With the positives of short-term rentals come negatives, not just for the homeowner but for the HOA community as well as the community at large.
The Pros and Cons of Short-Term Rentals for HOAs
Short term rentals and their impact on communities have recently attracted a great deal of attention – and controversy. While homeowners enjoy the income created by renting out their condos or homes, there may be issues involved that they may not have considered before taking this step. For the HOA property as an entity, transient renters can create noise and security problems as well as increased maintenance and administrative expenses.
Pros for Homeowners (and Community)
Many investors purchase properties in areas frequented by tourists specifically to profit by encouraging short-term rentals. In the case of a homeowner renting a room in the home, the extra income can mean the difference between being able to enjoy retirement in his home or having to move because he no longer can afford to live in a home he has occupied for decades. In general, the pros can be:
- Greater income for the homeowner
- Generation of tax revenue to the local economy
- Personal income tax advantages / deductions for needed property maintenance / upgrades
- Supplement to retirement income
Cons for Homeowners (and Community)
With the positives of short-term rentals come negatives, not just for the homeowner but for the HOA community as well as the community at large. Police departments in high tourist areas generally have more critical issues to address, rather than policing HOA communities because of short-term renters creating a nuisance.
- Safety and security risks
- Greater maintenance costs for HOA (common and recreational areas)
- Noise pollution
- Trash overflow / extra collection
- Homeowner exposure to illegal activities
- Homeowner liability
- Impact on property value
- Assessments from HOA to help defray costs of maintenance
HOA Board Considerations
Rules governing short-term rental platforms such as Airbnb. VRBO, Booking.com, Expedia, and HomeAway may or may not be contained in community homeownership documents, simply because the rise in popularity in these platforms is relatively recent. HOA rules generally will limit leases to either a minimum of 30 days or 1 year, restrict “hotel-like” operations or running a business out of the home. Occasionally an HOA will add an assessment to rentals of any kind of a specified dollar amount per year to cover any maintenance incurred by the rental. (damage to common areas by skateboards or scooters, for example). Additional rules do not mean amending CC&Rs is necessary; the Board will usually have the authority to vote on changing rules to benefit the HOA community.
If an HOA does not have an airtight prohibition or specific restrictions in its documents regarding short-term rentals, it is wise to address them in an open Board meeting to solicit feedback from residents, then subsequently address feedback and concerns in an Executive Session of its Directors. Assistance of legal counsel may be required, especially if the end game is to prohibit the practice altogether. Many municipalities in tourist areas have outlawed or severely limited short-term rentals altogether. The Board should seek information from its property management company or city officials about prohibitions or restrictions. Potential lawsuits by homeowners against the HOA can be costly, so it’s best to address all these issues head-on proactively.
Assistance from the HOA Property Management Company
Based on its experience handling other HOAs under its umbrella, the HOA property association management company can provide valuable source material on how the Board can craft language in its rules to restrict or prohibit the short-term rental activity. The management company can also help with surveying the community at large for feedback, to further help create rules that best benefit the community. The more “community-centric” the rules, the more beneficial in keeping the community safe, and the less the HOA will be open to lawsuits from homeowners that wish to flaunt the rules. Once the rules are in place, the HOA property management company can help disseminate them and train homeowners on the do’s and don’ts.
How to Address Violators
Once your rules or amended CC&Rs are in place, the Board must remain vigilant for violators. If a neighbor complains of a homeowner using their place of residence for short-term rentals, it may be easier to go to the web, find the address on a rental site, and approach the site management regarding the listing being in violation of HOA rules. A reputable site will understand restrictions placed on residents of HOAs and remove the listing.
It may be useful for HOAs to assess fines for violators to prevent repeat occurrences. Because short-term renters can create security problems for the community, it is a good idea to make all homeowners aware, and to also bring them up to speed about fines incurred should they be in violation of the newly-amended rules or CC&Rs. The property management company is an essential advocate in this situation.
Homeowners must also remain vigilant regarding long-term tenant behavior. A recent incident in a Southern California community revealed a lessee renting a room through an online short-term rental website. Another homeowner in the community saw the listing and the renter was subsequently warned. The lease in this case specifically prohibited short-term rentals, with a clause making it mandatory that the lessee inform the absentee landlord of family member visits and duration of stay.
Ultimately, the homeowner is responsible for activities in or around his home or parking place(s). As members of the community, whether absentee landlords or primary residents, homeowners are liable for any violations, such as noise or nuisance, or property damage from negligence, misuse, fire or flood. The most important point of agreement is that the HOA maintain a happy, healthy and prosperous community whose homeowners/landlords are contributing members to the greater community.