Advice and Opinion

Short term lets in sectional title schemes can be problematic to manage, says IHFM

“A recent trend is short-term letting of residential sectional title units as holiday accommodation, which often are specifically bought for this purpose. Certain online portals make this activity easy by the general public to do this themselves and the popularity of doing this to earn a much greater income without the hassle and risk of long-term leases, is gaining momentum, but there might be serious implications when the unit being let is in a sectional title scheme and the owner of the unit has not taken the rules into account”, says Michael Bauer, general manager of the property management company IHFM.

In the majority of sectional title schemes the rules will specify that a short term let is anything under six months, and that this is not allowed. The rules might have been set this way specifically because the owners want the security to remain “tight” and they do not want the perceived complications of having many different people in the complex over a period of time.

Bauer has recently encountered cases where the trustees of schemes have allowed owners to rent out their units as holiday accommodation, thereby going against their own rules, and they now have to rectify matters, either by changing the rules to allow for short-term letting to take place or by putting a stop to all the short term rentals.

“As with anything, there are pros and cons to short term letting, and it’s not to say that a holidaymaker will cause any more damage or disruption in a unit than a long term tenant. The trustees could also argue that security issues might arise if there is constant turnaround of keys and access tags, but even long term tenants can lose these or let people in that are not savoury”, said Bauer.

What has to be assessed is whether the owner of the rented unit has a means of enforcing the conduct rules with his tenants and if the correct behaviour is maintained, then short term letting could be allowed.

If there is a dispute as to whether to allow short term letting, the trustees should call a special general meeting to ask owners what it is they want and to get a special or unanimous resolution to vote on the changing the rules. If the owners vote in favour of a decision needed to bring about the change, the trustees can then either set about changing the rules to allow for short term letting or notify everyone involved that it is no longer allowed and that the rule will be enforced.

Trustees and owners must be reasonable in dealing with this sort of problem, as long as punitive measures can be put in place to protect the rest of the owners in the scheme, the owners who do rent out their units should be able to continue to do so. This could be in the form of additional levies to cover extra security and access tags, for example, said Bauer.

“It is, however, up to buyers of units that intend renting them out as holiday accommodation, to check the rules before signing an offer to purchase. If the rules stipulate that this is not allowed, another complex should be considered”, he said.