ST Scheme rules could curb holiday rentals
Sectional title units are popular investments for buy to let investors, with certain properties often bought specifically as holiday accommodation. In recent years online portals have made it easier for home owners to let their properties as short term holiday accommodation, thereby earning a much greater income without the risk of long-term leases.
Michael Bauer, general manager of the property management company IHFM, cautions that, if the unit being let as short-term holiday accommodation is in a sectional title scheme and the owner did not take the scheme’s rules into consideration, there may be serious implications.
According to Bauer the rules of a sectional title scheme often states that short-term leases (anything under six months) are not allowed in an effort to maintain good security in the complex and avoid 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.
Bauer explains that short-term letting has pros and cons. “It’s not to say that a holidaymaker will cause any more damage or disruption in a unit than a long-term tenant,” says Bauer. “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 unsavoury people in.”
When deciding if short-term letting should be allowed the trustees of a scheme should rather assess whether the owner of the rented unit has a means of enforcing the body corporate’s conduct rules. If these rules are maintained Bauer says there is no reason for short-term letting not to be allowed.
In the case of a dispute arising a general meeting should be called by the trustees. Owners must then be asked to vote on changing of the rules to accommodate short-term leases. This process will have one of two outcomes, short-term leases will be allowed with the trustees changing the rules formally or a notice must be sent to all occupants that short-term letting is not allowed and that this rule will be enforced stringently going forward.
Bauer explains that, although this is a reasonable manner of resolving disputes concerning the matter of short-term leases, owners and trustees must take care to remain reasonable. “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 doing so.” According to him such punitive measures could, for example, include additional levies to cover extra security and access tags.
Bauer cautions that that if a buyer is buying a sectional title unit specifically for the purpose of renting it out as short-term holiday accommodation it is up to the prospective buyer to first consider the rules of the specific scheme regarding short-term leases. The alternatives being either facing the possibility of fines and no longer being allowed to make an income in this manner in future, or considering another complex when buying.