Understand the laws that govern holiday-letting in South Africa

Spectacular waterfalls, valleys, mountains, game reserves and beaches make South Africa a prime holiday destination. In fact, according to national tourism statistics, the total tourism contribution to the country’s GDP in 2016, both foreign and domestic, was approximately R375.5 Billion. It is for this reason that buying property and letting it out for holiday purposes has become an attractive option for property owners.

KwaZulu-Natal is emerging as a frontrunner in the tourism industry and throughout the years, has witnessed its buy-to-let sector grow phenomenally, especially in the popular Dolphin Coast suburbs of uMhlanga, Ballito and uMdloti.

Sectional-titles including apartments, duplexes and complexes have evolved into the most popular property type for holiday buy-to-let investments, and is witnessing phenomenal buyer interest. For those planning on investing in these homes, it is important to note that the sector is accompanied by many rules and regulations. Therefore, it is important to stay on the right side of the law by making provisions for the following:

Comply with your Body Corporate

Before you get started on the venture, you need to inquire if the body corporate allows for short-term letting. If this is permitted, you will then need to find out the rules of the sectional-title with regard to holiday letting, as these are binding on both you and your short-term tenants. Your responsibility is to ensure that a tenant is made aware of and complies with these rules through verbal or written communication. This means that if a tenant conducts his or herself in a manner that is a nuisance to or interferes with others in the apartment or around common property areas, the owner either reprimands or if the problem escalates, evicts the tenant/tenants.

As an owner, it is important to note that any decisions implemented that are not included in your real estate contract first needs to be permitted by the body corporate, this may include, requiring additional parking bays, the placement of signage on your apartment unit and the sale of alcohol on the premises.

Regulatory Measures

In South African law, The Rental Housing Act governs the relationship between owners and tenants. It solely applies to lease agreements entered into for housing purposes and states that an owner must provide his/her tenant with a written lease agreement upon the tenant’s request. The Act details what should be included in a lease agreement, outlines the rights and responsibilities of both parties, provides information on the cancellation or termination of a lease and establishes Rental Housing Tribunals that deal with unfair practices.

In terms of sectional title acts and rules, the concept of short-term letting is not defined, however provisions made in the Sectional Titles Schemes Management Act 8 of 2011, Management Rules and Prescribed Conduct Rules refer to and bind owners and tenants. Management Rules state that it is an owner’s duty to ensure that a tenant complies with the conduct rules of any section or exclusive use area. Furthermore, the Sectional Titles Schemes Management Act 8 of 2011 provides that the rules within a sectional title binds the body corporate, owners and any person occupying a section.

Declare Rental Income

Owners need to declare all rental income received by their holiday-letting venture when they file for tax at the end of every tax season. This is calculated on the sum of all rental income collected over a 12 month period, however, the security deposit paid by the tenant does not qualify for tax, provided it is returned to the tenant after their stay, which is usually within 7 days. In the case where a security deposit is forfeited by the tenant, then it is taxable.

Enter the holiday buy-to-let investment sector with know-how and clarity by complying with your body corporate, understanding regulatory measures and declaring your rental income for tax purposes. These measures will help ensure that your venture is lucrative, successful and legitimate.

Available from Dormehl Phalane Property Group is a selection of apartments, duplexes and complexes for those considering tapping into South Africa's vibrant holiday sector. Speak to our agents today to find out more.