Short-Term Rentals: New Municipal Regulations & HOAs/Condos

Jim SlaughterThe convenience and cost of Airbnb, VRBO, Homeaway and other platforms have made short-term rentals (sometimes called “STRs” or “STVRs” for “short-term vacation rentals”) a booming business. Airbnb said earlier this year that it has over 640,000 hosts and 4 million listings!

That said, short-term rentals can bring concerns. For one, too many rentals may change the nature of a community. Some traditional owner-occupied homeowner and condominium associations have found themselves awash in short-term renters. While there is nothing inherently negative about short-term renters, some communities have found that short-term rentals can lead to additional administrative costs, such as determining who has a right to use the common areas (versus just assuming that any new face at the pool has a right to be there). In addition, some hotels and traditional B&Bs have questioned whether it is fair for mostly unregulated short-term rental hosts to avoid the rental taxes, construction requirements, regular inspections, and additional regulations of a typical hotel.

With such concerns, it was only a matter of time before some governmental jurisdictions began exploring greater regulation of short-term rentals. The Raleigh City Council has just this month authorized a committee to investigate and to propose new rules for short-term rentals, possibly by early 2019.

The Raleigh draft rules, which have not yet been adopted, mirror many of the provisions in Asheville’s short-term rental regulations. For instance, under the proposed rules, individual rooms in a home can be rented if a resident lives in the house during the rental. For those wishing to rent an entire home, there would be a fee of a couple hundred dollars. In addition, no kitchen appliances would be allowed in rented rooms, and there would be restrictions on total occupants. Unresolved issues with the Raleigh rules include parking restrictions, whether living areas away from the main house could be rented, and STR permits will be issued (whether by lottery or some other method).

Asheville’s 2018 STR ordinance greatly restricted new short-term rentals. Under the regulations, if an entire dwelling is to be rented, the property must be zoned “Resort” (although some exiting STR properties were grandfathered). If only a room or rooms are to be rented, the rental may qualify as a “homestay.” However, as to homestays, a long-term resident must be present in the home at the same time as guests, and no more than two total rooms can be rented. Like the proposed Raleigh ordinance, homestay rental rooms are not permitted to have kitchens. Short-term rentals that violate the Asheville ordinance can result in a $500 daily fine. (FYI, a recent article noted that one Asheville resident has more than $1 million in fines for improper Airbnb rentals.)

Given the recent actions in Asheville and Raleigh, it is likely that other city councils will also look at the pros and cons of short-term rental regulation.

For community associations, any governmental regulation of short-term rentals would be in addition to specific property restrictions in the filed documents of the community. HOA and condo associations sometimes have declaration language that prohibits or restricts short-term rentals. These can take many forms, including a flat-out prohibition on rentals, a number cap on total rentals, a percentage cap on total rentals, limits on how short a rental can be (whether for six months, a month, a week, or some number of days), or requiring owners to occupy their unit for some amount of time before rentals are permitted. We are sometimes asked if declaration language that no “business” or “commercial” use may be made of a unit is sufficient to prohibit STRs. The answer is typically “no,” because North Carolina courts have found even short-term rentals to be a residential use. As a result, the safest approach for regulating STRs is to have language in the declaration specifically referencing short-term rentals or even platforms such as Airbnb or VRBO.

For associations that wish to address rentals or short-term rentals, but do not have current language in their declaration, feel free to contact any of our attorneys about the amendment process. We can assist with preparing language for voting as well as helping to prepare final documents for recording. Our attorneys can also advise on the Fair Housing Act, which prohibits certain rental restrictions (most often in condominiums).

As we hear of additional regulations on short-term rentals, we will provide additional information.

5/22/2019 UPDATE: The Raleigh City Council has adopted an ordinance allowing owners to rent out guest rooms in their homes on websites like Airbnb, but not their entire home, in addition to other restrictions. More details at https://www.newsobserver.com/news/business/article230626659.html 

———————–

Our new offices are now open!
Greensboro | Charlotte | Triangle | Coastal