Residential Estate Industry Journal 5 | Page 46

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 46