Are you thinking about putting your condo on one of the many vacation rental sites like AirBNB but not certain if your HOA allows it? Here are some steps to help you navigate the process of renting out your condo for a short term vacation rental and avoiding personal liability.
The first step is to look at the laws that your city has regarding short term rentals. Many cities have restrictions on short term rentals (typically less than 30 days) that if not followed can lead you to penalties and fines. You can easily check to see what your regulations are by doing a Google search with your city name and the key words “short-term rental regulation”. There have been hotel and zoning laws enacted by your city far before the AirBNB craze.
For example, in New York City, they do not allow rentals of less than 30 days in multi-unit dwellings unless the owner is present during that time and sharing the space. One famous case in NY fined a resident $2,400 for renting his condo out.
Besides the possibility of neighbors complaining, the city isn’t getting the normal transient occupancy or tourist use tax. In most cities, the owner is responsible for collecting and paying the transient tax which goes to support the local area for tourism. In an interesting move, on April 15th this year, Airbnb sent a letter to New York Legislation asking to pay hotel tax for their customers. Airbnb has already started collecting taxes in Portland, San Francisco, San Jose, Chicago and even Amsterdam.
You might also have to have a business license as well as insurance to operate in your city. Obtaining a business license isn’t that expensive or difficult. It requires a trip to your City Hall and as long as you make the license under your name, you won’t need to do the extra steps of publishing a DBA.
Most home insurance does not cover vacation rentals and is meant to provide protection to owner occupied housing. Airbnb now offers Host Protection Insurance which covers up to $1,000,000 in most states and is free to the host. HomeAway offers an outside company that specializes in vacation rental insurance called HomeAway Assure™, however this is at an additional fee.
HOA REGULATIONS FOR SHORT TERM RENTALS
HOA’s have varying rules regarding short term vacation rentals, and some don’t even have any at all. Many HOA documents restrict leasing less than one year, so some homeowners think they are in the clear because technically they are not leasing, however they are not necessarily correct. The first place to look is in your CC&Rs (Declaration of Covenants, Conditions, and Restrictions) and bylaws. Legally fighting the CC&Rs is an uphill battle and can lead to large legal fees.
In San Luis Obispo, CA where the city ordinance bans “vacation rentals” for less that 30 days had a recent case of an owner vs HOA who went to court when the HOA said he violated the seven day policy. It went to court and the HOA won, and now the owner has a $1.7 million dollar legal bill.
A San Diego condo owner rented out his unit at The Mark and was fined $106K (16K in fines and 90K in attorney fees). Because the area of short term rentals through Airbnb and VRBO have become so mainstream, many people just assume that it is acceptable or that their HOA won’t find out. This is a dangerous path to take though, as it's very easy for the HOA Board to see listings in their building on the various rental sites.
If short-term rentals are a concern for you be sure to let your Realtor know that before deciding on a condo. It's just one more reason why it's important to work with an agent who specializes in condos and knows which buildings would fit your needs. At Highrises.com our goal is to help you find that agent in your city.