There are several advantages to short-term rentals. They offer more flexibility than long-term rentals, plus they often come with tax benefits — and who doesn’t want that?
But wait! Before you list your property on Airbnb, you need to be aware of certain legal considerations. In this article, you’ll learn about the legal considerations of running a short-term rental property in the U.S.
What is a short-term rental?
Short-term rentals are properties that are rented out for a short period. This usually ranges anywhere from a few days to weeks. Unlike long-term rentals that involve year-long living arrangements, short-term rentals are temporary. Although they still involve tenant screening, it’s not as stringent. Short-term rentals are also called vacation rentals, and are popular among couples and families.
The definition of a short-term rental may seem straightforward, but it’s actually more complex. This is because each state defines a short-term rental differently. Essentially, a short-term rental is defined according to the following aspects:
- Type of Structure. In some states, the home must have enough bedrooms to be called a short-term rental. Similarly, the short-term rental must still look and feel like a single-family home. Hence, a recreational vehicle (RV) can’t be called a short-term rental.
- Length of Stay. How long do you plan on renting out your short-term rental? In cities such as Charleston, short-term rentals can only be rented out for not more than thirty days. In Florida, short-term rentals (e.g. Airbnb and VRBO) are properties that are rented out for less than 90 days. It’s important to check your city or state’s limits as this will affect the types of permits that you may need.
- In some cities, the primary resident (i.e. the homeowner) should live in the short-term rental. This means that they’ll be sharing a space with transient tenants. If your city implements this rule, you can benefit from hiring a property management firm that can screen your tenants to make sure they aren’t a danger to the community.
What are the legal restrictions regarding short-term rentals?
Legal restrictions vary from state to state. Some states are lenient, while others consider short-term rentals illegal. In most states, short-term rental owners are required to obtain a permit before they can rent out their properties.
Let’s explore some of the common legal considerations of running a South Florida short-term rental:
#1 You may be required to live on the property
In New York, a residential unit must be used as a permanent residence. This means that homeowners can rent out a room for a couple of days, but they should also be staying on the property at the same time. They can rent it out without having to live there, but they can’t rent it out for less than thirty days.
#2 You need to take note of zoning laws.
Certain cities, especially tourist destinations, have strict rules regarding the number of short-term rentals that can be situated in one area. For instance, in California, a short-term rental cannot be located within 200 feet of another short-term rental. In Hawaii, only 1,715 properties are allowed to operate as short-term rentals at a time.
Hence, if you’re planning on turning a single-family home into a short-term rental, you should first check your city’s ordinances. Your property manager can help you double-check your city’s zoning laws.
#3 You must follow multiple dwelling laws.
Short-term rentals have raised the rent in areas such as New York. That’s why they enacted the Multiple Dwelling Law (MDL), which limits short-term rentals in multi-family properties (buildings with three or more households) to not more than thirty days. In this scenario, the permanent resident must be present. Violating this law can result in a fine falling anywhere between $1,000 and $7,500!
Are all cities strict when it comes to short-term rentals?
Don’t let the legal considerations discourage you! Not all cities and states are super strict when it comes to short-term rentals.
For example, in Palm Desert, property owners can operate short-term rentals for up to 27 days as long as they pay their “transient occupancy” taxes and apply for an annual permit. Similarly, in San Franciso, short-term renting is allowed for 90 days, but the property owner should also use the home as a primary residence for at least 275 days a year.
Can you rent out a unit in a condominium?
If you own a unit in a condominium, you can convert it into a short-term rental as long as it’s allowed in your association’s covenants, conditions, and restrictions (CC&Rs). Of course, you should first check your city’s ordinances, as these are above any association’s bylaws.
What permits will you need for a short-term rental?
If your city or state allows short-term rentals, you may be required to obtain the following permits or licenses:
- General Business License. Since your short-term rental operates as a business, you’ll need to obtain a business license or permit.
- Short-Term Rental License. Your city or state may also require you to obtain a short-term rental license. This is issued to property owners that have proven that their rental meets the minimum health and safety standards (e.g. smoke detectors). You may also be asked to prove that the short-term rental property is not your primary residence.
If you’re unfamiliar with your city or state’s requirements, you should consult your property management company. This information is readily available online, however, it can help to hire a property manager that can help you navigate this complicated process.
The bottom line
The legal considerations regarding short-term rentals are constantly changing. Cities and states are actively creating laws to protect their communities and residents. Hence, if you’re planning on investing in a short-term rental, you need to stay up-to-date with local laws.
One of the smartest decisions you can make as a property investor is to hire a property management company. Luxury Property Care can check your city’s rules on short-term rentals to ensure you stay out of legal trouble.