If you resemble the
modern-day traveler you will likely at least consider the idea of staying at an
Airbnb-like rental on your next vacation or work trip. If you own your home in or around a city or
other another attractive destination, you may have given consideration to
renting your house or condominium unit on a short-term basis, either while out
of town yourself or during a peak travel season. Often times Airbnb offers a
cost-effective alternative to a typical hotel and provides income to the
homeowner to offset property costs. But
for all the convenience Airbnb offers, both to the guest as well as the owner, many
of us have heard at least one horror story where an Airbnb renter caused
substantial damage to the property, held wild parties, or engaged in some form
of criminal activity. While the
incidences of such behavior are without question the exception rather than the
rule, many Airbnb guests engage, often times unknowingly, in conduct which is
either bothersome to neighbors or in violation of a condominium’s rules and
regulations.
When a guest rolls into
town for one or two nights it is safe to assume that he or she is not taking
the time to review the association’s bylaws and rules and regulations, even on
the rare occasion where those materials are provided to the guest in the first
instance. As a result, the guest is
likely to be unaware that smoking is prohibited in the courtyard, what the
proper trash policies are, and where he or she may legally park in the common
area parking lot. If this occurs only
once or twice a year it may be viewed by some as a minor inconvenience to the
other unit owners, however if there is frequent turnover and new guests are arriving
on a daily or weekly basis, that inconvenience quickly evolves into a
substantial interference with the ability of unit owners to peacefully enjoy
their homes and common areas.
Associations are
rightly concerned about a transient guest’s lack of ties to the community,
especially given that in most instances the guest is granted unfettered access
to all the common areas of the condominium which may include hallways,
elevators, basements, roof decks and recreational facilities without
supervision from the actual owner from whom the guest is renting. This presents a legitimate safety concern for
other unit owners, especially when a unit is rented by many different people each
week or month. The constant presence of
unfamiliar faces just outside the door of your home is likely to unnerve most
people, however a condominium association is not, and cannot be in the business
of evaluating and monitoring each and every guest of a unit owner.
While state and local
governments wrestle with regulatory, zoning, safety and taxation issues which
short-term rentals present, condominium associations are struggling with their
own set of issues related to the disruption and safety concerns transient
guests present to unit owners. While
many condominium governing documents contain restrictions on a unit owner’s
ability to lease or otherwise rent his or her unit, the majority of these
restrictions are boilerplate and do not contemplate the rapidly developing
market for short-term transient rentals with the proliferation of Airbnb and
similar type services. Standard leasing
restrictions in condominium documents may prohibit rentals for less than a
prescribed period of time (six months to one-year is common), prohibit rentals
of anything less than the entire unit, and may require that a copy of the lease
be provided to the Board. However, even
when an association’s governing documents adequately restrict transient rentals
there is still a concern as to whether the fine structure within an
association’s documents provides a sufficient deterrent to unit owners
considering renting their unit in violation of the condominium documents. For instance, many condominium documents
establish a graduated fine structure per offense (e.g. $25 fine for the first
offense; $50 for the second; $100 for the third, etc.). Unit owners considering short-term rentals of
their unit, especially in Greater Boston, can expect nightly rental prices in
the hundreds of dollars which, when weighed against a potential fine amounting
to a fraction of their anticipated profit, do not provide much incentive to
adhere to the requirements of the governing documents.
If a condominium
association’s governing documents are silent on leasing guidelines and
restrictions, the association must take steps to amend its documents to specifically
address this activity or it will likely be without authority to regulate or
enforce short-term rentals. Because such a provision operates to restrict what
one may do with his her or her unit, an amendment to the master deed and/or
bylaws will be required which requires a minimum percentage of unit owners (typically
at least two-thirds) to vote in favor of such a restriction. Depending on the
location and demographics of the ownership, this may prove to be a difficult
endeavor if multiple unit owners favor the ability to rent their unit on a
short term basis.
Associations must also
be cognizant of the implications unauthorized rentals have on Federal Housing
Administration (“FHA”) guidelines. In
addition to explicitly restricting transient rentals, defined by FHA as initial
terms of less than 30 days, FHA regulations require that at least 50% of the
units be owner- occupied (in limited instances this percentage may be lowered
to 35% provided the project meets certain additional conditions established by
FHA). If the total number of leased or
rented units exceeds this threshold FHA may suspend or revoke the project’s
eligibility which could have a drastic impact on the ability of prospective new
owners to obtain financing through FHA as well as unit owners seeking to
refinance using an FHA product. If an association
does not have a handle on how many of its units are leased or rented at any one
time, as they likely would not where multiple transient rentals are occurring without
oversight or approval, the association may find it difficult to bring the
project back into compliance with FHA guidelines.
If a unit owner’s use
of Airbnb violates state or local laws, codes or ordinances such a violation
could result in increased insurance premiums for the association as well as
difficultly recovering on a claim under an existing policy. Condominium unit owners who occasionally rent
their unit on a short-term basis may also be unknowingly violating their
homeowner’s insurance policies by effectively converting their occupied unit
into a rental property, which could result in a disclaimer of coverage by the
insurance carrier if they become aware of the prohibited nature of the use. If a transient renter is injured on the
common areas of the condominium, the Association could face trouble on a claim
with its master insurance policy if it is discovered that the unit was being
used as a for-profit rental.
While the policymakers
work to catch up to the everchanging issues created by short-term rentals one
thing is clear: Airbnb-type services are for the most part here to stay. Condominium associations have the tools to
regulate such activity, often times to a greater degree than state or local law,
however associations should be proactive about addressing Airbnb-related
concerns because retroactive efforts to address the short-term rental by unit
owners may fall short if the existing condominium documents do not properly
prohibit such rentals. Condominium unit
owners would also be wise to consult with their association prior to listing
their unit on Airbnb or else they run the risk of significant fines and
exposure their association’s legal fees incurred in connection with the
enforcement of the association’s bylaws and restrictions.
Chris is a founding member of Moriarty Troyer & Malloy LLC and brings
nearly fifteen years of litigation and trial experience in the areas of
community association, real estate and complex construction law. Chris’s
practice also focuses on condominium construction defect and transitional
litigation at the trial and appellate level of the state and federal courts as
well as in various alternative dispute resolution forums.
In his condominium and real estate practice Chris represents residential
and mixed-use condominiums, homeowner associations and property management
companies in a broad range of matters and provides advice on operational and
governance issues, interpretation and amendment of governing documents, rules
and bylaw enforcement, developer transition issues and common area disputes.
Chris also manages the firm’s common area lien enforcement practice.
Chris represents a wide variety of clients including condominium and
homeowner associations, building owners, developers, general contractors,
construction managers, subcontractors and suppliers in all aspects of
construction transactions, disputes and litigation including defective work
claims, breach of contract, and violations of M.G.L. c. 93A. Chris has
expertise with disputes involving both public and private construction projects
and has extensive experience with complex multi-party construction defect
litigation.
