2010: To let or not to let?

Private Property South Africa
Antoinette McDonald & Angelique Arde

Featherbrook, a fancy gated estate in Gauteng, has been in the news recently as residents line up to lease out their mansions for the Fifa Soccer World cup next year.

Situated in Krugersdorp below the Roodekraans Ridge and adjacent to the Walter Sisulu Botanical Gardens and the Crocodile River, the estate has a total area of 145 hectares. There are about 1000 homes on the estate and a handful of cluster developments too. Tennis, swimming, squash, cricket nets, a skateboard rink, wining and dining, conference facilities, a restaurant, green belts, lush gardens and their own cozy, in-house market – makes this one of the most exclusive living arrangements in the country.

Security is the big plus in this estate with electric fencing, guard patrols and a specialized card-system. Just waiting to get into Featherbrook to visit can turn into an outing in itself and one half expects to be asked to supply a DNA sample in exchange for entry. But, once you’re in, it’s bliss. This is stuff that one dreams of in Gangsters Paradise – kids play on the “streets” as happy parents wave to one another.

So, it’s no wonder that soccer fans with euros and dollars would choose Featherbrook as the place to rest their heads in 2010.

One Feathbrook resident, Deon, isn’t too chuffed about this though. He thinks that the risks far outweigh the reward.

“We’ve gone to huge efforts to make this a really safe place to live. Is it really worth jeopardizing this for the R60 000 to R70 000 that you could get out of renting your place for a month?” Deon says that Featherbrook was the target of criminal groups in the past and the estate has gone to great lengths to protect residents. “When you hand over your security cards and codes to strangers, you potentially place the rest of the estate in danger too. What about fans who could be involved with drugs and prostitutes? And you’re inviting that into Featherbrook by handing over access to your home!”

Deon says that his work with City Power takes him into interesting locations and he’s seen how people treat homes that aren’t their own. “I install geysers in units in Fairlands and Randburg and have seen how people disregard property that isn’t theirs. Units are let out to big corporates for their oversees employees and I am horrified when I see how these so-called professional guys wreck the place. They don’t care what they do because their company pays the damages. How much worse with soccer fans who are coming out to party? What recourse will you have when you get home and the place smells like a nightclub, your flat screen has been trashed and who knows who slept in your bed?”

Ever since SA realty veteran Samuel Seeff said 55 000 fans needed a place to stay for next year’s soccer extravaganza everybody with a spare room has been seeing dollar signs.

Seeff said the accommodation shortage represented a R400 million boost to the property market and quoted SA Tourism as saying the shortfall would be most pronounced on match nights in Gauteng, Port Elizabeth, Polokwane, Rustenburg, Bloemfontein and Nelspruit.

Soccer fundi Gary Bailey said South Africa was expecting between 250 000 and 400 000 visitors next year, 10 times the number during the Rugby World Cup.

Seeff said it was offering to help market short-term properties to let, adding that home owners close to stadiums could expect to coin it if their houses were in good condition.

Seeff was quoted as saying that you could probably rent your house out for double what a similar house would rent for. So, if your house could rent today for R20 000 a month, charge R10 000 a week and it will still be cheap. Seeff did, however, caution home owners to consult an expert before open their homes to soccer yobs, which prompted us to ask some experts how best to handle things.

Trent Richmond, attorney with Kokinis Inc, based in Johannesburg, said the three primary risks were damage to your premises, the holiday-maker’s failure to pay the rent, or worse still, his failure to vacate when the soccer is over! This could all end up in court, Richmond says.

His advice is for landlords to try and protect themselves against any eventuality. “Each landlord would have to take those safe-guards which best suit his/her circumstances and his/her approach to the landlord-tenant relationship. However certain safe-guards that can be implemented (and this is by no means an exhaustive list) are to take a large refundable deposit and to enter into lease agreements with people in their personal capacity (versus a company).”

Richmond says lease agreements must conform to legal requirements and must include things like the description of the premises. The leases must also be signed by all parties. He suggests an inspection of the property with the tenants before they move in and after they have vacated. Richmond says be sure the tenant understands the rules and that the cost of repairs will be deducted from the deposit.

At the end of the day though, legal action against a foreigner will be difficult.

“Unfortunately, even if judgment is obtained against a foreign national tenant in South Africa, they will not have any assets in South Africa against which the judgment can be executed. To proceed to locate the tenant overseas and to thereafter enforce the judgment in a foreign jurisdiction will be a very lengthy and costly exercise which may yield no results.”

Heather Hunter, the President of the National Accommodation Association, says people considering letting out their homes should be “very, very careful”.

She says they will need public liability insurance of about R50 million cover, which is not available on a normal domestic insurance policy. She says that running an accommodation establishment like she does, she had to sign up with MATCH and had to get star grading. “What happens when Mr and Mrs Blog come over, have paid you a deposit and then don’t like your spot. Star grading sorts that out. They want their deposit back and you’ve already planned your holiday to the Bahamas’ with the money. Now what?"

So, with all this in mind, what kind of rental can you expect to get for your place (in light of Seeff’s double your rent predictions)?

Dino Joannou, the director of Just Letting, Western Cape, says that because there is a shortage of accommodation, homeowners want to take advantage. But, before you get cross-eyed at the prospect of big bucks, remember that the market value of a home usually takes into consideration relevant features.

“If you take into account that the rates quoted above are for two people sharing a bedroom, the rates to the homeowner are fair. The visitors however will be paying amounts in addition to the above to cover the VAT, administration, commission and bank charges (in total this will be 30% of the cost of accommodation).”

Joannou says if you compare this to the rates normally applicable when renting property on a long-term basis, then the amounts “may seem to be excessive”. But, he says, they are cheap compared to hotel rates.

John Roberts the CEO of the Just Property Group, which is the holding company of Just Letting says 2010 will be an opportunity to cash in, especially in some areas. “The World Cup takes place at the same time as the world-famous sardine run. We have had interest already from foreigners wanting to rent properties along the South Coast in order to see this phenomenon, for example.”

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