By Mark Einhorn
The short-term rental of residential property is
producing long-term concerns. Those
concerns, which were just emerging when I wrote about this issue three years
ago, have grown exponentially as short-term vacation rentals have ballooned, creating
what is now a $34 billion business and triggering an
At the federal level, a group of senators
concerned about the issue have asked the Federal Trade Commission to
investigate the impact short-term rental companies are having on local housing
markets.
Closer to home, the Cambridge City Council
recently approved an ordinance requiring condominium owners and tenants who
rent their units on line to register the property with the city, and to obtain
permission from their condominium association or landlord before doing so. The ordinance also requires “hosts” to live
in the same building or a building adjacent to the one in which they are
offering a short-term rental unit.
Other communities have also been eyeing
regulations to deal with the business.
The Massachusetts Department of Health and Human Services has suggested
that short-term rentals should be regulated like bed and breakfasts; Boston
officials have been studying that idea for some time, but haven’t yet acted on
it.
Legislative
Action
The state Legislature also hasn’t addressed the
issue yet, but is being urged to do so.
Gov. Charlie Baker has proposed legislation that would impose a tax on
short-term rentals. A measure introduced
by Rep. Aaron Michlewitz, who chairs the Committee on Financial Services, would
also tax rental income and would, in addition, require owners to obtain a state license and comply with a
number of health, safety, and insurance requirements.
While hotels are concerned about the impact on
their business, condominium owners are concerned about the impact on their
communities when residences become hotel rooms and their neighbors become an
ever-changing parade of hotel guests.
Security, wear and tear on common area spaces and
amenities, rowdy behavior, and the vacation atmosphere created by transient
residents are the major complaints. Not
surprisingly, these complaints have ended up in the courts, which, also not
surprisingly, have differed in their responses.
Commercial
or Residential Use?
The key legal question in most of these disputes
has been whether short-term rentals represent residential or commercial use of residential
property.
The Massachusetts Land Court concluded in a recent
decision (Robert S. Lytle vs. Alana
Swiec, et. al.) that the short-term rental of a summer cottage in Hull violated
zoning regulations barring commercial uses in neighborhoods zoned for
single-family properties. The court
upheld the Zoning Board’s ruling that the rental did not constitute an
authorized “accessory use” of a residential property.
A Kentucky appeals court concluded similarly (in Vonderhair v. Lakeside Place HOA) that
short-term rentals of units in the condominium community violated residential
use restrictions in the HOA’s covenants.
But the Washington State Supreme Court reached the
opposite conclusion, ruling (in Wilkinson v. Chiwawa Communities Association) that
the determining factor was not how long a property was rented to tenants, but
how the tenants used it. According to
the court, the tenants were using the property for eating, sleeping and other
purposes, consistent with its residential use.
A Florida Appeals Court used similar reasoning in
a decision earlier this year (Santa
Monica Beach Property Owners Association, Inc. v. Acord) rejecting a condo
association’s effort to prohibit short-term rentals. The association argued
that language in the covenants mandating residential use precluded the
rentals. But the court said: “The
critical inquiry is not the duration of the tenancy, but the character of the
actual use of the property by those residing thereon.”
Significantly, the Florida
court also noted the absence of language in the covenants specifically barring short-term
rentals. “The need for explicit language
in the covenants is particularly important,” the court said, “where the use in
question is common and predictable, as is the case with short-term rentals of
houses near the beach to vacationers.”
Words Matter
The court’s
admonition underscores the advice we offer our condominium association
clients: If you want to prohibit
short-term rentals in your community, do so specifically and explicitly through
language in your governing documents. If
your documents don’t contain that language, persuade owners to amend the master
deed or the bylaws to add it.
As the court
decisions quoted earlier indicate, restricting the property to residential uses
may not be sufficient; the restrictive language should specify a minimum
acceptable rental period. We suggest no less than 30 days. We also recommend requiring owners to rent
the entire unit – not just a portion of it.
This would preclude an owner with a three-bedroom unit from renting the
two extra rooms to paying guests.
Regulating Rentals
It is also possible
that many owners – and possibly a sizable number of them – are already renting
their units to vacationers or want to preserve the option to do so. Before taking or recommending any action,
condominium boards should assess owners’ preferences. If owners don’t want to prohibit short-term
rentals, the board should establish policies and/or amend the condominium
documents to adopt provisions which ease some of the negative impacts involved.
We suggest, among others:
* Require owners (or an owner’s agent) to meet renters
personally at the property for each rental.
* Require owners to explain association rules to tenants and to verify that they have done so.
* Require owners to have insurance that will cover their guests. Check with the master insurance carrier to make sure the use does not constitute a commercial use.
* Have written policies describing the obligations of owners who rent their units.
·
(Mark
S. Einhorn is a Partner with Marcus Errico Emmer & Brooks which specializes
in condominium law, representing clients in Massachusetts, Rhode Island and New
Hampshire.)
