Airbnb and other similar web-based services provide an
increasingly popular alternative to hotel accommodations by
connecting travelers to local owners or occupants who want
to earn extra revenue by renting out their homes, or perhaps
just a room in their home, on a short-term basis. Travelers
like it because they can rent anywhere from fully furnished
luxury homes to spartan rooms at rates which are typically far
below those of traditional hotels, and owners like it because
they are able to generate more income than they would if their
property were leased on an annual basis. Much like Uber has
turned private vehicle owners into cabbies, Airbnb is making
innkeepers of many homeowners. While this type of short-term
rental service raises a host of legal issues in Massachusetts and
beyond, it poses particularly thorny issues for condominium
associations.
While my condominium unit may offer a choice location close
to the hospitals for a visiting physician or the family members
of a sick patient, you can bet that my neighbors won’t be happy
finding a constant parade of strangers roaming the building,
using the gym or perhaps parking in the visitors’ parking spots.
This type of transient use not only results in increased traffic,
but diminishes a condominium’s sense of community and
reduces security for all occupants of the building. Oftentimes,
the renters are not aware of the condominium rules or simply
flout them as they are only there for a short time. Meanwhile,
the other residents see their residential condominium take on
the appearance of a bed and breakfast.
The problems go beyond annoying your neighbors. A quick
Google search will bring up tales of rentals gone bad with wild
parties being thrown, guests being dropped off by the busload,
squatters who won’t leave, extreme damage being done to the
common facilities of condominiums and even murder. What
can condominiums do to prevent or control this kind of shortterm leasing?
First, condominium associations need to review their legal
documents. Most typical condominium documents contain
language limiting the use of units for residential purposes.
Many bylaws will contain restrictions on leasing units, either
prohibiting leasing entirely or requiring leases to be of a six
to 12 month minimum term. Often, there is specific language
prohibiting transient or hotel-like use. If the legal documents
contain language controlling this kind of use, the condominium
may deal with Airbnb rentals through its normal compliance
channels. That means penalties may be imposed and/or court
action taken in order to compel compliance, and the cost of
getting caught can be expensive. As reported by the Boston
Globe, one Back Bay condominium recently fined a unit
owner $9,700 for renting his unit through Airbnb in violation
of the condominium’s leasing restrictions. But what if the
condominium documents do not contain language prohibiting
this kind of leasing?
A second alternative is to amend the bylaws to clarify when
owners can sublet units or to expressly forbid the kind of
short-term rentals offered on Airbnb altogether. The difficulty
with this approach is that such amendments typically require
a high level of approval by the unit owners. In Massachusetts,
restrictions limiting the use of units must be in the master deed
or bylaws and cannot simply be imposed by the trustees as a
rule or regulation. Accordingly, a formal amendment would
need to be approved by the requisite percentage of unit owners
as called for within the condominium’s legal documents.
A third alternative is to determine whether the use of the unit
complies with local municipal ordinances. If commercial uses
are prohibited in a residential zone, then a hotel-type use might
be prohibited by local zoning and enforcement could be sought
through the municipality.
Other reasons to prohibit short-term leasing in the
condominium context include concerns about insurance and
mortgage ramifications. Treating a unit as a bed and breakfast
raises new risks for the homeowner, the condominium
association and the insurance companies underwriting those
risks. If there is an accident involving an Airbnb guest, an
insurance company could deny the claim under the theory
that the insured property was converted to a rental property.
Furthermore, most mortgages contain a provision stating that
the mortgaged property will remain the borrower’s principal
residence and not an investment property. Unit owners may be
violating their mortgages by converting their units into rental
properties. Finally, a short term rental can trigger sanctions for
FHA approved condominiums. The eligibility of FHA projects
is determined based on strict compliance with FHA rules, and
any short term rental can jeopardize project eligibility.
Home rental services such as Airbnb are booming in popularity,
but as they grow they clash with traditional rules. The hotel
industry has objected arguing that these rentals circumvent health and tax laws, and municipalities are struggling with how to regulate them. In condominiums, the friction caused
by frequent move-ins and move-outs and unfamiliar faces
heighten safety concerns and erode the feeling of community.
These are complex issues facing condominium trustees, and
they are unlikely to disappear.
If you are a unit owner considering offering your unit
as a short-term rental on Airbnb, be sure to review your
condominium documents to ensure there are no applicable
restrictions, contact your insurance company to make sure you
are fully covered, require a security deposit and mandate that
your guests to abide by all condominium rules and regulations.
If you are a trustee, review your condominium documents to
determine whether adequate controls are in place or need to
be proposed. Airbnb is changing how property is being rented,
and until the law catches up with the technology condominium
trustees and unit owners need to be prepared.