Many condo owners are using sites such as Airbnb, Homeaway, Vacation Rentals and VRBO as a way to monetize their assets. Yet while there are monetary benefits for condo owners in using these home-sharing sites, doing so poses significant risks to both the association and the condominium owner, including liability exposure, damage to common areas, and overall safety to all residents.
For example, there is concern over whether a temporary renter is covered under a condominium’s master insurance policy. What if the renter damages a portion of the common area – who is responsible for paying the damage? Or, what if the renter gets hurt while using the pool or slips and falls within the common areas of the building? Who is responsible for paying any medical bills or if there is a lawsuit? If short-term renters are not covered under the master policy, it could expose the condominium owner to liability. Moreover, this short-term rental practice raises questions of whether the condominium is being used as a commercial rental use, which may not be covered under the applicable insurance policy.
What can condo associations, HOAs do to protect themselves?
Although bylaws for a condo association or an HOA typically have restrictions on short-term rentals, to reduce risk, the association should add protective language to its bylaws to address arrangements made through Airbnb and other such companies. For example, an association may consider adding a rule specifying all rentals by condo unit owners must have a minimum rental period of no less than 30 or 60 days. Or, an association may add an amendment requiring that all rental leases be in writing, and must include a copy of the condominium’s rules and regulations and/or bylaws with the lease submitted to the association.
Even if the condominium bylaws already contain these protective provisions, some unit owners either may not be fully aware of them or opt to ignore the rules. It is therefore important that association boards and property managers engage in proactive and ongoing communication via monthly newsletters and fliers with the condo community. Several important points to cover in the communiqué include:
- A review of rental restrictions.
- The board’s rental approval process.
- Guest registration requirements with the association.
- Potential consequences of disregarding the bylaws, including significant fines and/or potential eviction, for those who rent their condos on Airbnb or other such sites.
- The potential liability exposure to the condo owner: Remind unit owners that if there is damage to their home by a temporary renter, their condominium insurance policy may not respond. If money is earned by frequently renting out the condo to short-term paying guests, the insurer could claim the condo owner is running a hotel or bed and breakfast business and deny coverage if one of the guests gets hurt or damages the unit owner’s property.
With the advent of home-sharing sites, it’s important that condo associations, HOAs and property owners update their bylaws and clarify when and if owners can sublet their units and whether short-term rentals and even house swaps are included.