A reader of Words of Conveyance recently suggested I write about use of internet sites such as Airbnb, HomeAway, CraigsList and VRBO that help homeowners make short term rentals.
Some cities with affordable housing shortages want to regulate or shut down short term rentals as “illegal hotels.” This week, Urban Turf reports that the New York Attorney General filed an Affidavit stating that 2/3 of Airbnb’s NYC listings are illegal. The Attorney General and Airbnb are litigating over access to sales data. See Mr. Turner’s April 22, 2014 Urban Turf article. This controversy may spread to urban or vacation communities in Virginia. As NY State Senator Liz Krueger points out, use of condominiums and apartments as vacation rentals impacts the local real estate market by decreasing housing inventory.
This issue also caught my interest on a personal level. In 2000-2004, I rented a room from an Arlington landlord who let each room in an apartment to unrelated tenants instead of having one or more co-tenants sign one lease for the entire three bedroom apartment. I had some horrible roommate experiences in the last couple years there. In January 2009, I attempted to rent out my old condominium to people in town for the Presidential Inauguration. I was unsuccessful – came too late to the action.
The economics of short-term rentals makes sense to homeowners who want to turn empty space into cashflow without the commitment of a year-long lease. The customers seek nice places at a discounted rates. See Lark Turner’s Jan. 31, 2014 article in Urban Turf. Many owners make significant supplemental income with short term rentals. Others have horror stories. Mashable.com reports that New York City comedian Ari Teman thought he found good customers on AirBnB in town for a family wedding. To his shock, he came home to find his building superintendent shutting down a “XXX Freak Fest” (as Teman described it) that damaged his apartment. Mashable also reports that in 2011, an Airbnb host in San Francisco had her property stolen and vandalized. These websites also present convenient opportunities for criminal enterprises involving narcotics or prostitution. Perhaps the most common headache that vacation rental hosts experience is navigating tax and regulatory burdens. Before taking photos and putting them up on one or more of these websites, a responsible owner wants to know how to avoid legal snags. The threshold question for the owner is, are you:
Put another way, what is the boundary between residential landlord-tenant law and the law of innkeepers?
Airbnb and HomeAway have only been around for a few years. However, charging visitors to stay in one’s own home on a short-term basis has a long history. Nowadays, chain motels dot roadsides at convenient, planned intervals. In the colonial period, hotels were only in large towns and cities. In rural areas, travelers had to look for private homes advertising lodging to the public. Since this tradition of short-term lodging in private homes is so old, there is some Virginia law on this. Consider the following legal differences between renting and lodging:
Virginia law discourages homeowners from running a B&B or hostel business as a side business – too many compliance and tax issues. Many Airbnb hosts offer lodging at lower rates because they have avoided these added obligations. Owners who want to rent out their homes during their own annual vacation aren’t really competing with hotel chains. As Airbnb argues, “Short term rental laws were never meant to apply to New Yorkers occasionally renting out their own homes.” See Apr. 22, 2013 Urban Turf article. Guests who stay while the owners are on their own vacation aren’t creating a substantial parking or traffic burden. They contribute more to the local economy than an empty house.
Is the short term rental of an entire apartment or condominium an “unlicensed hotel?” Consult with a qualified attorney regarding the unique circumstances of your property. For many owners, simply renting out an extra room to a long-term tenant may make more sense.
Scott v. Walker, 274 Va. 209 (2007)(whether a covenant restricting property to residential use prohibits short term rentals)
In Re Oceanview/Virginia Beach Real Estate Assoc., 116 B.R. 57 (Bankr. E.D. Va. 1990)(lodging rate income vs. tenant rents)
City of Worchester v. College Hill Properties, LLC, 465 Mass. 134 (2013)(lodging vs. renting in Massachusetts)
Va. Code Sect. 35.1-1, et seq. (Virginia’s statutes regulating hotel operation)
Va. Code Sect. 55-248.2, et seq. (Virginia Residential Landlord Tenant Act)