Landlord Fined $100,000 for Short-Term Rentals; Others Under Investigation

by | Aug 27, 2018 | Rental Property Management Tips

The Attorney General for Washington, D.C. announced that he is investigating 19 landlords who own 33 buildings after tenants complained that vacation rentals are being offered at the apartment complexes.

The office says it has received complaints from long-term tenants at the buildings who face increased security risks and disturbances from noisy and rowdy short-term guests. The tenants say these short-term sublets were not disclosed when they signed leases. That, the prosecutor says, is a deceptive practice and violates consumer protection statutes.

In addition to the consumer protection claim, the office also is investigating whether short-term rentals — which typically go for $200 per night — might be in violation of local rent control laws.

Recently, a landlord agreed to pay $100,000 in civil penalties to settle a claim that he effectively converted an apartment building into a short-term rental hotel.

Many major cities are restricting landlords from converting apartment rentals into short-term or vacation units. These prohibitions generally restrict leasing a unit for less than 30 days. Lawmakers are concerned over the impact short-term rentals have on availability and affordability of rental properties for long-term tenants. In addition, lawmakers feel pressure from the lodging industry to stave off the competition from private overnight and short-term vacation rentals which don’t shoulder the same overhead costs, and cities fear losing revenues from lodging taxes.

Examples of such restrictions include all-out bans on rentals under 30 days, a requirement that a tenant host occupy the same unit, and requiring tenant and landlord hosts to obtain lodging licenses and pay taxes.

Reaction from landlords to private vacation sublets has been mixed. Some newer buildings are offering the flexibility to sublet on Airbnb as an amenity to attract renters who want to offset high rent with short-term rental income. Others have agreed to the sublets in exchange for a share of the rental income. Still, many landlords are dubious of the practice, and prohibit sublets.

Landlords considering the option of converting units to short-term or vacation rentals first may want to:

Check for local ordinances that restrict rentals under one month;
Determine whether the rentals will be considered a commercial use subject to special licensing, regulation, or taxes; and
Determine the impact of any local stabilization or rent control laws.

Those landlords who haven’t decided whether to allow tenants to sublet on websites like Airbnb or VRBO need to assess the risks:
Increased tenant complaints and lower retention;
More wear and tear from frequent turnover;
Costs and damage from overcrowding — for instance, an apartment listing in Washington, D.C. claims a 650 sq.ft., one-bath space can sleep six; and,
Premise liability claims that may not be covered by insurance.

Landlords who allow the sublets need to take steps to reduce these risks, including limitations in the lease regarding common area access, safety and quiet enjoyment concerns of other tenants, and utility costs. And, all tenants should be fully informed of the short-term sublease policies prior to signing the lease.

For landlords who want to restrict the sublets altogether, the lease becomes paramount and should include a prohibition on short-term sublets along with the right to evict a tenant who does not comply.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

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Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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