Managing the complexities of short-lets, especially holiday apartments
Cape Town is the busiest tourist city on the African continent and regularly features as a top destination, the latest being CNN Travel naming it one of the world’s most beautiful cities.
The rise in popularity of Airbnb has seen somewhat of an explosion of short-term rentals with property owners looking to capitalise on what is often seen as lucrative rental income. While the income can be attractive, there are many complexities and pitfalls, says Natalie Muller, sales and rentals manager for Seeff Atlantic Seaboard and City Bowl.
According to an Airbnb Report released in October last year, 43,000 homes in SA are listed on the site (about 17,000 in Cape Town) and the typical host earns R28,000/annum based on 19 nights a year.
Ms Muller says, that property owners need to ensure that they are legally compliant as a priority and then, to really ensure you can meet your income targets, attract good calibre guests with a top quality product. She puts this into perspective by using Cape Town as a case study.
Cape Town is the busiest tourist city on the African continent and regularly features as a top destination, the latest being CNN Travel naming it one of the world’s most beautiful cities. The tourist season runs from around October to April annually and the city attracts people from across the country along with a great deal of foreigners who often spend lengthy periods in the city to escape the cold European winter.
Many town and city councils have by-laws which regulate the use of property. In the case of Cape, there is a comprehensive “Guest Accommodation Policy” which was drawn up ahead of the 2010 Soccer World Cup. It sets out the zoning and other requirements which govern holiday accommodation. Guest accommodation is also regulated in terms of the Municipal Planning By-law of 2015.
Broadly speaking, you can operate a B&B from a full title house without prior consent, but subject to certain conditions (like, not renting out more than three rooms), but it is more complex when it comes to sectional schemes.
Sectional Title Schemes
The challenge comes in, when it is sectional title property as many of the holiday flats are, says Ms Muller. It would only be permitted if the property is zoned GR2 – GR6, which the bulk of the properties in Cape Town are, however if it is not permitted in terms of the City’s by-law, permission is required from the City’s Development Management Department.
There is also the additional further hurdle of how the Body Corporate views short-term rentals. While the Sectional Titles Act and the Sectional Titles Schemes Management Act (STSMA) do not address short-term rentals, the STSMA empowers a body corporate with the authority to make or amend conduct rules, including rules around Airbnb and holiday rentals.
Given that residents live in such close proximity, it is understandable that, while an attractive holiday rental option, sectional title would be more complex, says Ms Muller. Property owners are also required to inform the body Corporate of the names and ID numbers of the occupants and will need to ensure that they brief and equip the guests with the necessary conduct rules. This will include security arrangements as well as noise (which can be problematic with short-lets).
Agreement and governance
It is important to have a detailed short-term lease to regulate the tenancy, deposit and payment terms, cancellation policies, breakages, complaints and general conduct. Ensure that the rights and responsibilities of both parties are defined and clearly set out in the contract, says Janine van Heerden, rentals manager for Seeff Hout Bay & Llandudno.
Note also that the CPA (Consumer Protection Act) and the PIE (Preventions of Illegal Evictions Act) do not apply to short-term rentals. The Rental Housing Act applies as a holiday rental is still seen as a lease. It is therefore important to conduct inspection handovers and manage the tenant’s deposit and the refunding of it in accordance with the Act.
Set-up and ensuring a great guest experience
For short-term or holiday purposes, the unit will need to be furnished and equipped for self-catering purposes with basic cooking, crockery and utensils as well as cleaning materials, bedding and towels as a minimum. Television and internet (WiFi) is also a prerequisite, says Ms Muller.
Top end apartments and villas may also need to be equipped with luxury finishes such as sophisticated home automation, temperature control, a heated swimming pool and a fabulous location with top class sea views, she says.
Some important aspects include ensuring that all appliances, lights, WiFi (uncapped) and DSTV (full bouquet if possible), are working before the tenants arrive to reduce late/emergency call outs. Ensure that there is enough linen and towels to allow for a change and cleaning while they are in residence.
Always conduct and in-going and out-going inventory report and documents everything from the number of spoons to the scratch on the table in the living room. Insist on a minimum of one clean per week to allow you to keep an eye on the condition of the home during the stay.
Collect relevant details about your tenant including ID, bank details, copy of credit card and do not allow occupation until the money has cleared in your (or the agency’s) bank account. Take a sufficient deposit to cover potential damages, but don’t scare guest with an unreasonable deposit requirement.
Don’t forget to check your insurance cover. You may need added cover for short-term or Airbnb rentals. Be open to price negotiation, especially if the client wants a longer stay.
Check-in, departure and other arrangements
Janine van Heerden, rentals manager for Seeff Hout Bay & Llandudno says that many property owners soon realise that short-term rentals, especially holiday rentals, are complex and perhaps best manged by a skilled rental agent.
She gives a few further additional aspects to take into account. Aside from ensuring that the property manager is informed of the basic information of guests and the dates of occupancy, you may need to alert the security and arrange for special handover keys of the guests are arriving late at night or in the early hours of the morning.
If the guest has their own car or a hired car, this also needs to be filtered through to the security if necessary.
Ensure the guests are made aware of the essentials of the property, which floor the apartment is on for example, especially if there is no lift. Only two guests per bedroom. You cannot have a double bed and then add an additional single bed in one room as it will be over-crowded.
Ensure the guests are equipped with the rules and don’t forget to make your guests aware of any restrictions around water consumption. Put a few laminated posters/signs up within the establishment to remind guests to save water.
Guests also need to be shown how the alarm system works and should be provided with instructions and codes for other equipment such as WiFi, DSTv or Netflix and so on. Advise guests of any maintenance work or construction that may be taking place at the time of their stay in or around the apartment block.
Lastly, put a bunch of flowers, fresh fruit or other welcoming gesture and it is always good to be on-hand to welcome the guests. Referrals and repeat business are vital to any short-term or holiday property owner.