What s New on the Home Sharing Horizon?

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1 What s New n the Hme Sharing Hrizn? Presented by Nrthern Califrnia: Mrgan Hurlbutt, Esq. and Melissa Ward, Esq. Suthern Califrnia: Christina Baine DeJardin, Esq. & Steve Rseman, Esq. I. Rental Restrictins: Any restrictins n renting (usually recrded in CC&Rs, mre n that later), can take many frms such as a requirement that the lease be in writing, limitatin n number f authrized rentals, r, as here, restrictins n the amunt f time a unit can be rented. II. Shrt-Term Rentals: 1. Shrt-Term Rentals = Big Business a. Grwth f nline vacatin rental cmpanies such as VRBO, Airbnb b. Grwing faster than majr htel chains such as Marritt c. Depending n lcatin, can be big mney fr hsts (see, especially, San Francisc, desirable vacatin destinatins such as Mnterey, Carmel, etc.) d. Cmmunity can benefit frm investment in services and infrastructure als 2. Plicy Cncerns Regarding Shrt-Term Rentals a. Lss f husing stck in areas where husing is scarce ( htelizatin ) b. Lss f htel/ccupancy/tot ( Transient Occupancy Tax ) revenue t municipalities c. Affrdability f husing in expensive markets III. Prhibitins: Civil Cde 4740 prvides that prhibitins n rentals can nly apply t new wners that purchase after the prhibitin is recrded 1. Minimum lease terms NOT a prhibitin a. 30 day minimum is reasnable b. Missin Shres v. Pheil (2008) 2. Mandatry waiting perids/wner ccupancy requirements. Smetimes referred t as residency requirements but desn t really matter if wner actually resides in the unit s lng as it isn t rented. a. One t tw year waiting perid the mst cmmn; three years ccasinally b. Unit bught fr parents, children r resided in by immediate family des nt vilate prhibitin s lng as n rent r ther cnsideratin is paid; make sure gverning dcuments define immediate family c. What if unit is bught fr cllege-aged kid that then rents rms t friends? d. FHA recently determined that this frm f prhibitin is NOT allwable and will reject an applicatin fr FHA certificatin if a cmmunity assciatin has a mandatry waiting perid 2017 CACM Law Seminar. All rights reserved. 1 P a g e

2 What s New n the Hme Sharing Hrizn? 3. Rental caps/ceilings a. 25%-30% mst cmmn. Can yu g lwer? What is t high? b. FHA has determined that this frm f prhibitin IS allwable but it still must be reasnable. What is reasnable? c. Unpublished case law regarding reasnableness Harrisn v. Sierra Dawn Estates Hmewners' Assciatin, Inc. (2010 4th District, Divisin Tw). CC&R amendment that included ne year rental waiting perid, 20% rental ceiling and ne year minimum lease prvisin and thers. [CID was a 55 and ver PD fr mbile hme lts (1,474). Owners filed a lawsuit after the amendments were recrded, alleging they were an unreasnable restraint n alienatin and challenging statements made during vte. Curt used Nahrstedt t judge CC&R prvisins.] Reynlds v. Auburn Cuntry Villa Hmewners Assciatin (2013 3rd District). Upheld CC&R amendment limiting rentals t a ttal f six. IV. Why D We Care Abut Shrt-Term Rentals? 1. Cllective frm f wnership with pre-agreed shared risks and rewards 2. Residential character f cmmunity 3. Recrded CC&Rs = cmmunity expectatins 4. Legal/gvernance relatinships V. Cncerns abut Shrt-Term Rentals 1. Prtectin f Prperty a. Overuse, damage t amenities and rec facilities by shrt-term renters wh are treating cmmunity as htel b. Cmmn Area damage (Super Bwl 2 AM pl party) 2. Nuisance Cnduct (parties, nise, trash) 3. Security Issues (making public gate cdes, security wrk arunds, entrance lcatins, etc.) 4. General cmpliance with rules and cmmunity standards 5. Character f cmmunity (quiet family neighbrhd r party central?) 6. Marketability (desirability, lender guidelines regarding rentals) VI. Scams and Schemes: 1. Rmmate r Renter? 2. Rmmates OK, whether paid r nt 3. What s the difference? Des it matter? 4. Subletting Scams 5. Squatters 2017 CACM Law Seminar. All rights reserved. 2 P a g e

3 What s New n the Hme Sharing Hrizn? 6. Surprisingly easy t get tenant status 7. Shckingly hard t evict squatter tenants VII. Shuld yu try t beat em r jin em? 1. Cnsideratins 2. Fears f Assciatins 3. Nuisance Cnduct 4. Security Risks 5. Owner desire t rent VIII. If yu want t fight them: 1. Implementatin f Shrt-Term Rental Restrictins. a. Amending the Gverning Dcuments b. Clear minimum lease terms c. Requirement t rent entire residence d. N htel/transient use e. N advertising n shrt-term rental websites f. Increased fines fr shrt-term rentals g. Increased fines/fees fr lst keys, fbs, etc. h. Other vilatins i. Business use j. Nuisance 2. Recrd keeping - may need all f the fllwing: a. Wh ccupies hmes -- use Occupancy Reprt/Frm? b. Cpies f leases, including lease term c. Dates f recrd wnership d. List f rental prperties e. Waiting list f. Affidavit re immediate family member 3. Mre wrk fr manager? YES a. Typically nt included in management cntract b. Include in management cntract as extra cst c. Administrative burden 4. Extra csts t assciatin: a. Might be able t recup administrative fees b. May need t update fine plicy/schedule f fines t allw bard t impse fines fr vilatins f rental restrictins c. Reimbursement assessment fr legal fees and ther csts f enfrcement 2017 CACM Law Seminar. All rights reserved. 3 P a g e

4 What s New n the Hme Sharing Hrizn? IX. Enfrcement: 1. Shrt term rentals - what infrmatin is needed t enfrce? Hw t gather infrmatin fr the attrneys. a. Cmplaints frm residents B in writing and detailed b. Printed cpy f listing/ad c. Phts f cars and ccupants d. Surveillance camera ftage e. What nt t d - recrdings? 2. Cmplaint driven enfrcement is nrm fr shrt-term rentals; usually arise because f ther issues (parties, nise, nuisance, trash, parking, access, amenities, etc.); n way fr bard t knw therwise. 3. Is there an affirmative duty n the part f manager r bard t enfrce rental restrictins? a. Cmplaints b. Off-site addresses c. Searching listings d. Time f year 4. There s an app fr that! X. If yu want t jin em: Permitting Shrt-Term Rentals 1. Why? a. Give the peple what they want! b. Avenue t defray cst f additinal security, repairs, and ther expenses 2. When? a. Special Events/Seasns Only i. Indian Wells - BNP Paribas Open ii. Cachella/Stagecach/Desert Trip iii. Mnth f February fr Super Bwl b. Anytime 3. Hw? a. Amend the CC&Rs, including authrity t adpt supplemental rules b. Adpt Rules and Regulatins c. Create explicit wner requirements d. Build in specific disciplinary actin e. Fees i. Civil Cde fee must have relatinship t cst ii. Watts v. Oak Shres (2015) 235 Cal.App.4th 466 f. Exact crrelatin f fee t expense nt necessary g. Gd faith estimate is sufficient 2017 CACM Law Seminar. All rights reserved. 4 P a g e

5 What s New n the Hme Sharing Hrizn? XI. Respnses f Cities t Shrt Term Rentals: 1. Recent Actin Taken by Cities t Ban Shrt-Term Rentals: a. Tibern - August, 2015: Amended its zning rdinance t ban rentals fewer than 31 days. b. City f Laguna Beach - August, 2015: Extended its mratrium n all shrt-term rentals in the city until Octber 1, 2016 t allw the city time t study ptential revisins t its municipal cde regarding shrt-term leasing. [Staff will wrk n an rdinance t ban all shrt-term ldging in residential znes, which make up a majrity f the city. City increased its budget t enfrce illegally-run shrt-term rentals and fficials said they will develp a plan t aggressively pursue illegally run hmes nw being ffered as shrt stays n vacatin sites.] c. Manhattan Beach - June, 2015: Enacted a ban n shrt-term rentals f 29 days r less in residential areas. d. Indian Wells - June, 2015: After having a mratrium n shrt-term rentals less than seven days since June, 2014, the city amended its rdinance gverning shrt-term rentals. The city currently allws shrt-term rentals f at least seven days but n July 4, 2018, the seven-day minimum expires and vacatin rentals under 29 days will n lnger be allwed in Indian Wells, except, again, during the BNP Paribas Open. e. Santa Mnica - May, 2015: Enacted a ban n the rental f an entire unit fr less than 30 days and requires thse wh take part in allwable hme-sharing t btain a business license frm the city and pay a 14% htel tax. f. City f Alis Viej - March, 2015: Prhibits shrt-term rentals in residential districts. 2. Actin Taken by Cities against Rental Websites (e.g., San Francisc): a. San Francisc - February 1, 2015: City s legislatin revised zning laws t allw fr shrt-term rental in residentially zned districts. Previusly, and as these shrt-term rentals cnstituted cmmercial use, hmewners and tenants were in vilatin f the city s zning laws. b. Airbnb has agreed t cllect taxes (e.g., transfer ccupancy tax) and ther fees frm hsts and remit them t cities and ther gvernmental entities. 3. Airbnb v. San Francisc. 4. Other State Agency Respnse t Shrt-Term Rentals Issue: Califrnia Castal Cmmissin CACM Law Seminar. All rights reserved. 5 P a g e

6 What s New n the Hme Sharing Hrizn? 5. Castal Act and pinin f the Cmmissin: Any prhibitin f an entire class f accmmdatin that prvides widespread ldging pprtunities that are varied in cst, is prblematic and incnsistent with the Castal Act. a. An assciatin ban n shrt-term rentals cnstitutes Develpment (Sectin 30106) as it wuld change access t the cast by diminishing the pl f visitrserving accmmdatins, and therefre, require a castal cmmissin permit. b. Since n permits were btained, the ban n shrt-term rentals vilates the Castal Act. c. Withut a castal develpment permit, the assciatin culd face fines f nt t exceed $30,000 and shall nt be less than $500 per vilatin. d. If assciatin intentinally and knwingly acts in vilatin, fines n less than $1,000 and n mre than $15,000 per day fr each day in which the vilatin persists. e. Castal Cmmissin can als seek a cease and desist rder. 6. Current Status XII. Airbnb Friendly Buildings Prgram: 1. Pilt prgram fr assciatins and building wners. 2. Includes prfit sharing and insurance. 3. Fr mre infrmatin, buildings@airbnb.cm r check ut buildingwners.withairbnb.cm. 4. Cnsult with assciatin accuntant re: tax ramificatins CACM Law Seminar. All rights reserved. 6 P a g e

7 What s New n the Hme Sharing Hrizn? Rental Checklist Is there a minimum rental term in the CC&Rs? If s, what is it? D yu have an enfrcement plicy? Des yur enfrcement plicy have escalating fines fr shrt-term rental vilatins? Are the escalating fines prprtinate t the rental rates? What ther disciplinary actin can the assciatin take (turn ff transpnders, turn ff cable TV, etc.) D yu have supplemental rules t address advertising n VRBO, Airbnb, etc.? Are yu addressing related vilatins in the same vilatin ntices (e.g., nise, parking, etc.) What evidence are yu gathering fr the hearing? Are yu taking phts? Are yu checking fr a city vacatin rental permit? Are yu sliciting neighbr cmplaints? Are yu keeping lgs f the different vehicles? Are yu printing ut VRBO and Airbnb listings, cmments, etc.? Have yu checked t see if the rentals vilate city municipal rdinances? Can yu enlist the help f the city t take enfrcement actin? 2017 CACM Law Seminar. All rights reserved. 7 P a g e

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