Volume XLVIII - March 2023

AVOIDING PROBLEMS WHEN RENTING A VACATION HOME

5 Tips For Owner

By: Daniel F. Mantzaris

As the summer vacation season approaches, now is the time to plan.  Private short-term vacation home rentals and home-sharing arrangements are the rage and provide an opportunity for vacationers to reduce their traditional vacation costs by obtaining cost-effective non-traditional vacation accommodations.   Additionally, property owners can use their homes to generate income.  Therefore, if the arrangement is handled appropriately with full disclosure and documentation, it can be the quintessential “win-win”.  The key, however, is to make sure that both parties avoid certain pitfalls.

Five essential steps the property owners must do to protect themselves and their investment:

1. Use a Reputable Online Booking or Management Service. In addition to handling the payment arrangements, many of these services offer pre-screening options for potential guests and additional liability insurance.  Of course, the owner has to pay a fee for these services, but it is well worth the protection and peace of mind.  If the owner elects not to use a third-party service, then the owner needs to address significant issues, such as credit card payment systems and collection and payment of sales tax, if applicable.
2. Use a Guest Agreement. Although, the reputable online vacation and short-term rental sites serve as a facilitator for the transaction, the basis of the contractual relationship is between the property owner and the guest.  To protect both parties to the arrangement and to avoid misunderstandings, it is important that a Guest Agreement be used.  Such an agreement specifies the exact terms of the rental such as dates, check-in and rate charged.  It can also include such important terms as the number of guests, the number of vehicles permitted,  and  unique restrictions that may be applicable (i.e.: no loud music or house parties).  Generic guest agreements are available online, however, to fully protect an owner’s investment, the agreement should be drafted and/or reviewed by a licensed attorney in the state that the property is located.   
3. Confirm and Comply with Local Government Regulations. Before any owner posts a property online for rent as a short-term vacation rental, it is important that the owner check state and local government regulations.  Many states, cities, towns, villages and counties regulate the use of a typical residential home for business purposes and short-term rentals.  Some expressly prohibit these type of rentals and others require special licensing and inspections, including, sometimes, health and safety inspections.  If the rental is in violation of a state or local ordinance or code, then the government could shut down the use of the property which would subject the property owner to liability to the renter and/or the imposition of penalties or fines by the government.  As an aside, in many instances, it is difficult to tell how a home is being used, however, if an owner intends to regularly rent out a home in this manner, there are often negative impacts on  the neighborhood which can cause neighbors to investigate and then complain to authorities.  Some negative impacts that can be a sign that the property is being used as a short-term rental home include different people coming and going, loud music or parties and parking of numerous vehicles.  Therefore, once the owner has confirmed and complied with applicable laws and codes, the owner should consider restrictions on the use of the property to avoid issues and problems with permanent neighbors.
4. Review Homeowners Association Rules. If the property is part of a homeowners association, there may be restrictions in the deeds and covenants for the association that prohibit the short-term rental of property.  Many homeowners, who buy homes in subdivisions, do not realize that there may be strict restrictions on the use of their homes.  The homeowner is deemed to have agreed to these restrictions, when the property was purchased and is required to comply.  It is important to note that even if the state or local government allows the use of the property for this purpose, homeowners restriction may prohibit it and subject the owner to fines and/or legal action. The best course is to read and understand the applicable restrictions and ensure that the property is used by renters in a manner consistent with other homes in the neighborhood.
5. Check Homeowners Insurance Policy. A property owner who agrees to offer a property for a short-term rental, arguably creates a greater liability risk related to the use of the property.  If someone gets hurt or property gets damaged then there is likelihood that the typical homeowner’s policy will not cover claims if it is determined that the claim resulted from the rental of the home for a short-term rental.  Therefore, the owner of the property should verify coverage and obtain specific insurance coverage, if needed.  Further the owner should notify the insurance carrier in writing of the intended use of the property.

Congratulations to Partner, Brett Miller for being appointed to the Melbourne Downtown Redevelopment Advisory Committee.

DSK Law was a proud sponsor to the Trinity Child Development Center’s Inaugural Golf Tournament on February 3, 2023.  Partner Cameron Frye and Associate Ryan Wisneski took part and braved the elements, played about 6 holes in the pouring rain, only to get in and find out that half of the tournament quit when it started raining. 

DSK celebrates Black History Month.

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