Handy checklist for holiday home investors in a sectional-title
Category Advice
It's that time of the year again when people are going away on much-needed holidays to celebrate the festive season after a long year of working hard. During December and going into the start of January, most holiday homes are fully booked. For buy-to-let investors who rent their holiday property to local and international tourists, this is their busiest and most profitable time of the year. In particular, holiday homes in sectional-titles such as apartments and duplexes are growing in popularity among investors as well as tourists who see it as the safer and more affordable option.
So if you've invested in a holiday home in a sectional-title and if you are ready to receive your guests, read-on as we have put together a last-minute checklist to ensure your investment is a success.
Ensure Holiday-Letting is Permitted
Sectional-titles come with unique requirements and this is no different for your holiday home. Since this is a last minute check-list, you would know by now that your venture first needs to be permitted by the Body Corporate. If this hasn't happened by now, you may not be able to open up your home to guests. There are many factors that may prohibit this form of letting, such as zoning regulations or past bad experiences that have led the Body Corporate disallowing holiday-letting altogether.
Inform your Body Corporate
Before your guests arrive, you will need to make sure you inform the Body Corporate of any change in occupancy of the unit. This is in accordance to the Sectional-Title Schemes Management Act (STSMA), section 13(1)(f).
Take Reasonable Steps
The next step is to take all reasonable steps to ensure your guests are compliant with the scheme's conduct rules. You will need to provide them with a copy of the rules and regulations, and ensure they understand and adhere to this. This is legally binding for both parties, including you as the owner. In the event of your guests becoming a nuisance or interfering with others in the sectional-title, you or the Body Corporate have the right to rectify such behaviour, or if the problem continues, the unruly guests can be evicted.
If you have unruly guests on a regular basis, the Body Corporate can impose a fine against you or eventually force you to shut-down operations. For a successful holiday-letting venture, the enjoyment of all, including guests and residents, needs to be upheld at all times.
Get Approval
The Body Corporate needs to approve a range of other aspects regarding your holiday home. For example; if you require additional parking bays, signage on your unit, or if you want to sell alcohol in your unit to your guests - this will need to be approved by the Body Corporate first.
Declare Rental Income in the New Year
All owners need to declare rental income received on their holiday-letting venture when they file their tax returns at the end of every tax season. For income received in 2019, this needs to be submitted in 2020 when the tax season begins, which is on 1 July and it usually closes on the last Friday of November of the same year. This amount owed to SARS is calculated on the total sum of rental income collected over a 12-month period.
When it comes to the security deposit, this is not taxable if it is returned back to the guest. However, if the deposit is not refunded to the guest due to them breaching the conduct rules, this means the deposit will form part of your income and will, therefore, be taxable.
Generating an income on a holiday home can be a lucrative venture during the festive season especially if you follow the rules of the Body Corporate. In this way, every person who's living on the property can fully enjoy this time of year.
Author: De Lucia Group
