Thursday, January 08, 2015

Air BnB CRACKDOWN - Read Between the Lines

by Osman Parvez

I've been warning my clients and now it's come to pass. 

Twenty unhappy owners have recently received "cease and desist" letters from the City of Boulder for operating illegal short term rentals.  More citations are likely on the way. 
  
The city recently hired more code enforcement personnel who continue to target violations on a complaints first basis. Anything less than 30 days is considered short-term.

From the City's official position

When the owner of a property that has a single-family or multi-unit dwelling rented out for a short period of time (usually less than 30 days), it is often referred to as a Vacation Rental by Owner (VRBO). Like other cities across the United States, the City of Boulder has seen an increase in such rentals.

The rentals are often advertised online with such companies such as Airbnb, HomeAway, and FlipKey, to name a few. They are also found listed in other types of media and through some real estate companies. Many times, VRBOs are found in areas of the city that are not zoned for such transactions and are therefore illegal under current city codes.

I checked with City Attorney Tom Carr and specifically asked him to provide a list of zoning areas where short-term rentals are legal. This was his response (emphasis mine):   

"There has been a tremendous growth in short term rentals over the last five years. The city council has asked staff to work on this issue in 2015.  The council will be holding a study session to discuss the issue on February 10. Obviously, our code was not drafted with these kind of rentals in mind. Council will need to make some policy decisions about what to allow where. I would be hard pressed to find a reading of the current code that allows them anywhere.  I cannot predict what council will do or what the ultimate regulations will be.  If your client is relying on revenue from short term rentals, he or she is doing so at his own risk."




Read Between The Lines    
Before we go any further, let me remind you that unlike Tom Carr, I'm not an attorney.   This post is not legal advice. 

No zoning in Boulder allows for VRBO.    Does any zoning specifically exclude VRBO?  No, because the code wasn't drafted with VRBO in mind.  This is why City Council is holding a study session.   

25 complaints were made but only 20 warning letters were issued.    5 VRBOs were deemed to not be in violation.   Why?

The 5 property owners who escaped the nasty gram were likely licensed rentals. 

Take home message?

1) If you're in the VRBO game in Boulder, you probably want to get the property licensed.  

2)  Even with a license, you're exposed to regulatory risk and at a minimum, will likely see your business activity taxed in the near future.

3) If your investment decision hinges on VRBO or other short-term home share schemes, don't buy. 

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The next Boulder Real Estate Meetup is scheduled for January 22.  Our topic: Best Practices for Bidding Wars.  Join Us!  Click HERE to learn more.

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Above image from H.L.I.T

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