Considerations for Condo Associations & Short-Term Rentals

According to iPropertyManagement.com, 2.58 million rental properties in the United States are in seasonal occupation. It’s a growing trend because the concept is popular with travelers and condo owners seeking to monetize their investment in the unit. As Condo Association Insurance specialists, we closely monitor trends that affect the condominium market to advise our clients about them.

Short-term rentals often irritate association boards because temporary tenants do not behave the same as full-time residents. The problems they cause are why associations oppose short-term rentals. Board members know a rise in short-term condo rentals is likely to force residents to experience noise, extra traffic, late-night comings, goings, belligerent behavior, vandalism, littering, and other troubling matters.

If your association board is not yet dealing with this rising development, it’s only a matter of time before it will. It is better to address the issue and potential problems now. We’ve seen other condo association boards using the following suggestions and guidelines to address the problems.

Evaluate Your Current Association Rules.

Start with a thorough reading of your association Covenants, Conditions, and Restrictions (CCR). Do they include short-term rental restrictions? If so, begin to enforce the restrictions assertively. Make a point to remind all condo owners of the restrictions regarding short-term rentals.

Get Legal Assistance.

Involve your legal counsel at the outset, particularly if you already have short-term rental issues. That’s because it’s likely you will need to revise short-term rental restrictions. An attorney can help make the language in the changes as foolproof as possible. Use their expertise to make sure all changes align with current CCRs, and state and local laws. A legal team will position the board to fight fire with fire as Airbnb and others may help their rental management clients find loopholes in poorly written CCRs.

Review State and Local Laws.

Request your legal adviser to review state and local laws regarding short-term rentals. Some jurisdictions already have imposed restrictions on short-term rentals, as in San Francisco, or have laws that override HOA regulations, as in Arizona. Either way, it’s a critical job for your attorney to review and report the findings carefully. They may find requirements for permits and state and local taxes, or other mechanisms to tamp down short-term rental activity.

Adding New Restrictions to the CCRs.

Since short-term rentals are more popular than ever, you may have a challenge getting a majority vote to add new restrictions for them. This dynamic might cause problems passing new rules that limit short-term rentals for members. Such conditions don’t mean you are powerless to make changes but must present them to show the benefits for all.

Presumably, no one wants to be responsible for inflicting noise, irritation, and damage on the community, and thinking win-win is how to get compromises. Instead of flat-out restrictions, you could limit how often a homeowner can rent in a year. Likewise, you can prohibit renters from using the amenities, including the pool, clubhouse, and paddleball or tennis courts.

Give Unit Owners Additional Responsibility.

Require residents renting their units to provide written notification with their renter’s complete identification. You could require residents to have renters complete a form from the association listing “Dos and Don’ts” with their signed agreement that they will abide by the regulations and accept responsibility for all guests and visitors they bring to the complex.

Have the unit owner sign a separate agreement stating they understand they are responsible for the actions if their renters violate CCRs governing short-term rentals, including paying any fines or legal fees that arise from the violations.

Make It Pay.

Short-term rentals are more likely to cause wear and tear on community property. Set up a condition to collect a flat fee to fund an account that covers routine maintenance and extra costs to the association for parking, trash removal, litter pick up, and more. Add a second line item to collect fees to cover the expenses for increases in the association’s condo association insurance caused by short-term rental activity.

Set Clear Standard and Guidelines.

Whether an HOA changes its CCRs to ban short-term rentals altogether or allow some means of short-term rentals, you must communicate to your homeowners thoroughly and transparently. Have your legal advisers provide written assurance that the association’s changes comply with local ordinances and state laws.

Decide upon and document the number of rental days that represent a short-term rental per the CCRs if your changes prohibit short-term rentals from now on. Then notify condo owners about new policy changes, including any fines violators will pay.

Enforce the Rules.

Contract with an HOA short-term rental compliance monitoring service to keep tabs on internet listings and activity for units within the HOA. Then set procedures to handle violations uniformly. You might choose to let the first offenders off with a stern warning, or you could decide to impose fines starting with the first offense. Publish the steps in your process, so homeowners know what to expect if they violate the rules.

Making Short-term Rentals Legal.

Allowing short-term rentals is a big step for the association and homeowners. To prepare and avoid confusion, think through all contingencies, and have a planned action for each potential scenario. With the advice of legal counsel, publish a written short-term rental policy and distribute it to all homeowners.

Detail the exposure to the association for the additional liabilities and risks it faces due to allowing short-term rentals. Explain the procedures for dealing with loud, troublesome renters. Be specific with the details that limit the maximum number of people per unit and days a property can be used for a short-term. Identify all actions and associated costs with allowing short-term rentals. Be aware as possible and address the areas of greatest concern to work on first.

Protect Yourself, the Property, and Association.

There are risks and perils every condo association and HOA board member face. Your first line of defense is making sure your condo association insurance policies provide adequate protection against potential problems.

Condominium associations have unique insurance needs and require the expertise of professionals who can meet those needs. Dickstein Associates Agency offers Condominium Association Insurance Programs to protect associations for their responsibility in the event of property and liability damages. We stand ready to provide you with decades of experience, comprehensive coverage, and competitive rates.

About Dickstein Associates Agency

Dickstein Associates Agency has distinguished itself as a leading provider of personal and business insurance in the tri-state area since 1965. We pride ourselves on being advocates for our clients and providing them with quality and affordable coverages. As Trusted Choice™ independent insurance agency, we partner with various national and regional carriers, allowing for flexible coverage for each client’s unique circumstances. For more information on how you can leverage all your insurance to work best for you, and how we can secure the best insurance in the marketplace suited to your specific needs and business objectives, contact us today at (800) 862-6662 or www.dicksteininsurance.com.