Your place, their rules: the regulation of short-term rentals in community schemes

Introduction

With the increase in short-term rental platforms like Airbnb and Lekkeslaap over the past few years, renting out your property has never been so easy.

However, it might not be as straightforward anymore. Governing bodies in community schemes (e.g. homeowners associations in security complexes or body corporates in apartment buildings) have raised certain, quite valid, concerns about short-term rentals, leading to their banning in numerous schemes.

This understandably led to questions about the legality of governing bodies regulating property owners’ use of their property, with property owners feeling that banning short-term rentals infringes on their right to use their property as they please.

Can governing bodies regulate what property owners do with their property? And if so, can property owners challenge these rules? This will be discussed in light of the current legal framework regulating short-term rentals in South Africa.

What are short-term rentals?

Short-term rentals are generally described as renting out property or a part thereof for less than 30 days at a time. We say “generally described” because currently, there is no national legislation which defines or even regulates short-term rentals, which is part of the cause of many of the disputes that arise.

Current regulatory framework

As mentioned, there is currently no national legislation which expressly defines or specifically regulates short-term rentals, let alone short-term rentals in community schemes. While the Tourism Amendment Bill, 2019, seeks to address this, it is yet to be enacted.

To understand how short-term rentals may be regulated, we must therefore turn to by-laws, legislation stipulating the governance of community schemes in general and case law:

• The City of Cape Town's Municipal Planning By-Law regulates short-term rentals in general in the City of Cape Town. However, in the context of short-term rentals in community schemes, property owners are merely advised to adhere to the rules put in place by the governing body, which might differ from the By-Law.

• Though it does not specifically mention short-term rentals, the most important piece of legislation applicable to this topic is the Sectional Titles Schemes Management Act ("STSMA"), which regulates the obligations of governing bodies in adopting and amending scheme rules.

• In the absence of national legislation that directly regulates parties’ rights and obligations regarding short-term rentals in community schemes, the position has mostly been set out by the Community Schemes Ombud Service ("CSOS") adjudications and our courts in the course of resolving disputes, as demonstrated below.

Therefore, to determine whether community schemes may regulate short-term rentals, a critical question must be asked:

Can community schemes regulate what property owners do with their property?

The short answer is yes.

When you purchase a property in a community scheme, you agree to the rules put in place by the governing body and any amendment thereof, provided that a certain procedure is followed.

In practice, the STSMA entitles schemes to create and amend rules, provided that a certain procedure is followed, while the CSOS oversees the fairness of both the rules and the adoption thereof. From a reading of the STSMA and the CSOS adjudications (e.g. Goucester Court Body Corporate v Maher and Others dated 14 August 2018 and Wianelle Briers and Davit Mawby and White Sands Home Owners Association; Dr Sunny Stout-Rostron case number CD IS 50/WC/17 dated 6 December 2007), it is clear that while governing bodies are entitled to create and amend rules, not only must a fair procedure be followed in adopting and amending these rules, but the rules themselves must be fair and reasonable by not unnecessarily infringing property owners' rights.

The CSOS’s approach was confirmed in the High Court case of The Body Corporate of the Paddock Sectional Title Scheme No 249- 1984 v Nicholl (29534/18) [2019] ZAGPJHC 437; 2020 (2) SA 472 (GJ) (2 October 2019) (“Paddock”).

The Court emphasised that the STSMA requires that a specific procedure be followed in adopting and amending scheme rules, that the rules themselves must be fair (taking into account the property owners' and governing body's interests) and that the rules must apply to all property owners equally.

The Court decided to uphold the scheme's rule of banning short-term rentals of less than six months, given that a fair procedure was followed in adopting the rule and the rule itself was deemed fair as it protected the legitimate interests of the governing body.

Requirements for regulation: fair rules and procedures

It is clear that the rules within a scheme must be fair in that they must be necessary to protect the legitimate interests of the governing body.

Most of the concerns expressed by governing bodies revolve around security within the community scheme and oversight over short-term tenants. It is argued that short-term rentals result in:

• a significant increase in access to the common property of the community scheme, which creates security risks; and

• the governing body being unable to enforce oversight over the actions and possible transgression of rules by short-term tenants.

The court in the Paddock case held that the above concerns are legitimate governing body interests and therefore, rules that are put in place to curb these concerns will be considered fair.

In addition to the fairness of the rules, the governing documents of the scheme must set out a fair procedure by which rules are adopted and amended. The procedure must involve a process whereby:

• the adoption or amendment of rules are voted on by the members of the scheme, i.e. the property owners; and

  
  

• the proposed rules are submitted to the CSOS for its approval.

It is therefore of the utmost importance that property owners actively engage in the governing body's decision-making process and voice any concerns they might have regarding the proposed rules.

When can property owners challenge scheme rules?

A property owner willingly enters into a contract with the community scheme, agreeing to the scheme’s rules and regulations and the amendment thereof. Therefore, the CSOS and any court will be hesitant to interfere with this agreement since the rules and regulations were in place at the time that the property owner joined the scheme.

However, disputes usually arise when community schemes amend or supplement rules after the property owner entered into this contract. Here, one must consider the views expressed by the CSOS and the courts, and the requirements stipulated by the STSMA where an emphasis is placed on the fairness of the proposed rules and the fairness of the procedure followed in adopting the rules.

Therefore, if rules have been adopted without following a fair procedure, or the rules themselves can be said to be unfair, a property owner may very well succeed in challenging the adoption or amendment of the rules.

Key takeaways

• Property owners in community schemes are contractually bound by the rules of the scheme.

  
  

• Governing bodies may regulate short-term rentals provided that the rules are fair and properly adopted.

  
  

• Property owners can challenge unfair rules or procedures.

• As long as property owners are aware of what they are agreeing to and actively participate in the scheme’s governance, disputes can be kept to a minimum.

  
  

• Governing bodies must ensure that their governing documents contain clear and fair provisions and that the provisions are followed to ensure harmonious relationships within the scheme.

At Van Zyl Scheepers Attorneys, we help both property owners in enforcing their rights and governing bodies in ensuring their governing documents are up to scratch. Contact us today for all your property law concerns!