Considerations for Owners

An increasing number of people are making their homes or rental properties available for short-term occupancy to others through local brokerage companies or online services such as Airbnb and VRBO.com. Last summer, over 17 million guests utilized Airbnb alone. While many owners see the ability to offer short-term rentals as a significant benefit of ownership, the practice has caused contention in the hospitality industry and among neighbors and led to new laws and regulations. There are several important factors that an owner should consider before making his or her property available for short-term rental.

Zoning. Some zoning ordinances may restrict an owner’s ability to offer a property for short-term rental. It’s crucial to understand the intricacies of such ordinances, as penalties can include fines and even arrests. The dispute over one St. Simons Island zoning violation was taken all the way to the Georgia Supreme Court, which ruled against the property owners, and serves to limit the types of activities that can be carried on within a vacation home.

Restrictive Covenants. Owners who are part of an association may be subject to

Considerations for Owners of Short-Term Rental Property

covenants restricting their ability to engage in short-term rentals. Also, restrictive covenants governing subdivisions may be amended from time to time; at least one St. Simons Island subdivision is currently considering an amendment to prohibit short-term rentals.

Insurance. An owner should review his or her insurance policies before making a property available for short-term rental, as some policies do not cover losses arising from the use of the property by short-term renters.

Form of Ownership. Many owners choose to form an entity such as a limited liability company to hold title to short-term rental property in an effort to limit individual liability and provide anonymity.

Legal Agreement. An owner should utilize a professionally drafted occupancy agreement, specific to the arrangement the owner wishes to establish with the occupant. There is a distinction in Georgia law between “innkeepers” and “landlords,” and the distinction can have significant consequences if a tenant’s property is lost during an occupancy period or if the occupant refuses to leave at the end of an occupancy period. An occupancy agreement should identify the nature of the relationship, the rights and responsibilities between the parties, and any special restrictions an owner wishes to place on the use of the property, to best protect the owner’s interests.

Taxes. Owners should be aware that shortterm rentals are subject to local, state, and federal taxes, including in some cases sales taxes and specially designated taxes, and communities are beginning to take proactive steps to collect taxes on short-term rentals.

While vacation rental opportunities garner much attention, it’s important to remember that, from a legal standpoint, there is a great deal of risk involved. Property owners should consider these factors when deciding whether or not to make a property available for short-term rental, and take appropriate steps to protect themselves and their interests, if they do.

By Joey Strength, HunterMaclean Special to Elegant Island Living

JOSEPH F. “JOEY” STRENGTH is a partner in Real Estate at HunterMaclean. He can be reached at 912.262.5996 or jstrength@HunterMaclean.com.