mean the rules in relation to the control, management, administration, use and enjoyment of the rental housing property. In the context of sectional titles this will include the management and conduct rules in terms of section 10 of the STSM Act.

In terms of section 10(6)(c) of the STSM Act the body corporate must deliver a copy of the rules to each person who becomes an owner or occupier. We therefore recommend that the short-term reservation booking websites, landlord owner and body corporate ensure that any short-term tenant have access to a copy of the scheme rules. The rules could be left on a public notice board at the scheme, or the rules could be left within the section that is let.          

What type of short-term conduct rule should bodies corporate adopt?

Schemes that allow short-term letting should adopt a conduct rule that states that owners are entitled to continue letting their units on a short-term basis, subject to certain conditions, for example:

• The owner must keep proper and accurate records of the full identities, addresses and contact details of all tenants leasing their units.
• The owner must ensure that a copy of the scheme’s conduct rules is made available to each and every tenant that lets their units.
• The owner must ensure that each tenant sign an undertaking to comply with the scheme’s conduct rules.
• Rules that specifically address the actions and behaviour of the short-term tenants that result in nuisance.
• Rules that addresses access control and security.
• Penalty rules for consistent, persistent and serious nuisance caused.

Conclusion

The body corporate should therefore identify the undesirable activities that result from the short-term letting, and establish whether this high-turnover occupancy process unreasonably interferes with the use and enjoyment of the common property or sections by other owners or occupiers, and whether the activity causes a nuisance. The scheme rules should address the specific actions or behaviour of the short-term tenants, rather than to target the investment owners with blanket bans or overly restrictive rules.

WRITTEN BY DR CARRYN MELISSA DURHAM