What You Need to Know
By Attorney Kendall MacRostie
As rental fees and mortgage payments continue to climb in major metropolitan areas around the U.S., tenants and homeowners are turning to short-term rental services to relieve the economic burdens that have begun to build up.
This option is especially appealing to individuals who travel on a regular basis for work, who travel for extended periods after retirement, or who are looking to make a profit from the rebounding real estate market. But before opening up a home, apartment, or condo to a would-be renter, it is important for the owners or lessors to take the following factors into consideration.
City Ordinances, CC&Rs and Limitations in Rental Agreements
Housing and rental markets in major cities are already crowded, and adding short-term rental arrangements to this equation only serves to compound the difficulties in finding affordable housing. With this in mind, several cities in California have passed zoning ordinances restricting or completely forbidding the use of short-term rental agreements in otherwise long-term housing.
For example, in San Luis Obispo County, California, a short-term rental home may not be located within 200 feet of a similar rental on the same block. Further south, Palm Desert, California adopted an ordinance allowing short-term rentals of up to 27 days provided that an annual permit is obtained and a 9% transient occupancy tax collected and paid to the city. St. Helena, California enacted a similar law.
In 2015, San Francisco enacted an ordinance permitting short-term rentals of up to 90 days per year, but limited it to owners who live in their property at least 275 days per year. This makes sense, considering that Airbnb originated in this stifling rental and housing environment.
This ordinance provides enough restrictions so that renting is limited to property owners and long-term tenants. However, it also provides flexibility so that these owners or renters can make extra money when they are on extended vacations or traveling for work.
Covenants, Conditions & Restrictions and Lease Restrictions on Renters
In addition to city ordinances, most planned developments and condominiums have Covenants, Conditions and Restrictions (CC&Rs) that limit what renters or owners can do in these communities.
These may bar short-term rentals entirely, or subject them to restrictions. These CC&Rs are enforced by a homeowners’ association or coop board, and the penalties can vary from severe fines to expulsion from the community.
In addition, renters typically have restrictions on subleasing or short-term leasing written into their lease agreements with their landlords. Violating these provisions can result in fines, or more commonly, evictions.
When a renter or owner places their unit on the short-term housing market, he or she is typically offering access to his or her property to a complete stranger, which brings risk and uncertainty.
In order to protect against negligent or malicious damage to the property, or to cover basic cleaning costs after the temporary resident moves out, it is best practice to collect a security deposit from the renter.
While this may not cover all damage that could accrue, holding this deposit could give the renter greater incentive to treat the property with care.
If a renter or owner is worried about greater damage accruing, it is best to check with the host website that was used to advertise the temporary housing.
These websites/companies can sometimes have provisions that cover against significant damages. For example, Airbnb offers a $1,000,000 Host Guarantee, which protects a host against damages above and beyond the amount of the security deposit.
Steps to Take After Finding a Temporary Tenant
To avoid conflict with tenants after the fact, be up front about fees, such as cleaning costs, which will be charged against the security deposit after he or she moves out.
In addition, try to have a walk through with the tenant to note the state of the unit before the start of his or her stay. Having a checklist noting all the areas of the unit is helpful, as it puts the state of the unit in writing.
Finally, have a walk through with the renter using the same checklist after the termination of the stay. If both parties agree on the condition of the unit after move out, then there will be no surprises if the property owner makes charges against the security deposit.
If you have questions or issues related to short-term property rental, the Mlnarik Law Group would be happy to assist you! Call our office today to speak with one of our trusted and experienced attorneys: (408) 919-0088.