Maximise Your Property Value: Building Second and Third Dwellings

If you are a homeowner with unused space on your plot, building a second (and possibly a third) dwelling can be an effective way to maximise the value of your property and generate additional income. Many people are not aware that since February 2020, in the greater Cape Town area, you can build a second and third dwelling on your property without a consent use application, as long as there are no other departures from the zoning scheme regulations, and certain conditions are met.

Previously, single residentially zoned land (SR1) only allowed a second dwelling as a ‘consent use,’ which meant a land use application had to be made. This typically required getting letters of no objection from all of your neighbours and the ratepayers association before consent was granted—a process that could take anywhere from three months to a year, depending on whether any objections were received. In the updated zoning scheme regulations of July 2016, second dwellings were changed from a consent use to a right of use, and the allowance for a third dwelling was added as a right of use in 2020. This change aligns with the city’s Densification Policy, approved in 2012.

How Can This Unlock Value and Generate Income?

Increased Property Value:?Properties that can accommodate multiple dwellings are generally more valuable than those limited to a single unit. The ability to add a third dwelling enhances the potential for higher returns on investment, making these properties more attractive to buyers and investors alike.

Rental Income Opportunities:?Homeowners can generate additional income by renting out the second and third dwellings, either as long-term rentals or short-term, using platforms like Airbnb. Since the cost of the land is either already accounted for or part of your primary residence, the feasibility of an additional unit is often positive. The unit typically starts to pay for itself as soon as it is completed and rented out.

Investment Opportunities:?The new legislation opens up investment opportunities for property developers and homeowners willing to renovate or expand their existing homes. This can lead to an increase in property values as properties are improved and modernized to meet the new zoning allowances.

Opportunity to Sectionalize the Property:?Many people are not aware that a single residential property with a second or third dwelling unit can be sectionalized, similar to a block of flats. This allows the separate sections to be sold off as sectional title units.

Considerations and Challenges

Zoning Scheme and Building Regulations:?There are specific zoning scheme requirements for second and third dwellings. For example, each must be smaller than the main dwelling, and the allowable heights, while still permitting double stories, are somewhat more restrictive than for the primary dwelling. One cannot concurrently apply for a second and third dwelling; the second dwelling must be built to completion before an application for the third dwelling can be submitted.

Design Considerations:?Where a clear and distinctive architectural style exists for the main dwelling (e.g., Cape Dutch), the second or third dwelling may need to be built in the same style. Where there is no distinctive style, there is no requirement. Other design considerations should include access and placement, ensuring privacy and views for the main house are maintained.

Title Deed Restrictions:?Check your title deeds for any restrictions that may prevent the addition of more dwellings. If there is ambiguity or the title deeds refer to earlier title deeds, you will require the services of a conveyancer to check the deeds. If there are no restrictive conditions, they can provide a Conveyancer's Certificate, which would form part of the application to the city for your second or third dwelling.

Infrastructure Capacity:?The construction of additional dwellings is contingent upon the availability of municipal services such as water, electricity, and sanitation. If these services are insufficient, the city may decline the application. Alternatively, we could explore off-grid solutions.

Primary Residence Approvals:?Especially with older properties, there is a good chance that some alterations were done over the years without council approvals. The city now requires that for any application, all approvals for buildings on the erf are up to date. This typically requires updated as-built plans for the existing primary dwelling, including any alterations and additions done over the years, as part of the documentation required for the second dwelling application.

The Building Process:?Keep in mind that you will have builders working on your property, essentially in your garden, for the construction period, which can be somewhat disruptive. If not required to match an existing style, or if you don’t particularly require a custom design, many pre-designed or prefabricated modular options are available. These options can significantly reduce the turnaround time and construction time on-site.

Sectional Title Scheme:?In a sectional title scheme, each unit owner holds a separate title to their individual unit while sharing ownership of common property with other owners. This arrangement allows for multiple dwellings to exist on a single erf, making it an attractive option for both developers and homeowners looking to maximize land use in urban areas. A cash flow consideration is that the sectional title registration can only be applied for once the building has reached roof height, and the sale of a title can only be concluded once it is registered with the Deeds Office. A body corporate is automatically formed when a sectional title scheme is established, managing the common property and enforcing rules regarding maintenance, insurance, and financial contributions from owners.

Development on Vacant Land:?In addition to adding a second dwelling to your existing primary home, if planning to build a new home on vacant land, consider including a second dwelling from the outset, either connected to or separate from your main house, for the added value this can contribute.

Note that the above is specific to the City of Cape Town’s zoning scheme regulations. We also regularly provide architectural services in other municipal areas of the Western Cape, such as Swartland Municipality (Malmesbury), which includes Yzerfontein and surrounding areas, Overberg Municipality (Hermanus and surrounds), Vredenberg, and the various municipalities of the Garden Route, all of which have somewhat different rules and regulations pertaining to second dwellings.

For more information or advice on any of these, and how we can assist with unlocking additional value on your property, please get in touch.

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