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December 05, 2018

Airbnb and short-term letting in sectional title complexes






Can body corporate’s rules prohibit this?

I believe that Airbnb has over 40,000 South African active listings on their site. How many of those are owners in sectional title complexes, and how do short-term rentals affect security in complexes?
As our complex views short-term rentals of under 3 months as a security risk, our body corporate rules provide:

SHORT-TERM RENTALS
It is recorded that no section shall be let by any owner or resident for a period of less than 3 months at a time. No "Airbnb" or similar leasing/bed and breakfast/hotel/serviced apartment arrangements or platforms shall be permitted unless the prior written consent of the Trustees is obtained.
FAILURE TO ADHERE TO THIS RULE SHALL ATTRACT AN IMMEDIATE FINE OF R5000 PER OCCURRENCE/INCIDENT, WHICH AMOUNT SHALL INCREASE ANNUALLY BY 10%.

But can we enforce this? It seems that we must wait for a High Court ruling.

The Community Schemes Ombud Service Act (“the CSOS Act”) applies. In July 2018, the CSOS adjudicator heard a dispute between the body corporate and three owners regarding the amendment of the body corporate’s conduct rules that prohibited letting units in the scheme for a period of less than 3 months. The owners, who had been making use of the Airbnb website to let their units for less than three months at a time, contended that this rule was unfair and unreasonable.

The adjudicator had to consider the following questions:

1.     Is the rule prohibiting short-term rentals in compliance with the Sectional Titles Schemes Management Act (“the STSMA”)?
2.     And, if so, is the rule applicable and enforceable against the 3 owners letting their units on Airbnb?
3.     Is the rule prohibiting short-term rentals in compliance with the STSMA?

The adjudicator considered section 10(3) of the STSMA, which requires that a scheme’s conduct rules be reasonable and apply equally to all owners of units within the scheme, and the balance between the respective interests of the owners and the body corporate.
I
n summary, the adjudicator’s findings were as follows:
·         The rule prohibiting short-term rentals of less than 3 months at a time is reasonable and fair in the circumstances.
·         Different rules cannot apply to different owners and the owners who previously let their units via the Airbnb platform have to abide by the new rule.

·         However, the rule should only become enforceable after a fair and reasonable notice period.

Having reached that conclusion, however, the adjudicator finally found that the CSOS Act “does not confer any jurisdiction on an adjudicator to make an order whereby a party can be instructed to cease his/her/their behaviour in contravention of a rule” and further that the act “does not confer the jurisdiction on an adjudicator to declare a rule reasonable and enforceable.”

The adjudicator confirmed that as she does not have the required jurisdiction she stated that “given the uncertainty in schemes insofar as short term letting is concerned, a High Court ruling would be highly beneficial”.

November 16, 2018

Is your sectional title complex looking a bit tired?




Sectional title maintenance and improvement

Maintenance

The trustees of your body corporate need to maintain the complex (to keep it more or less in its original condition). These items are provided for in a budget that deals with routine maintenance and provision for unforeseen expenses. The trustees normally have discretion to authorise spending on these items. If the maintenance item is out of the ordinary (e.g. you need to spend a large sum to resurface your tennis court) a majority of the owners should approve the expenditure.

Improvements

Sometimes, it may be necessary to improve the property (perhaps to make it appear more modern).  An improvement that is a “must have” is likely to be non-luxurious but one that is a “nice to have” is probably luxurious. The common property of a scheme is owned by all owners in undivided shares. One of the basic principles of co-ownership is that all owners must agree to any significant or change to their property.

Maintenance of the common property, especially in schemes that have been running for a few years, should hold no surprises. Improvements to the common property, on the other hand, are not routine. This uncertainty is unfortunate because while a non-luxurious improvement must almost always be authorised by a special resolution of the body corporate, a difficult thing to achieve, authorising a luxurious improvement always requires a unanimous resolution, an exceptionally difficult thing to achieve.

The trustees are entitled to suggest a non-luxurious improvement but there is a specified procedure that must be followed to get the authorisation. The owners must be notified in writing of the trustees’ suggestion and given 30 days to request a meeting to discuss the proposal. They must be fully informed of the financial implications and, if any owner requests a meeting to discuss the improvement, a meeting must be held and the special resolution taken at the meeting. If the resolution is not taken, the improvement cannot be made. There are two implications to this provision. The first is that if no owner requests a meeting within the required thirty day notice period, the meeting need not be held and no special resolution is required to authorise that particular improvement. The second is that this is one special resolution that must be taken at a meeting and cannot be taken by round robin.

November 09, 2018

CCTV cameras at home and the right to privacy



A client asked: What is the law on CCTV installation on a private property in relation to privacy and the law? I have a situation where a camera has been set such that 85% of what is being captured is in my yard.

Privacy issues

You have the right to protect your property and this can be done by using a CCTV system where it is necessary, such as a security measure. However, out of respect for your neighbour, CCTV systems should be used in a responsible way to respect the privacy of others.

The problem arises when you cross the line between monitoring your own property and somebody else’s. If your camera is angled in such a way that it includes coverage of your neighbour’s yard or driveway, then complaints about invasion of privacy will follow.

CCTV monitoring is acceptable and even welcomed in public places, but it is unreasonable to be spied on in your own private property. 

The law

The complaints about invasion of privacy are not specifically protected in law. Our constitution gives a citizen the broad right to privacy. However, there is nothing illegal, per se, about home surveillance in South Africa.
South Africa’s Protection of Personal Information Act which seeks to regulate the Processing of Personal Information, does not apply to purely household or personal activity.
Clearly, the common law would protect you, regarding your neighbour’s CCTV cameras, when:
·         The surveillance is of a criminal or voyeuristic nature;
·         The area being monitored is one where someone would reasonably expect to have privacy, such as a bedroom or bathroom;
·         The surveillance is of such intensity that it is creating a nuisance, preventing someone from the enjoyment of their property;
·         The installation of the cameras is the result of a neighbourhood dispute involving threatening behaviour, in which case an apprehended violence order may call for the cameras to be removed.
The solution
Use some basic common sense to avoid alienating your neighbours and possibly being taken to court.
When you install CCTV cameras, make sure that:
·         You are transparent to those around you when installing your CCTV system, by informing your neighbour(s) about your system;
·         They are only monitoring your property;
·         If your camera is pointing directly at a neighbour’s property, you should take steps to reposition it to avoid complaints or in some cases accusations of violation of privacy or harassment;
·         If they are overlooking the street, there is a sign informing people they are being monitored;
·         They are not monitoring areas where people could reasonably expect privacy;
·         The stored information is not used for any other purpose than protecting your property;
·         If you record images, regularly delete the recordings and do not keep them for longer than is necessary for the protection of your property;
·         If your system captures information of an incident, retain that information as it could be use by the police to aid an investigation.


October 31, 2018

Must a contract be in writing to be binding?



Elements of a contract
·         A contract consists of an offer by the offeror (the seller or service provider) to the offeree (the buyer or client) to buy goods (movable or immovable) or services, for an agreed price or fee;
·         A contract becomes binding when the offeree accepts the offer;
·         Obviously, there must be agreement as to what is being offered;
·         There must be an intention to contract freely and voluntarily. Any misrepresentation by either party will render a contract void. Anyone who is coerced or bullied into signing a contract will have a defence of duress.
·         The person who wants to conclude a contract must also satisfy certain legal requirements:
o    He or she must have mental and contractual capacity. This means that the person must be sane and not under the influence of any drugs or alcohol which could affect his ability to fully appreciate what he is agreeing to;
o    He or she must be a major (18 years or older) unless his parents or guardian assist him;
Oral or written
As a rule, parties can do a deal with a handshake, or even orally.
However, in South Africa, there are a few contracts that must be written to be enforceable:
·         An agreement to sell immovable property (land, house or building);
·         Suretyship agreements, credit agreements, antenuptial (marriage) contracts, leases over ten years, and contracts for executionary donations (to be made later);
·         Wills.
Some contracts, both oral and in writing, may not be enforceable, e.g. if they are illegal, contra bonis mores (that means against public policy or norms) or impossible to perform.
Importance of written contracts
Why is it important to reduce a contract to writing, even if you don’t have to, in law?
·         It’s easier to prove the existence of a written contract;
·         Written contracts provide individuals and businesses with a legal document stating the expectations of both parties;
·         If a party breaches a term of the contract, the consequences of a breach and the remedies, are set out.
Contracts in business
·         Written contracts are for your protection;
·         A business contract states the terms and conditions of any business transaction, including product sales and delivery of services. This helps the parties involved avoid any type of misunderstanding that may arise, in the absence of a written contract;
·         If you use written contracts, it is far less likely that you will end up in court - your clients will be much more inclined to work with you to find a solution and work things out.;
·         If you have an oral agreement, you might forget some points that you have agreed on verbally, with the passage of time. But with a written agreement, all the terms and conditions are clear, and you can always amend the agreement with the consent of both the parties.
·         Companies also can use non-compete agreements to limit the type of services offered by former employees who have specific knowledge about the company’s specialized business services.
Termination of a contract
·         Some agreements terminate automatically after a fixed term (such as a property lease) or event (fixed term employment contract),
·         Parties to an agreement that carries on for an indeterminate period, can mutually end a contract if the business relationship has ended;
·         An oral contract can be terminated, verbally;
·         Parties should formally terminate a written contract, in writing.
·         If a party is in breach of a written contract (e.g. the goods sold are defective or the services provided, are poor), the other party has the remedies set out the contract, or at law (such as the Consumer Protection Act);
·         Some contracts require the one party to give the party in breach written notice to remedy the breach, before the first party can cancel.   
·         Termination will not affect any liabilities for breach of contract that occurred before the contract is ended.


October 28, 2018

Boilerplate arbitration clauses



Does your arbitration clause cover what you want it to cover?
In the case of North East Finance (Pty) Ltd vs Standard Bank of South Africa Ltd 2013 (5) SA 1(SCA) the Supreme Court of Appeal (SCA) made it clear that where an agreement has been brought about under fraudulent circumstances, and is therefore invalid, a clause that requires parties to refer any dispute between them to arbitration is also invalid. However, it is in principle possible to draft an arbitration clause in such a way that it will remain enforceable even where the agreement it forms part of turns out to be invalid.
North East Finance (North East) and Standard Bank (Bank) entered into a settlement agreement following disputes between them. An arbitration clause in the agreement stated that "in the event of any dispute of whatsoever nature arising between the parties (including any question as to the enforceability of this contract…), such dispute will be referred to arbitration…"
The Bank chose to walk away from the agreement after learning that North East had been defrauding it at the time the agreement was signed. North East then asked the Bank to attend pre-arbitration meetings, pursuant to the arbitration clause. The Bank refused, arguing that due to fraud, the arbitration clause was as invalid as the rest of the agreement. North East countered that since the arbitration clause specifically included the phrase "including any question as to the enforceability of the contract" it meant that the clause covered a dispute over allegations that the agreement was induced by fraud.
The SCA found that the agreement "did not have to be cancelled or rescinded: it was void". This meant that there was no question as to the agreement's enforceability and the arbitration clause therefore did not cover the dispute. Had the arbitration clause been drafted to provide that the scope of a dispute to be referred to arbitration included validity of the agreement and not merely enforceability, the outcome would have been different.
When a court is called to interpret an agreement, so the judgment goes, the court must find out what the parties to the agreement intended the contract to mean. The court found it to be clear that the Bank did not expect that there might have been fraudulent conduct by North East and therefore when concluding the agreement the Bank did not intend that the validity of the agreement or questions of fraudulent misrepresentation could ever have been matters to be arbitrated.
Finally, the SCA found that the agreement was probably induced by fraud with the result that the entire agreement, including the arbitration clause, was void. The Bank was therefore not obliged to submit the dispute surrounding the agreement's validity to arbitration.
A further reminder to make sure that the boilerplate clauses in an agreement say what you want them to say.