Short Term Rentals – A Growing Issue Impacting Community Associations

Home sharing services like VRBO and AirBnB have become increasingly popular around the country and throughout the world. In many cases, these services have provided a steady stream of income for property owners and, in some areas, have even sparked investment buyers seeking to cash in on the global demand.

Without debating the market impact this has had on available residential housing in crowded cities, it has created policy dilemmas for local governments and community associations. From a local government perspective, elected officials in some cities and counties have passed statutory regulations in an attempt to limit short term rentals and, more importantly, seek ways to protect consumers and collect similar tax revenue assessed hotels who provide a comparable service.

For community associations, short-term rentals can pose safety risks for residents and present potential covenant violations for owners. At the very least, these services have provoked conflict and debate in community associations with some of those cases ending up in the courtroom. Courts in certain jurisdictions have already ruled that short-term rentals are “transient” in nature and therefore violate covenants restricting property to “residential” use. In the condo setting, short-term rentals can jeopardize FHA’s prescribed limits on non-owner occupied units. This can prevent an association from receiving FHA authorization, which would restrict the availability of lenders to potential buyers.

Many associations have begun examining their community documents to determine if they specifically address short-term rentals. Absent specific language in the documents, local or state legislation will control. It’s a good idea for association boards of directors to consider this issue and whether any changes are needed or desired in their community documents. It’s always better to address a potential conflict now before it becomes a problem subject of litigation.

ABOUT THE AUTHOR

John Krueger is the Vice President of Government Affairs for Associa.