Airbnb & Short-Term Rentals: How to Reduce Risks to Multi-Family Buildings and Residents

Posted on Monday April 04, 2016 |



The sharing economy continues to grow, and this, in turn, is fueling the proliferation of home-sharing websites like Airbnb, VRBO and HomeAway.  In our previous article on this growing trend, we discussed how the interest in short-term rentals is impacting multi-family buildings throughout the U.S. and Canada.  Now we’re back with a game plan to help your condo board or strata council protect its interests.

Why are short term rentals become so popular?  Because they’re a win-win for both travelers and unit owners – travelers can enjoy unique vacation experiences and save on lodging, while owners can monetize their living spaces and earn extra cash.  Interest and demand are especially high in markets where pricey hotel rates rule, like New York City, San Francisco, Vancouver and Miami. 
 
But short-term rentals, and consequently, temporary residents, are a growing risk for multi-family building condo boards and strata councils.  It’s not hard to see why. 
 
“Short-term leasing is a practice that can not only harm a building’s reputation, but it can also decrease its investment value,” says Dan Wurtzel, president of FirstService Residential in New York. 
 
Unauthorized occupants increase security and safety risks and may disregard building rules and protocols—and that can directly affect building residents, staff and members of the management team.  Short-term visitors can also cause noise, wear and tear and damage to common areas, which diminishes the building’s sense of community, as well as homeowners’ quality of life. 
 
Some multi-family buildings already prohibit short-term leasing – i.e. fewer than 30 days – in their governing documents.  Many rental leases ban the practice as well.  But in some cases, building by-laws or lease agreements were written before short-term rental companies arrived on the scene, so they may not directly address the issue. 
 
And in many cities, short-term rentals are illegal.  For example, New York City’s Multiple Dwelling Law prevents co-op or condo owners or tenants from renting out an apartment for fewer than 30 days, and the practice can also jeopardize a building’s 421-a tax abatement.  But despite this legislation, illegal subletting continues to occur. 
 
Many condo boards and strata councils are understandably concerned.  In response, some buildings are imposing fines for short-term leasing, while working to pass new by-laws that expressly forbid the practice.  A good property management company can provide information and guidance, and consult with your association attorney or outside counsel to learn your legal options.
 
But in the meantime, there are steps that boards, strata councils and owners can take to help reduce and mitigate the risks of Airbnb and other home-sharing sites in multi-family properties.  Below are five proven tactics from an article written by FirstService Residential’s Wurtzel about this very hot topic.  To read the full article, click here

Understand your building’s governing documents.  As a Board or strata council member, it is critical that you have a firm understanding of your building’s by-laws – in this case, how they address apartment leasing.  If the language regarding length terms is unclear or not specifically addressed, consult with your association attorney or outside counsel before making changes.

Impose fines and penalties.  If you discover that a homeowner or shareholder has rented out their unit on a short-term basis, impose a fine – in some buildings, penalties can range as high as $1,000 per night, plus charge-backs for the building’s legal fees if such action is necessary for compliance. 

Prevent entry to unauthorized guests.  Instruct the front-desk team and all other staff to forbid strangers or unauthorized guests to enter the building unless the owner is present or written authorization is obtained from the managing agent.  If unauthorized guests are already in the building, due diligence is critical (see below). 

Document unauthorized occupants.  While a crucial role of your front desk staff is to track all building visitors, it is especially critical that they compile detailed information on short-term renters – this can serve as prima facie evidence if legal action is taken against the unit owner or shareholder.  Some property management company utilize management software for this purpose.  For example, FirstService Residential’s custom management software, FSRConnect, captures comprehensive information about all building visitors, including their name, a photo, contact information, whom they’re visiting and how long they plan to stay. The system also notifies the front desk and management teams of each guest’s presence and provide alerts them the visitation period is scheduled to expire.

Educate residents and staff.  Education and training are key to building awareness and consensus among staff members and residents. Provide proper training to all building staff members to ensure they understand best practices for dealing with suspicious or unauthorized guests – your property management company may be able to conduct this training or provide resources. 

In addition, alert building unit owners, residents and stakeholders about the potential risks and problems associated with illegal short term rentals, and encourage them to notify the Managing Agent, Resident Manager, superintendent or other management team members if they discover unauthorized visitors in the building.  You can hold special meetings for this purpose, or communicate with residents through email blasts, letters, newsletters and phone notification systems, such as FirstService Residential’s Resident Alert. 
 
The growth of Airbnb and similar home-sharing sites continues to impact multi-family buildings, but taking steps to reduce the practice and its risks can help protect the safety of your residents, as well as the value of their investment.  For more information about maintaining your homeowners’ quality of life, contact FirstService Residential.

Is your community ready for the realities and impact of the sharing economy? Fill out the form below to download our in-depth white paper on short-term rentals and obtain more information on how partnering with a professional property management company can add value to your community.

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