Online third-party rentals have become quite popular in recent years. Many unit owners see these companies as an opportunity to bring in additional income by renting out their unit on a short-term basis, sometimes even just for a weekend.
Most condominium communities do not want short-term rentals of units. Short-term rentals can reduce property values, impair the security of the community, cause headaches for rules enforcement, and negatively impact compliance with the Federal Housing Administration’s (FHA) Condominium Project Approval and Processing Guide, which requires at least 51 percent of the units to be occupied by the owner. The rise of Airbnb and similar online third-party rentals can create problems for condominium associations, but there are ways that associations can protect themselves.
What is Airbnb?
Airbnb is an online source that connects those looking to rent out their residence with those looking to stay in such a residence. The company is simply a connection between the two parties as the renter, or host, can set their own terms regarding the duration of the stay, the price, and the maximum number of guests allowed.
Types of Airbnb Hosts
There are five different types of Airbnb hosts. Full-time operators are those that rent out their residence for 360 days or more per year. Multi-unit operators rent out two or more residences. Variable operators rent out multiple residences for 360 days or more per year. Mega operators rent out three or more residences. Finally, occasional operators randomly rent out their residences, usually coinciding with major local events.
What Problems Does Airbnb Cause Condominium Associations?
There are several problems that Airbnb users could cause for condominium associations. Because the stay is often just a weekend, the guests are likely to be unfamiliar with the rules and regulations of the association. This could lead to them unknowingly violating rules of the community. Also due to the shortness of their stay, the guests have less reasons to consider the impact their actions have on neighbors in the community. For those that have FHA insured condominium mortgages, owners of units renting out their residences may bring the percentage of rentals in the community above the percentage permitted by the FHA guidelines. It may also result in not fully complying with the FHA’s restrictions on leasing, such as the length of leases. If compliance with FHA leasing guidelines is impaired, prospective purchasers will have less financing options making it harder for owners to sell their units.
Due to the problems caused by Airbnb rentals in condominiums, most associations look to put a stop to such rentals. They often look to their governing documents in search of restrictions that prevent these rentals. The typical restrictions found are leasing restrictions, nuisance restrictions, and guest restrictions. However, these restrictions usually are unable stop Airbnb rentals because they are not like typical leasing and more like a hotel lodging transaction. Also, because occupants often only stay for a weekend, they have vacated before associations can screen the occupants or successfully prosecute arbitrations against the occupants.
What Associations Can Do to Stop Airbnb Rentals?
While it can be difficult to stop Airbnb rentals within a condominium because they are usually not specifically addressed in governing documents, there are steps associations can take to avoid these situations. Oftentimes, host operators will own or rent multiple residences so updating the purchase agreements to address whether someone looking to purchase has listed a property on Airbnb or a similar site within the previous two years will give an indication if they may be looking to do so in your community. Because it is more convenient to rent out multiple units in the same condominium, associations can limit ownership in the condominium to one unit. Associations may also want to consider amending their governing documents to specifically address transactions through companies such as Airbnb, clearly stating that such an action is in violation of the governing documents.
Another tool is to retain an internet monitoring company that can notify you if it finds any of your properties listed on these sites. Some communities research these websites themselves and print out the ads when they find unit owners listing their units. These reports and print-outs become vital when trying to prove a unit owner is repeatedly violating the leasing or occupancy restrictions when fining or seeking an injunction.
Finally, condominium associations may consider going directly to the source. Companies like Airbnb want to ensure that the places listed on their websites are available for occupancy so informing them that the community does not allow such actions may put a stop to it.
Airbnb’s terms of service, which all Airbnb members agree to be bound by through their usage of the website, states the following:
You acknowledge and agree that you alone are responsible for any and all Listings and Member Content you post. Accordingly, you represent and warrant that any Listing you post and the booking of, or Guest’s stay at, an Accommodation in a Listing you post: (i) will not breach any agreements you have entered into with any third parties, such as homeowner association, condominium, lease or rental agreements, and (ii) will (a) be in compliance with all applicable laws (such as zoning laws and laws governing rentals of residential and other properties), Tax requirements, and rules and regulations that may apply to any Accommodation including in a Listing you post (including having all required permits, licenses and registrations), and (b) not conflict with the rights of third parties. Please note that Airbnb assumes no responsibility for a Host’s compliance with any agreements with or duties to third parties, applicable laws, rules and regulations. (Emphasis added).
If you community has valid restrictions against these kinds of transactions and unit owners are listing them on Airbnb anyways, they are in express violation of Airbnb’s terms of service.
Above all else, associations need to establish its credibility with the unit owners. They need communicate to its members what the rules are, how it plans to enforce those rules, and then follow through on those plans. Once you successfully enforce against one rule violator and make that known, most other will fall in line. Then instead of dealing with 15 unit owners violating the rules, you may only have one or two repeat offenders.