How to Manage Short-Term Rentals in Your HOAs
Welcome back to our 3-part series on short-term rentals in the HOA. In our first post, we shared the advantages and disadvantages of short-term rentals in community associations, and how it continues to shape some state and international regulations. In this week’s post, we’ll share some effective ways to handle short-term rentals in the communities you manage. It’s no longer a matter of “if” short-term rentals will arrive in your communities but when. How do you prepare?
Form a committee
Form a committee of board members and residents to research short-term rental advantages and consequences. Members of the committee should work together to form an unbiased plan that protects the community’s interest while deciding how to approach the growing trend. This committee should be tasked with researching the governing documents and local laws, identifying gaps, addressing how to deal with the gaps, and what impact those gaps can have on the community. Assign each person in the committee with a specific task, so that the burden of responsibility does not lie on a single person.
Hear the voices within the community
Survey your residents to find out their opinion on short-term rentals. You’ll want to know what concerns they have, if they support/discourage short-term rentals and why, and what conditions they think should be in place if the community were to allow short-term rentals. Hold community meetings to discuss potential issues and solutions. Then, organize a voting system to make a collective decision on how short-term rentals should be handled.
Draft a short term rental policy
Once you have gathered all relevant information and the community has voted on the topic of short-term rentals, it’s time to draft a concise policy. Note, that it is very important that the HOA also consults their lawyer as they are drafting the policy. The policy should encompass the following:
- Define what a short-term rental means
If a short-term rental in the community is not defined appropriately and well-documented, this leaves your community vulnerable to loopholes that can be exploited and lead to costly lawsuits. According to a post by CAI’s Washington chapter, it’s important to define whether a rental is an exclusive possession of the property for the stay duration or simply a licensing agreement in which the renter does not own the property, much like a hotel. - Determine the minimum amount of time a short-term rental should be active
Lindsay Diaferia, the Director Client Services at Hillcrest Property Management, shared that some associations she manages allow for short-term rentals of no less than 6 or 12 months. - Percentage of the community that is permitted to perform short-term rental activities
Set a threshold of the percentage of homes in the community that is allowed to be a short-term rental. This can help protect the resident’s interests while making sure the community retains its appeal to prospective homebuyers. To determine the percentage that is viable for the community, consider things like the interest of short-term rentals in the community, community size, and the impact that the risk of noncompliance can have on the community. For example, the association can require a maximum of 5% or 20% of homes in the community to be allowed to engage in a short-rental business. - How to handle noncompliance
If the board finds out that a resident is engaged in short-term rental activities that are not in compliance with the governing documents, there needs to be a violation and fine policy to discourage noncompliance. Clearly define the fee schedule based on the rule that was violated, the number of times they are in violation, and the non-response of a violation by the owner. - Place the onus on the resident
Make sure homeowners know that they are responsible for their property, in keeping management informed, and the entire booking process. Adam Clark from Excel Association Management in Plano, Texas, says that specific actions he has seen Associations enact include “requirement of lease submission to the Association, requirement of an ‘intent to rent’ form to the Association, background checks on tenants, as well as fees payable to the Association for property rental”. Providing this information to the association/management company ensures that the resident maintains compliance. - Make house rules clear
Encourage homeowners to seek guests that would behave responsibly on their property and screen them prior to confirming the booking. The short-term policy should clearly define guest rules and behavior that align with the governing documents and shared values of the community. Document clear rules on the use of community amenities and it’s restrictions. Restrictions may include the number of people allowed to use the amenity or hours allowed to be used. Additionally, you’ll want to clearly state rules on parking, pets, and trash disposal.
Update the association’s governing documents
Once the association’s lawyer has reviewed the policy and suggested any revisions, make sure to update the governing documents. If the association has hired a community management company, they will need to make sure they are well informed of the decision and how it should be handled. Then, send a notice to the entire community about the changes decided on, how it impacts them, and what happens if rules are violated.
What to do when the Association wants to ban short-term rentals
Many associations prefer to ban or restrict short-term rentals in their communities due to the concerns we highlighted in our earlier post. If the association wants to ban or restrict short-term rentals, it’s important to take your state’s current legislation into consideration, identify any loopholes, and address it concisely in the short-term rental policy. Adam Clark shares that “Many Association Documents already have stipulations written into them restricting utilization of homes for non-residential use. However, at least in Texas, the Legislature has ruled that this clause is not sufficient to warrant a violation for short term rental use since the home is technically still being used for residential purposes. Due to this, a policy specifically speaking to rental terms is a must for Associations hoping to put an end to short term rentals in their community.”
As short-term rentals continue to increase, the subject needs to be treated with care in community associations. For some residents, short-term rentals are a good opportunity for generating an additional stream of revenue, and for others, it can be a disruption to an otherwise well-functioning neighborhood. Management companies can help associations they work with in researching trends and implications, identifying resident concerns, deciding on the best course of action, and implementing rules for the community.
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