Anyone invested in real estate (and anyone who reads the daily headlines about real estate) knows that Denver continues to attempt to regulate the short-term rental market, with a plethora of mixed results. The Airbnb and VRBOs continue to make headlines as governmental entities seek to find regulations and licensing that works for everyone.
One of the latest headlines concerns short-term rental landlords facing felony charges over their Airbnb listings. While many applaud Denver’s attempt to regulate the short-term rental market, the problems are inherent in the regulations and continue to present themselves, as in these possible felony-facing property owners.
The definition of a short-term rental, as defined by the city of Denver, is any residential property available for rent for a period of one to 29 days. Outlining all the rules and regulations associated with the short-term rental market would take volumes, but the primary rule of the current legislation requires that “the property” must be an owner’s primary residence, and the “the host” must obtain a short-term rental license. Many property management firms (ours included) do not participate in the Airbnb or VRBO models. As this regulatory saga continues to unfold, and as the city seeks to clearly regulate short-term rentals, many property management firms are, in fact, forbidding (within lease agreements) any Airbnb-like activity.
It is too fraught with problems and with “gray areas” (How long must an owner actually occupy a property – one day a month? Every day? Etcetera.)
That doesn’t mean that clients don’t try to skirt the rules. Anyone who manages property on behalf of others has examples like the ones below. All of these situations require proper disposition.
A first scenario involved a simple misunderstanding. Our firm was contacted by a client who was being transferred out of the country and wanted us to lease their house while they were away. We leased it for a long term, and everyone was happy.
However, before they contacted us, they had listed it on Airbnb thinking that would be a great solution. After all it was their primary residence. The part they didn’t understand is that they had to still live there. Once we had it leased, they simply forgot about the Airbnb listing. The first we heard about it was when the tenant was served a summons ordering the owner to cease and desist.
Unfortunately, there was a fine to be paid but it could have been much worse.
The second case is an example of someone who knew exactly how to cheat the system. A tenant approached us about leasing one of our fully furnished units for a one-year term. We met with the prospective tenant, ran all the credit and background checks, and everything passed.
What we realized in very short order was that the “tenant” was most likely only a front man who was probably paid to have his name on the lease. The property was quickly listed on Airbnb and booked out for four months. We were notified by the HOA. Their bylaws strictly prohibited any short-term leasing, as did our lease agreement. Although we did not violate any laws, we were left to clean up the problems. It is doubtful that anyone was ever found and prosecuted, although this happened before Denver enacted its current legislation.
The third example involves a person who contacted us about leasing out his fully furnished unit on Airbnb. We met with him and explained that we do not participate in Airbnb and we also explained that it must be his primary residence and that he must obtain a short-term rental license. We were also careful to explain that by primary residence he must live there and must not maintain a separate residence. The property in question was a very small one bedroom and it seemed unlikely that he lived there.
He decided to try it on his own anyway. We heard from a neighbor that the police showed up to the property to arrest him. Apparently he had signed an affidavit stating that this was, in fact, his primary residence. It is hard telling if or how this situation was resolved, but he is most likely facing felony charges for making a false statement.
The Airbnb and VRBO models are here to stay; they are popular options for travelers and work well for many. However, there is clearly more work to be done to regulate the issues, while also providing a service and choices for travelers.