No Vacancy – When Bed & Breakfasts Run Afoul of Condominium Communities

The popularity of vacationing or traveling via bed and breakfast lodging, or, as more popularly known, “BnB,” is rapidly on the rise. The concept allows an owner with a vacant house, condominium, apartment, or even a single room, to create investment property by listing the space on a website for rent to vacation and business travelers, often for very short stays and possibly as short as a single night. Property owners can make a little extra money, and travelers can often find better accommodations at lower prices. Add in the ease of use by listing your space on the internet – airbnb.com and vrbo.com are among the most popular sites – and this is a quickly expanding industry.

Frequently, the phenomenon overlooks the legal ramifications of being a short-term landlord, or essentially acting as a hotel or lodge. Some local governments are addressing the issue and requiring that property owners apply for permitting, pay taxes, or maintain compliance with other local rules relating to lodging or short-term leasing. However, the Airbnb concept also runs afoul of various considerations applicable to community associations, specifically condominiums and townhomes.

First, most condominium and townhome associations have rules in their declarations and by-laws that prohibit short-term leasing of units. Many of these provisions require that any lease of a unit, if leasing is permitted at all, be for a period of at least six months or a year. These rules are in place to prevent the exact issues presented by the Airbnb phenomenon. Community associations generally do not want short-term tenants or lodgers, often due to a belief that they, and the owners of the subject units, are not good stewards of the common property and the desire to maintain a cohesive community. Short-term tenants are also more likely to violate association rules they do not know about, including rules about pets or common areas, such as pools, exercise areas, and parking garages.

Second, most community associations prohibit owners from running businesses from their condominium units or townhomes. Home offices and telecommuters are often exempted from this rule, but selling your unit or rooms within it for temporary lodging purposes likely qualifies as a separate business enterprise and would violate various restrictive covenants.

Third, the use of townhomes and condominium units as temporary lodging creates unneeded safety and security risks for community associations. Some community associations require that owners who lease their units obtain background checks on their long-term tenants, even if the association itself is not responsible for obtaining or monitoring those background checks. An Airbnb or other short-term tenant may be vetted or rated by others from whom they have rented, but there may be no specific background check conducted to investigate for criminal or other matters. Additionally, short-term guests have access to the community’s common areas and may be provided with security codes or other information needed for the lodger to access the building, the parking garage, or other common areas. Providing this information to short-term lodgers on a repeated basis creates a greater likelihood that the information will be shared outside of the community and could ultimately be used to cause damage to the community, to common areas, or, worse yet, to other owners or occupants.

It is important for community association management, including board members and property managers, to be aware of this growing phenomenon and the impact it may have on their community. In addition to reminding owners that such use of their property by way of short-term lease is prohibited, board members and property managers should regularly check short-term vacation rental websites, to make sure none of their units are listed and that their community is preserved for the benefit and welfare of the owners.

Posted by Attorney Jeffrey R. Schmitt. Schmitt leads the firm’s Title Litigation practice group and practices in commercial litigation including banking, real estate, construction, and other matters for businesses and individuals.