Researching laws and licensing regulations around short-term rentals can be time-consuming, but it is an imperative step for any short-term rental host. By understanding the applicable laws and regulations first, you can ensure that your investment is protected.
When determining the legality of setting up and operating a short-term vacation home rental, you’ll need to engage in some thorough research. Here’s a checklist to help you on your journey, from micro to macro in scale.
City restrictions: If your rental is within city limits, check the local regulations to ensure that short-term rentals are allowed in the area where the property is located. Some cities have restrictions on what type of zoning allows short-term rentals, proximity to the nearest STR, caps on the total number of STRs allowed, licensing or permitting requirements, and differentiation between owner and non-owner-occupied short-term rentals. City sales tax normally applies to vacation rental income (along with property tax and the taxes of other applicable tax jurisdictions). In smaller cities and towns this information can be difficult to find, but you may want to search the city website, city code, speak with other hosts, and visit the city office for more information. Be sure to look into occupancy limits and safety specifications, including smoke and CO detectors, fire extinguishers, and emergency exits. If the rental property is required to comply with accessibility laws, research the requirements and ensure that the property meets those standards. Research any local ordinances regarding noise and nuisance, trash collection, complaint response, and any other requirements so you can ensure that your STR can comply. It can be tempting to skip some of these steps, but in addition to increasing safety and limiting liability, as restrictions tend to increase over time it’s helpful in the long run to have a compliant vacation rental that is more likely to be grandfathered in when restrictions increase.
County restrictions: Repeat the above, but on the county level.
Research state laws: Repeat the above, but on the state level.
Tax jurisdictions: In addition to city, county, and state taxes, you may be required to pay taxes related to special tax jurisdictions such as regional public transportation and emergency medical services. We recommend searching for terms like “sales tax”, “sales and use tax”, and “lodging tax” along with the name of your city, county, and state.
Homeowner’s association (HOA) or covenant rules: If the property is part of an HOA and/or covenant, check the rules and regulations to see if short-term rentals are allowed. Relevant restrictions are normally in regard to the length of stay and sometimes subletting. Parking restrictions are also common, which may be relevant to hosts since vacation rental guests in large homes sometimes bring multiple vehicles, and many HOAs will rule out RV parking and especially dwelling in a parked RV.
Insurance requirements: Some jurisdictions have specific requirements in regard to insurance coverage. Learn more about insurance here.
Leases: Some people choose to lease a property in order to host a short-term rental (this model is sometimes called rental arbitrage). We strongly recommend doing this ONLY with the full knowledge and agreement of the homeowner. Review any leases, contracts, or rules that may apply. Check with your landlord to ensure there is no prohibition against subletting or any other restriction against hosting. Speaking of contracts; in most jurisdictions, any stay over 30 nights will make the rental guest a tenant in the eyes of the law. For this reason, whether you are a homeowner or host in another’s space, we do not recommend hosting stays of 30 or more nights without the due diligence typical of long-term renting; including thorough background and credit checks, signed leases, and validating identification, even though booking platforms try to encourage hosts to open up for longer stays.
Fair housing laws including service and support animals: Something that vacation rental hosts often fail to consider is that vacation rentals are not exempt from fair housing. It’s important to ensure that you comply with all applicable fair housing laws, including those related to discrimination on the basis of race, color, religion, sex, national origin, disability, and familial status. There are also laws about service and support animals (and the booking platforms have their own policies as well) that dictate what you can and cannot ask guests about their animals and disabilities. It’s important to weigh the legal, ethical, and financial considerations before you determine whether to make an accommodation for a service or support animal. If this doesn’t sound like tons of fun for you, we offer compliant and strategic services through our Guide service together with many other benefits.
Neighbors: While not a requirement, it can be very beneficial to notify your neighbors about your plans to host short-term rentals, especially your plan for setting expectations so your guests are good neighbors as well. Good neighbors can be huge allies for vacation rental hosts. If the neighbors are willing, consider rewarding them for communicating hazardous situations or inappropriate parties, and even help with yard care, snow removal, setting out garbage and recycling bins for collection, etc. You might offer free or discounted stays for their upcoming visits from family or friends, use of amenities (who doesn’t love a hot tub session when the property is vacant–and they might do it anyway!), or simply paying them for their services. Neighbors who are “on the team” and benefit from the vacation rental are unlikely to become critical neighbors.