“How Community Associations Can Handle the Continuing Popularity of Short-Term Rentals,” FCAP Managers Report

“How Community Associations Can Handle the Continuing Popularity of Short-Term Rentals,” FCAP Managers Report

Yellow Rolling Luggage with a straw hat on top in front of a white home.

Despite a year that has drastically curtailed traveling due to the global COVID-19 pandemic, the popularity of online vacation and short-term rental platforms, such as Airbnb and others, has persisted as people have sought escapes to private homes instead of hotels and to upgrade their work-from-home routines to somewhere with a view. Airbnb is only one of a number of platforms that has facilitated the process by which owners can rent out their properties or a section of their properties for any number of days. Florida has remained a popular choice for short-term vacation rentals, with its sunny weather and numerous beachside properties.

These online platforms have popularized income-generation from short-term rentals for some property owners. This includes owners whose properties are located within community associations. Short-term vacation rentals create a host of issues for community associations and for neighboring owners—issues that may be exacerbated by the COVID-19 pandemic. Short-term guests are likely unfamiliar with association rules and regulations, or may simply not care. This may result in nuisance behaviors, such as excessive noise, unauthorized parking, or improper trash disposal. Short-term guests also are not impacted by the long-term effects of the wear and tear of common facilities and therefore may disregard proper use of the facilities, or worse, cause damage to the property. Moreover, guests unapproved by the association always have the possibility of being a security risk to the community. Some of these issues are exacerbated by the COVID-19 pandemic as associations seek to protect their residents with additional rules aimed at curbing the spread of the virus within the community. For example, a short-term renter may unwittingly attempt to use the pool or gym despite a rule prohibiting all guests.

All types of community associations face issues with short-term rentals. However, they may be much more visible in condominium associations where a unit is bound on other sides to other units, as opposed to single-family lots in homeowners’ associations. Part of the difficulty association boards face with short-term rentals is enforcement of existing regulations and/or COVID-19 specific rules. A weekend-renter who hosts a noisy gathering on Saturday night may be gone the next day. A family who foregoes wearing masks when walking around the common areas may have already caused harm by the time the owner is contacted regarding the violation.

In addressing short-term rentals, community associations should first look to their governing documents. A provision defining short-term rentals and restricting such use of the property would prove most effective. Because the short-term rental boom is still a relatively new issue, many association documents will not contain such a provision. If so, an association should seek to amend its governing documents. While not always easy to accomplish, this is generally the most effective way to deal with short term rental issues.

Condominium associations face an added challenge even if they successfully amend their documents. In 2004, the Florida Legislature amended the Condominium Act to limit the impact of such an amendment. Per Section 718.110(13) of the Condominium Act, an amendment prohibiting unit owners from renting their units or altering the duration of the rental term or specifying or limiting the number of times unit owners are entitled to rent their units during a specified period of time applies only to unit owners who consent to the amendment and to unit owners who acquire title to their units after the effective date of the amendment. Therefore, this amendment would not serve the association against owners currently engaging in short-term rentals without their consent. The Homeowners Association Act does not contain a similar provision.

Other restrictions that are more commonly found in association documents may also be useful in restricting an owner’s ability to set up short-term rentals. Some common restrictions found in association governing documents specify a minimum term of a lease, such as six months or a year, or specify the number of times a property may be rented per year. Florida courts have long upheld properly adopted leasing restrictions.

Many associations have sought to utilize the “residential use” restriction contained in their governing documents to restrict short-term rentals. Such an endeavor would first require a close examination of this provision. For example, the governing documents may mandate residential use, or in other cases, may prohibit commercial uses of a unit. Any interpretation, and thus application to a short-term rental, would turn directly on the express language of the provision. These provisions have been extensively litigated in courts across the country. This is so because defining the bounds of activities that constitute residential use or commercial use is not a bright line. Moreover, certain activities of short-term renters may be consistent with residential usage of the property, while the owner is generating income from the use. Nevertheless, courts have generally been reluctant to apply a residential use provision as a restriction on short-term rentals.

Most significant to Florida community associations is the First District Court of Appeal’s 2017 decision in Santa Monica Property Owners Association v. Acord. In Acord, the court found that where renters were using the property for ordinary living purposes, such as eating and sleeping, the duration of the rental was not relevant. The court went on further to explain that the nature of the use of the property was not changed from residential to commercial simply because the owner earned income from the rentals. The court included a laundry list of cases from out-of-state jurisdictions wherein courts have held that short-term vacation rentals did not violate the residential use restriction at issue. Acord as a case of first impression and the only Florida appellate case on the issue serves as a signal to associations that relying on its residential use restriction may not be enough to curtail short-term vacation rentals in the community.

Of note are two 2020 cases from jurisdictions outside of Florida wherein the courts have sided with associations in interpreting the residential use restriction. In Cherry Home Association v. Barker, a Michigan community association sued several owners engaging in short-term rentals, citing the residential use limitation in their declaration. In a creative argument, the owners argued that they had not violated the residential use restriction because they had not turned a profit from their rentals. The judge granted the association’s injunction, finding that earning a profit does not determine whether a use is residential or commercial. The owners’ poor business skills did not make the use non-commercial. In the second case, Hoffman Revocable Trust v. Marshall, the Kentucky Court of Appeals agreed with the association that an Airbnb rental is a commercial use, rather than residential use, comparing the transaction to that of a hotel’s. These cases have no binding effect on Florida courts, but may serve as persuasive tools for courts, as well as for associations unable to amend their governing documents and needing to rely on a residential use restriction.

Outside of the governing document provisions, an association has several other steps it can take to address short-term rentals.

  1. An association should document violations as they arise and send the appropriate violation letters to the owners. Although the quick departure of a short-term renter may dampen the efforts of the association to resolve an issue regarding that particular guest, a thorough record of violations against the particular owner is vital to an association’s enforcement efforts.
  2. Going directly to the source by contacting the online platform may be an option in some instances. For example, the Airbnb Terms of Agreement makes hosts responsible for complying with laws, rules, regulations and contracts with third parties, specifically listing homeowner and condominium association rules that may restrict subletting, short-term rentals, and even longer-term stays.
  3. An association may have to resort to legal action against owners who repeatedly violate their association’s governing documents.

Short-term vacation and rental websites, such as Airbnb and Vrbo, are not diminishing in popularity anytime soon. Moreover, the potential uptick in demand for leisure travel following the wide distribution of the COVID-19 vaccine may very-well cause a rise in demand for such short-term rentals. It is important for association boards to be aware of potential issues resulting from short-term rentals.

Now is the time to take proactive action to arm your association with the tools required to deal with these types of problems.