01/13/2017: Your condo probably has a rule against renting your unit out on Airbnb
By Benny L. Kass
January 13, 2017
Inauguration weekend is almost here, and it is estimated that more than a million visitors will be coming to Washington — some to applaud and some to protest the new president.
Where will all these people stay? Some will be in hotels, although room rates in downtown places will be astronomical; others will stay with friends.
And many will sign up for lodging with Airbnb, which expects more than 10,000 renters will be staying for the long weekend in more than 6,000 listed lodgings.
One area of interest: the many condominium buildings in the vicinity of the White House and Pennsylvania Avenue. Condo unit owners can make a lot of money just renting out their unit for the three days of festivities.
But there is a problem. Condo owners must honor and abide by the bylaws of their association, and the bylaws in every condominium here in the Washington area contain restrictions on leasing. Typical language in bylaws reads that no unit shall be rented for less than six or 12 months, and “under no circumstances can a unit owner permit unit to be used for a hotel or transient purposes.”
Why is this language found in condo legal documents all over the United States? There are two basic reasons. First, the Federal Housing Administration — the predominant mortgage lender in this country — imposes restrictions on the number of renters that a condominium can have. Currently, there can be no more than 50 percent of tenants in any one complex, although based on recent legislation, that number can go down to 35 percent if the association meets certain guidelines.
Right or wrong, FHA’s policies indicate that it does not believe tenants are good for condominiums.
A second reason: If you live in a large building in an urban area, you want to make sure your building is safe and secure. If people such as Airbnb customers come and go at will, and if keys are widely distributed, there can be problems. Accordingly, many condo boards are taking strong steps to ensure that owners will not be renting out their unit — whether for the inauguration or any other time. What can the association do? If a unit owner is violating the community rules, it can fine the owner. Some associations have implemented rules that require the owner to turn over all of the Airbnb rent received to the association.
It must be noted that before a unit can be fined, the board must hold an informal hearing, during which the unit owner can present a case and try to get the fine abated or reduced.
If a fine is imposed and not paid within a reasonable time, the board can file suit against the owner or in some cases can foreclose on the unit because of the unpaid fine.
We are a litigious society, and lawsuits involving condo law are no exception. Recently, a case, known in Canada as the Airbnb decision, was handed down from the Ontario Superior Court of Justice. The court ruled that an Airbnb short term lease violated the condo documents, which restricted the use of units to that of a single family dwelling.
The court’s language is instructive: “Single family use cannot be interpreted to include one’s operation of a hotel like business with units being offered to complete strangers on the Internet on a repeated basis for durations as short as a single night. Single family use is incompatible with the concepts of ‘check in’ and ‘checkout’ times, ‘cancellation policies,’ ‘security deposits,’ ‘cleaning fees,’ instructions on what to do with dirty towels/sheets and it does not operate on a credit card payment.”
Although this is a Canadian decision, I suspect that U.S. judges will pick up on the quoted language as more and more lawsuits involving Airbnb are brought.
Benny L. Kass is a Washington and Maryland lawyer. This column is not legal advice and should not be acted upon without obtaining legal counsel. Send questions to [email protected]
PAID PROMOTED STORIES
Crowdfunding is Making Real Estate Investing Easy
Hiring a Contractor? 7 Common Mistakes to Avoid