The internet has made it easier than ever to forge connections between the people with needs and the people who can meet those needs. Many people have seen the benefits of renting out their property in whole or in part to travelers. For consumers, services like Airbnb, VRBO (Vacation Rentals by Owner) and others offer a chance to find a place to stay that's cheaper or more convenient than a hotel room. And for property owners, these sites make it possible to earn a little extra cash.
Legally, the issue can become sticky on both sides—for the renter and the property owner. We'll cover this topic in two parts, starting with what you need to know if you want to rent out your room, home, cabin or other space for short-term use.
Check local and state laws. Cities and counties are facing this issue head-on, so these days renting out your property may be in violation of local regulations. Many places have regulations that prohibit short-term rentals outright, and penalties can include hefty fines or even eviction if you're a renter. Be aware that zoning laws are sometimes leveraged to make short-term rentals illegal.
In Wisconsin, particularly, renting your home could potentially be considered “tourist rooming houses,” which cover “all lodging places and tourist cabins and cottages, other than hotels and motels, in which sleeping accommodations are offered for a fee to tourists or transients.” Tourists or transients are defined as “a person who travels to a location away from his or her permanent address for a short period of time for vacation, pleasure, recreation, culture, business or employment,” and tourist rooming houses are required to obtain a permit from the Wisconsin Department of Health Services.
Be aware of the legal requirements in your area, and know that laws around this issue are changing rapidly.
Check your lease or bylaws. If you are currently renting, your lease may prevent you from subletting your space to others. In the end, the cost of making a little extra income may be way too high and could include eviction or other legal action. With the growing popularity of online short-term rental platforms, landlords are getting wise to the practice. In addition, those who own a condo, cooperative or planned development are likely bound by what are known as bylaws or covenants, conditions and restrictions (CC&R).
CC&Rs are enforced by the coop board or homeowner's association, not municipalities.
You must collect and pay required taxes. Some areas require that short-term renters pay lodging taxes. Cities like San Francisco are starting to levy hotel taxes on short-term rentals, and counties are beginning to tax transient occupancy rentals as well. In addition, your earnings may be subject to U.S. income taxes if you rent out your space for more than 14 days a year and do not meet personal use requirements.
You may need a business license. Some cities are managing transient use of properties by requiring that those offering rooms for short-term rentals have a business license.
Short-term rental platforms say they can't provide legal assistance or review lease agreements for their hosts, but Airbnb does provide a summary of laws for many cities. In addition, platforms often require hosts to have the permissions they need, comply with the law and tax requirements and not breach any agreements with third parties, such as a landlord.
If you’re looking to rent a vacation space or other property short-term, be sure to watch for part two in our series. There we’ll look at legal considerations for those looking for vacation rentals.
For a real estate lawyer in La Crosse, call Johns, Flaherty & Collins, SC, at 608-784-5678.