6 Legal Aspects of Short-Term Rentals

The following information is provided by the Center for REALTOR® Development (CRD).

With the rise of Airbnb and VRBO.com, there has been a rise of short-term rentals in all parts of the country, in all kinds of neighborhood settings. Many people are buying investment real estate and using it for short-term rental purposes.

In the most recent episode of our podcast, host Monica Neubauer talks with attorney Brian Blaesser about the different aspects of short-term rentals, tips to know, information about what regulations you might encounter, and how agents can best help their clients.

Blaesser is a partner with Robinson & Cole LLP, and heads the real estate development practice in the firm’s Boston office. He is in charge of the firm’s consulting work for the National Association of REALTORS® (NAR), and, along with his team, has prepared over 1,000 analyses for NAR of state and local land use plans.

Blaesser begins his interview with Neubauer by giving an overview of six legal constructs to understand when it comes to legal rights for property use:

The first point: The right to rent is a core property right. There are three things you can do with your single-family residence: you can live it in, you can rent it, or you can sell it.

The second point: Renting is a residential use. With things like Airbnb where investors own multiple properties, it is starting to edge into the territory of being a business. Even if it may be, it doesn’t defeat the residential status of the property.

The third point: You have the right to use your property for productive purposes, but it can’t interfere with your neighbor’s use and enjoyment of their property, or injure the community at large. Provided the behavior on your property does not cause a private or a public nuisance, you have the right to rent.

The fourth point: Because it is a core property right, it can’t be turned into a privilege.

The fifth point: While a vacation rental may be considered a business that could be subject to a business or occupational tax, renting is still a residential use, and remains that core property ownership right.

The sixth point: There are registration and licensing schemes that some communities are proposing to inspect and monitor what people are doing with their rental properties.

One of the most important ways agents can help their clients who want to acquire short-term rentals is to know the local, state, and federal regulations that may apply in this situation.

In terms of local regulation, it is important to know what approach the community takes—addressing the situation using zoning codes, or non-zoning regulations, or a combination of both.

A community may only allow rentals in certain zones, or have regulations about how many rentals can be in one community. Zoning only regulates the use, not the user, so this is something to keep in mind when knowing your rights. An example of non-land use or zoning restrictions would be a licensing or registration requirement or quantitative/operation restrictions.

In addition, many homeowner associations have covenants that were set in place before short-term rentals rose in popularity. You should find out if there is a restriction in the documents from the start, but even if there’s not, you may be subject to them later. Despite what state law says, these documents function as a private contract and you could still fall under those restrictions.

Blaesser urges REALTORS® to get involved right at the beginning in any kind of meetings or workshops that a local official establishes. As a REALTOR®, it’s important to know the ordinances of a community, and try to help shape the dialogue.

The National Association of REALTORS® has a program called the Land Use Initiative Program that allows REALTORS® to be involved in the shaping of/responding to legislation at the local and state level that may affect real estate interest. Blaesser’s team at Robinson & Cole analyzes the ordinances, and can help provide talking points and other support. They provide questions that can be asked to local attorneys to help work some of these issues out. The program is provided free of charge to members of the association.

For much more information and access to this great interview, see podcast episode #4 at the podcast website at www.crdpodcast.com. For even more education about real estate investing and second-home properties, check out the great courses on our site, and sign up there for our email list to be notified of monthly specials and new courses.

For more information, please visit onlinelearning.realtor.

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