The recent surge in popularity of global accommodation websites, such as Airbnb, enables property owners in South Africa to let their properties to holidaymakers from all over the world. In recent years, these opportunities have been widely exploited by property owners across South Africa. This is particularly prevalent among owners in Sectional Title schemes and Homeowners’ Associations situated in coastal towns and cities, where there is a burgeoning demand for secure and affordable self-catering holiday accommodation.
Understandably, an increasing number of property owners prefer the higher income generated from short-term letting over traditional forms of renting out their properties on long-term leases. To keep up with this trend, certain Sectional Title schemes and Homeowners’ Associations have taken steps to regulate short-term letting, and in certain instances, they have taken strict measures to prohibit it entirely.
The Legal Framework of Sectional Titles:
The question arises whether it is legally permissible for a Body Corporate or a Homeowners’ Association to restrict or prohibit owners from conducting short-term letting in their schemes.
In a Sectional Title scheme, an owner acquires extensive rights to the use of their section. However, this general principle is subject to the provisions of the Sectional Title Schemes Management Act 11 of 2011 (“the Act”), which binds not only all the owners of sections in the scheme but also any person occupying a section. Although the term ‘occupier’ is not strictly defined in the Act, it encompasses short-term tenants.
While short-term letting is not specifically mentioned in the Act, several core statutory provisions provide guidance on this issue:
- Section 4 of the Act: Establishes that a Body Corporate retains the power to do all things necessary for the enforcement of its Rules and for the management and administration of the common property in the scheme.
- Section 13(1) of the Act: Dictates that an owner must:
- Use and enjoy the common property in such a manner as not to interfere unreasonably with the use and enjoyment thereof by other owners or other persons lawfully on the premises;
- 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; and
- Notify the body corporate forthwith of any change of ownership or occupancy in his or her section.
Amending Conduct Rules to Limit Rentals:
A Sectional Title scheme is legally permitted to make its own rules or amend its existing rules, provided that any amendments are approved by the Community Schemes Ombud Service (CSOS). Once the amended Rules have been approved by the Ombud, they are valid and binding on all owners and occupants.
Should a Sectional Title scheme wish to limit or prohibit Airbnb activities, it must first obtain the formal approval of the Body Corporate. This must be authorised by a special resolution passed by:
- At least 75% (calculated both in rateable value and in the number of votes) of the members represented at a general meeting; or
- Agreed to in writing by members holding at least 75% of all total votes.
Judicial Precedent: Body Corporate Paddock v Nicholl
In recent years, South African courts have increasingly been called upon to determine disputes involving the regulation and prohibition of Airbnb activity.
In the landmark judgment of Body Corporate Paddock Sectional Title Scheme v Nicholl 2020 (2) SA 472 (GJ), the High Court held that an amendment to the Conduct Rules of a Sectional Title scheme which prohibited short-term rentals was fully in compliance with the Act.
In this case, the Body Corporate had adopted a Special Resolution amending its Conduct Rules to prohibit leases shorter than 6 months. The owner contended that the amended Rules were unfair, unreasonable, and contrary to her constitutional right to freely deal with her property under Section 25 of the Constitution (which protects private ownership rights).
Notwithstanding the owner’s constitutional arguments, the Court ruled that the scheme’s amended Conduct Rules did not unlawfully violate private ownership rights. Consequently, the owner was ordered to desist from all Airbnb activities in her unit.
Key Considerations for Property Investors:
In light of these ongoing legal developments regarding the regularisation of Airbnb accommodation in South Africa, property investors should exercise caution when acquiring investment units strictly for short-term income derivation.
Potential property investors in Sectional Title schemes and Homeowners’ Associations should thoroughly familiarise themselves with the existing Conduct Rules of those schemes prior to acquisition to confirm that short-term letting is not actively forbidden or restricted.
