Letting your property

What you need to know

If you let a property in South Africa, you’re required by law to pay tax on your rental income in South Africa and not in the country where the income is received.

You should have third party insurance (costing at least R1,250/€129 per year) covering accidents and injuries to guests (or anyone) using your property. If you’re planning to buy a community property, you must check whether there are any rules that prohibit or restrict short-term letting. You may also be required to notify your insurance company.

Bed & Breakfast

The number of bed and breakfast (B&B) establishments in South Africa has rocketed over the last decade. In the mid-’90s, there were barely 300, but now there are well over 10,000. Some people, foreigners included, imagine that running a B&B is easy and probably even fun. But be warned: it involves long hours, hard work, and patience and grace under pressure, often for modest rewards.

Before you can turn your South African home into a B&B, your plans must be agreed by the Town Planning Department of your local council. If they approve them, you must register the business and secure a trading licence from the Licensing Department. You must also register with the regional Services Board and the tax authorities, as a business sole proprietor, close corporation (cc) or private company (pty).

If you’re still tempted to run a B&B in South Africa, further information and advice can be obtained from the following: the Bed and Breakfast Association of South Africa (BABASA), PO Box 2005, Groenkloof, 0027 (Tel. 012-480 2041, www.babasa.co.za ) and the Guest House Association of Southern Africa (GHASA), 27 Tennant Road, Kenilworth, Cape Town, 7800 (Tel. 021-762 0880, www.ghasa.co.za ).

Short-Term Letting

Most people who do holiday letting have a simple agreement form that includes a property description, the names of the clients, and the dates of arrival and departure. However, if you do regular letting, you may wish to check with a lawyer that your agreement is legal and contains all the necessary safeguards. If you plan to let to non-English speaking clients (South Africa is attracting visitors from all over the world), you must have a letting agreement in other languages. If you use an agent, he will provide a standard contract.

Long-Term Letting

Owners who will be away from South Africa for much of the year or for long periods might consider a long-term let while they’re absent. Unless your property is rent-controlled (and very few in South Africa are) you can set any rent you decide. It must be realistic, of course, or nobody will rent the property. The best way to gauge the current rental level is to investigate rents being charged for other properties in the area; pose as a potential tenant if necessary or enquire at local estate agents.

If you are away from South Africa for long periods, you might decide to let your property through an estate agent who, as well as finding a tenant, will mange the property while you are absent. If you use an agent, you will have to pay him commission. There is no fixed rental commission in South Africa, but expect to pay at least 10 per cent (probably more), the amount depending on the type of service provided, i.e. partial or full management of the property.

If somebody wants to rent your property, he must make the offer in writing. If an agent is handling the letting, he will probably draw up a document for the applicant to sign. You should ask for and check an applicant’s credit references and/or proof of income.

Lease

Since August 2000, residential leases have been governed by the Rental Housing Act, which stipulates that a lease must contain the following:

• The landlord’s name and address;
• The tenant’s name and address;
• A description of the property, e.g. its address;
• A list of any existing defects to the property (see Obligations below);
• The amount of rent and any periodic increases;
• Any other expenses that the tenant must pay;
• When the rent must be paid (usually at the beginning of each calendar month);
• How much deposit must be paid by the tenant as insurance against any damage he might cause (at least six to eight weeks’ rent is usual);
• The period of the lease unless it’s ‘open-ended’, and details of the notice required by the landlord and tenant to terminate it;
• The landlord’s and tenant’s obligations towards each other (see below);
• Any ‘house rules’ that the tenant must comply with (which usually include restrictions on noise, particularly between around 11pm and 8am, keeping pets and sub-letting);
• A list of furniture and fittings, if the property is let furnished.

Strangely, a lease can be oral, but you are strongly recommended to draft a written lease. In any case, if a tenant requests a written lease, a landlord must provide one.

Obligations

The law requires the following obligations from landlords and tenants:

• The landlord must issue a detailed written receipt for every payment received from the tenant.
• If the tenant pays a deposit, the landlord must invest it in an interest-bearing bank account and must give the tenant a written statement of the interest earned whenever he asks for one.
• Before the tenant moves in, he and the landlord must inspect the property and draw up a list of defects, which must be attached to the lease.
• When the tenant moves out, he and the landlord must inspect the property again to see if the tenant has caused any damage.
• If there’s no damage, the landlord must refund the deposit and the interest within seven days.
• If there’s damage, the landlord can pay for repairs out of the deposit and must refund the balance and the interest within fourteen days.
• If the tenant owes money to the landlord, the landlord can deduct it from the deposit before refunding it.

If any disputes arise between landlords and tenants, they can be referred to the Rental Housing Tribunal of the province in which the property is located. Contact a provincial government office for details.