To Airbnb or not to Airbnb

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The meteoric rise of Airbnb — the short-term letting app launched in a San Francisco apartment a mere seven years ago — is, without question, shaking up the entire residential property letting industry. From humble beginnings, the company has, in a startlingly short period of time, become a global behemoth with a market valuation of $25 billion — more than three times that of the 50-year-old Hyatt Hotels chain. Initially, the online portal catered almost exclusively to tourists and business travellers seeking short-term rentals, however of late Airbnb’s market has experienced a significant surge in the number of local property-owners and tenants utilising the online booking service for medium- to longer-term rentals. A further natural by-product of this growing paradigm shift is an increase in the amount of pop-up rental agents who manage only Airbnb properties on a full-time basis.

The statistics outlining the trend are telling — according to Airbnb, there has been a 190% growth in the number of local South African hosts signing up with the site in the past 12 months, bringing our country’s total listings to an impressive 22 000. Remarkably, half of these nationwide listings are in Cape Town alone, placing the Mother City in a noteworthy 21st position on the list of Airbnb cities world-wide. During the same period, 134,000 inbound international guests rented properties through the website, representing an extraordinary 250% growth from the previous year.

Lastly, one particularly significant number stands out to reveal the true extent by which the playing field is changing: Between 2015 and 2016 alone, almost 100,000 South Africans used Airbnb domestically. Naturally, property owners and agents alike will be tempted to jump on this now-rampant bandwagon. However, before doing so, it is vital that certain key elements are borne in mind before one elects to adapt one’s residential letting practices to accord with this archetype of technological progress.

Firstly, for those owners considering listing flats which fall within sectional title schemes, it is important to first determine whether their particular scheme allows short-term letting, since many expressly prohibit the practice and, where this is the case, to do so would contravene the body corporate rules. Even where short-term letting is, in fact, allowed, owners must ensure that prospective guests are provided with a copy of the applicable conduct rules, and that they agree to be bound by these rules prior to finalising their booking — since, in the event of non-compliance, it is the owner who will be liable for any breaches, and not the tenant. Conveniently, Airbnb makes provision for hosts to add their own tailor-made ‘House Rules’, which I would suggest owners utilise by adding a full set of the conduct rules applicable to their scheme-at-large.

Secondly — and following on from the first point — it is imperative when listing your property on Airbnb to draw up a detailed tenancy agreement which would serve as a short-term lease. This should make provision for deposit and payment terms, cancellation policies, breakages, and how the guest would deal with complaints, inter alia. As with any ordinary residential property rental, the rights and responsibilities of both parties should be clearly and comprehensively delineated from the outset.

Although Airbnb has its own ‘Host Protection Insurance’ — which covers owners against third party claims of property damage or bodily injuries up to $1 million — this is only available in 15 countries at present, excluding South Africa. One would therefore be well-advised to consult a specialist in advance, to properly understand the implications of operating without an inbuilt policy, and to gauge how much one ought to ask upfront from a tenant as a deposit, or what kind of added insurance policy would be suitable to ensure adequate liability cover for an owner. In short, care must be taken to ensure that every conceivable scenario is anticipated and addressed.

Thirdly, if you are a tenant who wishes to sub-lease your property, you must first ensure that your lease agreement allows you to do so, or whether you are first required to obtain your landlord’s written authorisation. Should you fail to obtain the requisite permission, or should your lease expressly prohibit sub-letting, by listing your property on Airbnb you would be committing a material breach of your lease, and your landlord would, in such circumstances, be entitled to terminate your lease, which could have disastrous consequences should you, and your Airbnb guest, face eviction.

If you are a tenant who wishes to sub-lease your property, you must first ensure that your lease agreement allows you to do so, or whether you are first required to obtain your landlord’s written authorisation.

Lastly, over the past year or two, a plethora of self-titled ‘Airbnb rental partners’ have cropped up offering various services to hosts, such as the preparation and marketing of host listings on third-party platforms (that is, apps or websites such as Airbnb), interacting with potential guests, and managing professional cleanings, etc. This particular kind of agent operates in a similar way to rental agents who procure and manage longer-term lease relationships, only many work exclusively with Airbnb properties.

Just as hosts are now finding an easy way to rent out properties by side-stepping licensing requirements, so too is it inevitable that many of these particular agents will be practicing without any accreditation. Although the Estate Agency Affairs Act dictates that nobody may perform any act as an estate agent without a valid fidelity fund certificate, it is becoming increasingly difficult to define ‘estate agent’ in this evolving landscape, and therefore policing the practice is now near-impossible, which in itself should sound a caution to both property owners and prospective ‘Airbnb agents’.

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