Short Term Rentals – Owner Beware and Owner “Be-Smart”
The short term rental (STR) industry has taken off in the past couple of years and has generally been resilient in the face of economic struggles. Government regulation of this ever-growing industry has generally focused on zoning and tax issues, without seeming to fully address situations related to liability. One of the biggest problems arising out of this area is how to treat the relationship between owner and renter, as how that relationship is treated directly determines any liability the owner may incur. If you are intending to use STR as a means of additional cash flow, read on.
Liability for Property and Conditions Liability. As the owner of STR property, you may be liable for any unsafe conditions at your accommodation. Some of the biggest questions to ask yourself when considering this liability include: Am I offering up a standard that is less than the generally accepted “standard of care?” Do I have any unsafe conditions on my property? Is the occupant at risk of injury by debris, odors, chemicals, lead paint, or otherwise? Is the occupant’s property at risk of destruction or theft? Additionally, you will want to think about who will be held responsible if there is damage to either the occupant, their property, or your property at the STR.
Liability for Crimes. In general, if a crime occurs in a hotel, it is the innkeeper that is responsible depending upon whether or not there was a violation of the standard of care. This can apply to the STR industry as well. If an STR host and guest are considered to have an innkeeper-guest relationship, the host would be expected to protect guests against reasonably foreseeable criminal acts, but if the host were considered a business invitor or landlord, the guest would have to meet a higher burden in order for the host to incur liability.
Liability for Nuisances. Often, STR guests are unfamiliar with neighborhood norms, so what happens if a guest violates nuisance laws, including trash, noise, or other nuisances? Unfortunately, your neighbors may have a claim against you as the owner of the STR property. But what happens if it is the neighbors that cause the nuisance? Although your guest may not have a claim if they are simply a business invitee or hotel guest, they may have a stronger claim if your relationship is determined to be more of a landlord-tenant arrangement.
Get Your Liability Standard In Writing – Make Sure Your Insurance Covers You. Despite the potential liability concerns, the STR industry has been incredibly beneficial to owners and occupants. We urge you to have a clear agreement with your guests that sets the expected standard of care and clearly delineates your relationship. Further, make sure the insurance covering your property will cover the STR as well because if it does not, and there is a claim, you will not be covered. Finally, ensure that you are properly licensed, as many insurance policies have clauses that automatically decline coverage where the use was not licensed and lawful. More importantly, be careful to whom you rent. Avoid renting where there are transients of whom you have no knowledge of their credit or employment history, and generally avoid renting to occupants that have too many users or who have pets. You are less likely to have issues with occupants who have a history of steady employment, good credit history, and good references. Don’t risk your property ownership on a gamble – be smart. Contact Weiss LLP for more information.