Kayley Leverton | Senior Associate | Gillan & Veldhuizen Inc. | mail me |
Airbnb is dominating the property conversation right now. Record tourism numbers, mounting pressure on housing supply in cities such as the City of Cape Town (COCT), and fresh regulatory movement from the city have pushed short-term letting beyond a side hustle. It is now serious business. However, alongside the opportunity, a growing and increasingly litigious tension is emerging in sectional title schemes.
In these developments, short-term letting is colliding with building rules. As a result, Airbnb and sectional title schemes are becoming a major legal and governance issue.
South Africa now has tens of thousands of Airbnb listings. Most consist of entire homes or apartments rather than spare rooms.
In Cape Town alone, listings exceed 20,000. Although hotels and guesthouses still dominate overall accommodation capacity, Airbnb’s scale and flexibility have reshaped the market. Increasingly, they are also reshaping dynamics within residential communities.
For many sectional title schemes, this is where the friction begins. The debate around Airbnb and sectional title schemes continues to intensify as more owners turn residential units into short-term accommodation businesses.
When ownership meets rules
When developers establish a scheme, they introduce management and conduct rules that bind all owners.
In newer schemes, these rules often address short-term letting specifically. However, older buildings now face growing uncertainty because many of their rules do not clearly address the issue. At its core, these disputes are rarely about Airbnb itself. Instead, they involve whether owners are complying with the rules they agreed to when they bought into the scheme.
In a recent matter, a body corporate enforced clear conduct rules restricting short stays below a specified number of days. Despite repeated warnings and fines, several owners continued operating Airbnb units in contravention of the restriction. The body corporate ultimately had to approach the High Court for an interdict.
The court granted the order and required the owners to stop the short-term letting. If they continue, they face contempt of court. It serves as a reminder that “ownership rights are never unlimited. They always remain subject to the scheme’s rules and applicable law”.
The balancing act – income vs impact
There is no denying the appeal of short-term letting. In tourist-heavy areas, these rentals can generate significantly higher returns than traditional leases. However, many schemes now weigh that financial upside against serious downsides. These include noise complaints, security concerns, increased wear and tear on common property and a sense of transience within residential communities.
At a broader level, the discussion has moved beyond individual buildings. As more units shift to short-term letting, fewer remain available for long-term tenants. Consequently, rental prices increase while access for local residents decreases. Although this debate is gaining traction, it still largely sits outside the courtroom.
Our courts apply the law as it stands. The broader housing debate is unlikely to influence outcomes unless legislation changes.
That said, legislative change may be approaching. Proposed amendments to tourism legislation aim to create a more balanced framework between economic growth and housing needs. Therefore, Airbnb and sectional title schemes may soon face tighter legal oversight.
SARS, rates and the compliance catch-up
Another important shift is happening quietly in the background: compliance. The South African Revenue Service (SARS) is certainly becoming more aware of the income generated from short-term rentals.
Many owners do not realise that short-term letting, which typically involves stays under 28 days, is not VAT-exempt. By contrast, long-term residential rentals remain VAT-exempt. In addition, municipal considerations now play a greater role. The City of Cape Town requires properties used for short-term letting businesses to be reclassified and charged commercial rates.
Earlier this year, COCT signalled a major shift in the treatment of short-term rentals. Under its draft 2026/27 rates policy, authorities may reclassify properties used predominantly for short-term letting and charge commercial rates. In some cases, increases could reach up to 135%.
Many people refer to this as an “Airbnb tax”. However, the City has clarified that this is not a new tax. Instead, it reflects the enforcement of an existing distinction between residential use and commercial activity. This move, together with a proposed short-term letting by-law expected to enter public comment soon, points toward a broader trend. Authorities no longer treat short-term rentals as informal or incidental income streams. Instead, they increasingly view them as structured commercial operations requiring proper compliance.
It’s questionable how many owners are actually updating their property status. For owners operating multiple units or running large-scale operations, the gap between “side income” and “commercial activity” is narrowing rapidly.
Where disputes really land
When disputes escalate, body corporates have several enforcement options. These include internal fines, referrals to the Community Schemes Ombud Service (CSOS), and court proceedings. However, litigation does not always offer a simple solution.
These processes can become costly and time-consuming, and not everybody corporate has the resources to pursue them.
Each matter also depends heavily on its specific facts. Conduct rules differ from one scheme to another, and successful enforcement depends largely on how clearly schemes draft and apply those rules.
So, what should owners (and trustees) be doing?
For anyone currently operating, or considering, short-term letting in a sectional title scheme, the starting point remains straightforward: read the rules carefully. If the conduct rules restrict short-term letting, those restrictions will generally be upheld.
Ignoring them is what leads to disputes. For schemes without clear provisions, the best opportunity to act comes before problems emerge. If there’s an appetite to regulate short-term letting, the rules need proper amendment through a special resolution. That process requires a 75% vote, which can become difficult once opinions divide.
My practical advice includes:
- Reviewing your scheme’s conduct rules carefully.
- Starting discussions early if changes become necessary.
- Keeping records of complaints and disturbances.
- Treating short-term letting as a regulated activity rather than a loophole.
Short-term letting is not disappearing. However, the environment surrounding it continues to evolve through court action, stricter enforcement and shifting municipal policy. For owners, the position is increasingly clear. The opportunity remains real, but Airbnb and sectional title schemes now operate within an environment of stricter rules, closer scrutiny and far less room to ignore compliance obligations.