If your community association is located in or relatively near an area that is attractive to tourists, it is time for your board to start discussing the Airbnb phenomenon and what it might mean in the coming years. Sites like Airbnb, VRBO (Vacation Rentals by Owner), FlipKey, HomeAway, and Roomorama tout the fact that they are innovators in online vacation property rentals and market that their strengths lie in their community- based approaches. However, for volunteer boards and the managers who assist them, hotel-like lodging transactions in private residential communities can present security and privacy concerns, as well as constitute violations of a community’s governing documents.
Social historians may look back and see today’s Airbnb and Uber trends as defining moments in our connected, technological age. While private citizens may be celebrating their newfound ability to monetize assets they already own like their homes and vehicles, community association boards are scrambling to figure out whether or not their existing document restrictions on rentals are sufficient to stem the tide of owners jumping on the Airbnb bandwagon.
A recent study by the American Hotel & Lodging Association tracked Airbnb data from October 2014 through September 2015 in 14 major metro areas. This study revealed that South Florida joined Los Angeles, New York, and San Francisco as the areas with the largest number of full-time Airbnb operators. In 2015, 87,000 people visited Miami with Airbnb and stayed an average of 4.8 nights according to Airbnb spokesman, Christopher Nulty. The typical Airbnb host made $6,400 sharing their unit or home over 42 nights of the year.
Not surprisingly, South Beach was one of the most active markets for Airbnb, but many other places in the Sunshine State, including our coastal areas and theme park tourist destinations like Orlando and Tampa, also are seeing an increase in listings of residences in private residential communities with these online rental companies.
There are five categories of Airbnb hosts: full-time operators who rent out their units 360 days or more per year; multi-unit operators who rent out two or more units; variable operators who rent out multiple units 360 days or more per year, mega operators who rent out three or more units; and occasional operators who rent out their units randomly, usually in connection with a local event such as the Miami Open tennis tournament, a wine and food festival, etc. In South Florida, 62 percent of Airbnb’s revenue came from multi- unit hosts, who account for 30 percent of operators.
The starting point for most associations when they discover that an owner has listed his or her property on one of these sites is to determine if they can prohibit the activity with the current restrictions in their governing documents without having to amend those documents. Let’s take a look at the typical restrictions which could be used:
- Rental restrictions. Many communities have specific guidelines on leasing which include minimum and maximum lease terms. In the case of Airbnb, the exchange of money for the use of a residence does not easily fit within the typical example of a lease agreement but is more akin to a hotel lodging transaction. Even more problematic is that the guest occupancy is usually so brief that the violation is moot before the association can attain a successful result in arbitration in the case of a condominium or cooperative or in court in the case of an HOA.
- Nuisance restrictions. Every set of association documents I have reviewed over the last two decades has at least one thing in common—the existence of a nuisance provision. However, most of those provisions are fairly generic with little specificity when it comes to defining nuisance activity. Instead, we are left to debate if an activity interferes with the neighbors’ quiet enjoyment of their property or increases the rate of insurance in the community overall. Again, the biggest issue with relying on the nuisance pro- vision to limit or prohibit Airbnb activity overall is that the lodgers have typically vacated the property before an enforcement action can be completed and, in many cases, even commenced.
- Guest/Occupancy Restrictions. Airbnb customers can be construed as guests/temporary occupants in a community, but the typical guest/occupancy restriction requires that guests and occupants be screened, which is not easy to do when you have a customer arriving on a Friday and leaving the following Monday.
SO WHAT CAN YOUR ASSOCIATION DO?
Based on the survey data discussed above, host operators often own and rent out more than one unit. As such, one way for associations to start managing the trend is to update their purchase applications to inquire if the potential purchaser currently or has previously listed property on an Airbnb or similar site within the last 24 months. Associations may also want to prohibit multiple ownership of units in the community as once an operator successfully rents out one property it is much more convenient to rent out a second or third property inside the same community.
Associations should consider amending their governing documents to specifically address Airbnb-type transactions and to clarify that the listing of a unit or home on such sites constitutes a violation of the governing documents.
Even if the association does not have rental/occupancy restrictions in its Declaration (usually this happens as a result of a difficulty in amending the documents), a board could pass a rule requiring owners to advise of the presence of an Airbnb guest and that they provide an ID when entering the community. That type of rule would give the association an idea of who is coming into the community, and that knowledge can help trace damage and other type of problems.
Fining for rules and covenant infractions is an enforcement option but not always a terribly effective one, especially in condominiums and cooperatives where fines cannot become liens. Suspension of use rights can be a more effective tool in terms of regulating the behavior particularly as negative reviews from customers who have not been allowed to use the common areas can impact future returns.
There are companies like STR Monitor that will monitor the Web for a monthly fee and report to your community if it finds any of your properties listed on these sites. In the absence of such monitoring, the association and/or manager often does not become aware that a unit has been listed on Airbnb until the “guests” show up in the lobby with their suitcases.
Airbnb and the other companies mentioned in this article want to ensure that the properties being listed on their sites are actually available for occupancy. If your community has valid restrictions against this type of lodging transaction, then contacting the company and advising that your community is not eligible for this type of activity can possibly head the problem off at the pass. Lastly, communicating with your association members about the issue of Airbnb is also a good idea. Some residential property owners may not have considered nor do they fully understand that offering their residences for short-term occupancy exposes them to certain tax liabilities as well as to other laws which pertain to life safety as well as the Americans with Disabilities Act (ADA). While making some extra money from an asset you already own may sound like a great idea, doing so in your community association requires a thorough understanding of what is and is not permitted as well as a thorough understanding of the pros and cons of such activity. For boards and man- agers, it is important to discuss this activity and decide on a course of action well before the Airbnb customers show up in your community.