The Pope will be here on September 23rd. Millions of people will come to see and hear him. Where will they stay? Back in 2009, in anticipation of the large crowds wanting to be part of history for Barack Obama’s inauguration, the District government relaxed all residential requirements so homeowners could do a daily or weekly rental. Today, there is a new game in town called Airbnb. According to its website, “Airbnb began in 2008 when two designers who had space to share hosted three travelers looking for a place to stay. Now, millions of hosts and travelers choose to create a free Airbnb account so they can list their space and book unique accommodations anywhere in the world.”
Currently, there are over 1000 possible rentals in the Washington metropolitan area. They range from a private room, a shared room, or even the entire apartment or house.
But if you own a condominium apartment, you will most likely be in violation of the association legal documents. The bylaws of condominiums typically contain restrictions on leasing units. In some associations, the bylaws prohibit any leasing whatsoever. However, the majority of associations do allow leasing, but with either a six month or one year minimum term.
Kyle Piers, a unit owner in Boston, learned his lesson the hard way. He was renting his one-bedroom condo unit for $200-300 per night, but his neighbors in the 31 unit complex were not pleased. The heavy traffic of daily visitors was a concern to the board of directors, and Mr. Piers was hit with a $9,700 fine for violation of the association’s leasing restrictions.
Housing advocates are complaining that landlords are depleting the housing stock because the short-term rentals are more lucrative than long-term leases. San Francisco recently enacted legislation which legalized such rentals, on the condition that the host must be a full-time resident, and they cannot rent for more than 90 days a year. Any such renter must register with the city.
In addition to being subject to fines, a short term rental can trigger FHA sanctions. Stephen Marcus, a Massachusetts attorney whose law firm represents thousands of community associations in New England, and a member of the College of Community Association Lawyers, asked FHA for comment. According to Marcus, “A condo currently on the FHA approved site could conceivably find their approval in jeopardy. HUD is clear. Any short term rental, even one out of 100, could cause a problem with project eligibility and approval status.”
But Marcus conceded that FHA would probably not take such drastic action if the short-term rentals were limited to just the pope’s visit.
What should association boards do? On the one hand, the board — and it’s manager — might want to take the position that we just do not want short-term rentals, period. That is the decision of the board, and the courts will most likely support the board. The “business judgment rule” is in effect throughout the metropolitan area. Oversimplified, the courts take the position that unless the board is doing something seriously wrong, it will not second-guess the board’s decision.
The board could also decide to temporarily waive the leasing restriction for a one or two day visit by the Pope. It would be prudent, however, to run that decision by the owners. Many owners just do not like strangers roaming all over the building, day and night. And as is occurring in San Francisco, owners may not want a precedent to be set. Will the board take the same action for the next inauguration? What about when the Nationals go to the World Series this year?
These are difficult and complex decisions facing boards of directors. It not only involves losing FHA status, but relates also to the peace and quiet enjoyment of your home.
“Courts,” added Marcus, “have upheld the desire for predominately owner-occupied condominium units. Airbnb has upset this goal by creating a hotel-type use with real issues including constant move-in and move-out, transient and security issues. Renters, many believe, tend not to take care of a property as well as owners residing in that property.”
If you do decide to use this service, here are a few suggestions. First, contact your insurance company to make sure you are fully covered. Next, you should personally contact your potential guests. If you have any hesitation, don’t rent to them. You have the right to take a security deposit to protect you from any damage created by your guests. And finally, while this may be obvious, put all of your valuables in safekeeping, preferably away from the premises.
Written by Blanche Evans for www.RealtyTimes.com Copyright © 2015 Realty Times All Rights Reserved.