Short Term Rentals: A Mixed Bag

We are in the property rental business, both short- and long-term. We have the necessary business licenses and lodger’s tax license to allow us to legally conduct short-term rentals, as well as a sales tax license to allow us to purchase supplies for our rentals.

One would think that we’d support changing the current ruling in Denver that disallows rentals of fewer than 30 days.

Not so fast! Although we’ve seen many sides of this issue, we are not convinced that changing the rules is in the best interest of tenants, owners or the city. The regulation change that is currently before City Council has many problems, and although we won’t attempt to address those specific issues, we would like to share our perspective.

Here’s a true story: We were trying to lease a beautiful, completely furnished apartment for three months or longer. A lovely couple looked at the unit, and after much deliberation they decided they wanted to sign a one-year lease. We were thrilled! We ran credit and background checks, called employers and verified funds; in short, we did everything possible to thoroughly vet this nice young couple. He had a job that required much travel (or so the story went), so they were happy to have a fully furnished, lock-and-leave situation.

They moved in, and in the first week we had the normal maintenance calls for things like touch-up paint, help with getting cable installed and a request for extra keys. Then in the second week, they listed the apartment on Airbnb.

The HOA clued us in (this type of activity is strictly forbidden in their bylaws). Although our lease agreement has a clause that forbids subleasing activity, the tenants were making a profit off of our lease, and the property was fully booked for four months.

We called our attorney and found out that this happens all the time. The “lovely young couple” disappeared and we were left to clean up the mess, including canceling reservations, proceeding with legal eviction and paying hefty fines to the HOA. And the once-beautiful apartment was pretty well destroyed.

This situation did not benefit the Airbnb tenants who signed up for a “stay” only to lose their deposit money and have the inconvenience of not having anywhere to land. It did not benefit the city, as it wasn’t able to collect any taxes or fees on this illegal short-term rental, and it certainly did not benefit the owner, who had to pay for the cleanup. InTransit incurred the legal fees as well as the HOA fines and fees, so it hurt us, too. The only winners were the dishonest tenants, who have probably moved on to another “advantageous lease.”

This is a complex problem with no easy answers. We believe the Airbnb and VRBO model is here to stay, but the question remains: How do we properly regulate and control this volatile market?