Home-sharing has become very popular with the advent of websites like Airbnb, HomeAway, and VRBO. Travelers find short-term rentals in condominiums a cheaper alternative to hotels, while owners enjoy an additional source of income. However, this arrangement can lead to conflicts — particularly if the condo is run by an association or management company. As such, condo boards should be clear on how they will handle condo short-term rentals.
Are Condo Short-Term Rentals Allowed in Your Association?
The first thing to determine is whether your governing documents already have HOA short term rental restrictions. It’s possible that your condo association rules already state that rentals should have a minimum length of stay of at least 30 days.
If so, owners would not be able to have short term condo rentals for periods shorter than that. Meanwhile, if short-term rentals have been prevalent, you may already have a condo Airbnb policy or something similar.
If you do not have a clear policy on short-term rentals in condos, it’s time to draft one.
So, can a homeowners association prohibit renting? Yes, they can. However, the condo board should not decide this on their own. Prior to making the decision, board members should consult with their management company or association attorney.
They should also ask the owners if they want to allow or prohibit short-term rentals in condos. The final verdict should be based on the majority vote or after obtaining a consensus.
Rules and Policies for Condo Short-Term Rentals
If the condo association decides to allow condo short-term rentals, it’s important to establish rules and policies for the owners. The board should also ask condo owners to fill up short-term rental agreements.
The short-term rental agreement must state the rules established by the board or association. For instance, the agreement can state that the unit will only be used for residential purposes. This could mean that short-term renters are not allowed to throw parties or conduct any business.
Noise hours, use of amenities, alcohol use in common areas, and other rules can also be included in the agreement or contract.
The condo board can also implement a rule stating owners should provide detailed information about their short-term renters. This includes the start and end dates of their stay in the property, contact information of the renter/s, and so on.
Condo associations may decide to charge a nominal fee every time owners decide to rent out their property for less than 30 days.
What Does the Law Say About Condo Short-Term Rentals?
Your association’s policy should incorporate laws that your city or state may have when it comes to short-term condo rentals. For instance, condo owners in major cities like Seattle, Boston, and Austin need to have licenses before they can rent out their units.
New York City’s short-term rental law has a provision that owners cannot rent out their entire apartment. Meanwhile, in San Francisco, condo owners must register as a business in order to rent out their unit for short-term periods. Lastly, in Los Angeles, condo owners can only rent out their unit for a maximum of 120 days a year.
As for the IRS, the “Masters” exception states that condo owners who rent their unit for 14 days or less do not have to pay taxes on income generated, but they cannot deduct operational expenses from their tax returns. Meanwhile, owners who rent their unit for more than 14 days must submit a Schedule E form, but they will be allowed to deduct expenses.
So, when drafting your own policy, make sure to check your city, state, and federal laws on short-term condo rentals.
How to Deal with Owners Who Violate Your Condo Short-Term Rentals Policy?
Condo owners who do not comply with your association’s short-term rental policy should be reprimanded and/or fined. The board can send a warning letter on their first offense but succeeding violations can have fines in increasing amounts. There should also be strict consequences for owners who continuously refuse to comply. For instance, the policy may state that the board can pursue legal action on an owner who already has five offenses.
The condo board can also levy fines on owners who violate the short-term rental agreement, and if their renters cause property damage to common areas while staying in the property.
Have your policy studied and approved by an HOA attorney to avoid any legal proceedings in the future.
Condo Short-Term Rentals and Insurance
Allowing short-term condo rentals will have repercussions on your association’s insurance costs and coverage. It’s most likely that your current insurance plan does not cover short-term rentals.
The association may choose to add a short term renters insurance to their plan to protect against property damage, theft, injury, and other liabilities. As an alternative, the board may require owners to add their own short term renters insurance. Insurance is critical to protect the condo association from any damage or danger.
Take note that home-sharing websites like Airbnb and HomeAway offer up to $1 million in liability insurance coverage. This can protect owners from costs associated with property damage or if short-term renters sustain an injury while staying in their unit.
You will want to consider the insurance implications on whether you decide to allow or prohibit short-term rentals in your condo association.
Condo Short-Term Rentals: The Verdict
Ultimately, the verdict on short-term condo rentals will depend on the board and the homeowners. It’s best to seek the opinion of all parties and make a decision based on the majority vote. Keep in mind that as a condo board member, you should never execute the policy on your own.
You should have it thoroughly looked at by an HOA attorney or management company. This is to ensure that everything is above the law and that there is a minimal legal risk for the association.
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