SHORT-TERM LETTING
WITHIN COMMUNITY SCHEMES
Many people buy into residential estates and sectional title developments for
investment purposes and, with economic pressures being what they have been in
the last few years, everyone is looking to maximise their return on investment.
Renting out investment property is a time-honoured way to Schemes Ombud Service (CSOS) regarding the introduction or
boost your income and, in the past, this would most usually enforcement of restrictions on short-term letting in its many
be on a long-lease basis. But now, with the proliferation of guises, adjudicators are interrogating the manner in which
internet booking sites such as Airbnb and Booking.com, it changes to scheme governance documents are introduced.
has never been easier to find short-term tenants. However, They are upholding restrictions designed to limit or control
an influx of short-term tenants can be the cause for much short-term letting provided due process has been followed
conflict within a community scheme. when changes are introduced. This is despite arguments that
owners’ freedom to deal with their properties and to earn an
The concept ‘short-term letting’ is not defined in the sectional
income is being restricted.
title legislation, and the prescribed management or conduct
rules do not distinguish between different classes of tenants On the other hand, the CSOS approach to the approval of rules
or leases. for sectional title schemes is not consistent, and schemes
may well find proposed rules being rejected as unreasonable
While the Sectional Titles Schemes Management Act and the depending on the extent to which owners’ property rights are
Rental Housing Act impose certain obligations on owners interfered with. The prevailing attitude seems to be in favour
when letting their units, they, too, do not distinguish between of the introduction of appropriate, reasonable controls and
short-term and long-term leases. In community schemes the utilisation of a system of penalties in order to control
governed by a homeowners association (HOA), be it a tenant issues as opposed to the introduction of outright
corporate entity or voluntary association, there is also no set prohibitions.
standard when dealing with regulation of leases and tenants.
In every instance one needs to consult the applicable scheme 2018 saw many HOAs and bodies corporate grappling
governance documentation to determine the extent to which with short-term leasing issues such as increased noise,
leases, and in particular short-term leases, are regulated. No overcrowding and security issues. Management bodies are
two schemes are necessarily the same. faced with h aving to strike an appropriate balance between
property rights – and the right of property owners to earn an
Some completely restrict the right to lease for periods income – and the broader interests of maintaining the safety,
of less than six months, while, especially in resort-type security and amenities of all residents. The debate continues.
developments, there may be no controls and home owners Some estates are considering the introduction of user-
may be free to rent out properties on an unrestricted basis. pay models to administer short-term lets, while others are
increasing expenditure on sophisticated access and security
When buying into a scheme with the intention of short-
monitoring systems.
term letting, it is critical to examine the scheme governance
documentation to determine how and to what extent short- Whichever route a scheme chooses to follow to meet the
term leases are regulated. In addition, it is important to challenge, it is always wise to engage in a consultative
consider all relevant town planning scheme regulations and process with members and residents to ensure that whatever
by-laws, as well as title deed restrictions and the terms and measures are introduced enjoy the appropriate level of
conditions of all relevant policies of insurance to determine support, and achieve the goal of balancing the interests of
whether the conduct of short-term letting, which may possibly all residents in an appropriate, fair and reasonable manner.
be considered a business enterprise, will attract further levels
of regulation.
There is also no guarantee that what you bought into will
not be changed, provided that change is brought about
lawfully. In disputes that are coming before the Community
Lazelle Paola, Partner Cox Yeats Attorneys
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