Short Term Vacation Rentals: A Second (or Third) Look
By: Karl P. Enderle, Esq.
With spring and summer vacation season upon us it may be worth taking a second or even a third look at short term vacation rentals in your community. Online services such as Airbnb and VRBO are growing in popularity. These services allow property owners to list their properties for rental on a short term basis at rates that are often comparable to the rates charged by luxury hotels. This creates a strong financial incentive for owners to participate. Moreover, we have found that many owners are unaware (or claim to be unaware) that such arrangements violate the leasing restrictions contained in the governing documents of their community. From the association’s standpoint, short term rentals present special challenges and risks. As a practical matter, it may be difficult to identify such violations where there are no moving trucks or other obvious signs of a change in occupancy. At the same time, short term rentals raise even greater concerns than traditional long term leases. In many cases the owner has not even met the person(s) who will be occupying the property and knows nothing about their background. Yet the owner allows them to occupy the property without any supervision or control. The occupants, who will in most cases be there for only a few days, may not be aware of community rules and restrictions. Even if they are aware of community rules and restrictions, short term occupants may have little or no incentive to comply with them. For all of these reasons, many of our community association clients have come to us for guidance on how to address short term vacation rentals. Much depends upon the individual community’s governing documents as well as local zoning ordinances.
Short term, transient leasing may constitute a violation of your community’s governing documents. Many condominium declarations and community covenants contain leasing restrictions which limit and restrict an owner’s ability to lease his or her property. Most often, an owner may only lease his or her property after he or she has applied for and obtained a leasing permit from the Board of Directors. Many declarations also provide that all leases must be for an initial term of not less than six (6) months or one (1) year. Some declarations expressly prohibit short term and transient leasing. Short term vacation rentals may constitute a violation of one or more of these leasing restrictions which may be enforced by your community association.
Your community association may also turn to the general use restrictions contained within its declaration in dealing with short term, transient leasing. Usually, property within a community association is restricted to residential use and only very limited trade or business activity may be conducted from such property. Sometimes property is bought purely as an investment and is leased through services such as Airbnb and VRBO as a business venture which generates a profit for the property owner. Such business activities may constitute a violation of this restriction which may be enforced by your community association in addition to the leasing restrictions.
Short term, transient leasing may also constitute a violation of local zoning laws and ordinances, giving rise to another potential enforcement avenue for your community association under its governing documents. It is widely known that cities such as New York and San Francisco have jumped into the fray of short term vacation rentals and have either banned or restricted them. Recently, our firm received confirmation from the chief of zoning enforcement for a large municipality that short term, transient leasing of a condominium unit (such as that done through Airbnb and VRBO) meets the definition of a hotel under that municipality’s zoning ordinance because the owner was offering transient lodging, available at daily rates, to the general public. In that municipality, a hotel is considered a commercial use and is not permitted in any single-family, duplex, or multi-family residential district. Because the condominium building was not issued a permit for hotel use, the unit owner’s short term, transient leasing of a unit constituted a zoning violation. While your community association cannot enforce zoning violations on its own, its governing documents may contain a provision providing that nothing may be done in the community that would be in violation of any statute, rule, ordinance, regulation, permit or other validly imposed requirement of any governmental body. If your community’s governing documents contain such a provision and transient leasing in your community constitutes a zoning violation, this could provide an additional avenue of enforcement.
Short term leasing can have a detrimental impact on property values and the quality of life in any residential community. Winter Capriola Zenner can assist you in developing an effective strategy to address these issues.