“Short-Term Rentals, Long-Term Problems” – Attorney Omar Malik discusses the common issues that associations address when unit owners rent their homes to short-term tenants, including liability, security, and legal concerns. (12 mins.)
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Since 1983, KSN has been a legal resource for condominium, homeowner, and townhome associations. Additionally, we represent clients in real estate transactions, collections, landlord/tenant issues, and property tax appeals. We represent thousands of clients and community associations throughout the US with offices in several states including Florida, Illinois, Indiana, and Wisconsin.
For more info about our law firm and legal services, please visit www.ksnlaw.com
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Since 1983, KSN has been a legal resource for condominium, homeowner, and townhome associations. Additionally, we represent clients in real estate transactions, collections, landlord/tenant issues, and property tax appeals. We represent thousands of clients and community associations throughout the US with offices in several states including Florida, Illinois, Indiana, and Wisconsin.
For more info about our law firm and legal services, please visit www.ksnlaw.com.
Episode Transcription
Bernie: You’re listening to the KSN podcast and today we’re talking about short term rentals in community associations. Welcome to the KSN podcast where you’ll hear from Kovitz Shifrin Nesbit attorneys as they share their experience and insight on legal issues surrounding community associations, collections, property tax appeals, and landlord tenant law. I’m Bernie and today we’re joined by KSN attorney Omar Malik. Omar practices condominium, townhome, and homeowner association law. He has a background as a litigator. He works with associations big and small in the Chicagoland area, in their surrounding suburbs. He’s been doing it for a few years. Omar, welcome to the podcast.
Omar: Great to be here.
Bernie: All right. So our topic today, Omar, is short-term rentals. Something that again, if you live in a condominium, townhome or homeowner association can be a very complicated issue to address.
Omar: Absolutely. Recently the popularity of websites such as Airbnb, homeaway.com, vrbo.com have all made short term rentals a topic of discussion amongst common interest associations.
Bernie: So let’s jump right in, Omar. What concerns does an association need to address? What do board members need to address regarding unit owners renting homes on a short term basis?
Omar: The first thing that comes to mind is safety and maintenance. When a host makes their unit available for a short term accommodation they typically allow paying guests to utilize all of the association services and amenities. These can include parking, laundry room, the exercise facilities, the pool, rooftop decks, hallways, lobbies elevators. Basically, there’s no distinction made amongst these guests and the true residents of the buildings who are owners there. So as a result, security and upkeep concerns arise when unknown parties are granted access to areas that are exclusively shared and maintained by community members.
Bernie: All right, so safety and maintenance. Another issue is insurance, right?
Omar: Absolutely. Insurance is another concern. Some home sharing online services provide insurance protection for claims during a guest stay up to a certain dollar amount. In addition to that, hosts are encouraged to carry their own landlord’s insurance. Based on how the property is managed or claimed insurance providers may view short term rentals as commercial operations, akin to a hotel business. As a result, this can lead to the denial of an insurance claim. If an accident occurred on the association’s common areas, or there was damage to the association’s property, short term rentals can affect the association’s insurance liability, coverage, premiums, and claims processing. This is a concern amongst the ownership, because if there’s claims that are processed, it could lead and be passed on to the ownership in the form of a higher premium amount.
Bernie: Omar and I are going to take a quick break, but when we get back, we’ll get into legal restrictions around short term rentals.
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Bernie: And we’re back. I’m here with KSN attorney Omar Malik and we’re talking about short term rentals. So Omar we’ve talked about safety and insurance, maintenance concerns. Are there legal restrictions to you owners renting out their homes on a short term basis?
Omar: Yes, there are state, local and city regulations in play here. There are jurisdictions, cities and states where short term rentals are number one, restricted due to zoning laws and municipal codes. Number two, regulated through registration, permits and licensing and number three taxed differently due to occupancy, hotel and tourism laws. For example, a lot of our Chicago associations are familiar with this, but Chicago adopted a home sharing ordinance in 2016 allowing the city to track rental units, Nu things, complaints and violations. Associations can request to be added to the prohibited building list in the city of Chicago, by having an authorized representative such as their property management company or their attorney submit a notarized affidavit to the city of Chicago department of business affairs and consumer protection.
Bernie: So, it seems that an association needs to have governance in place in order to proactively address issues with short term rentals. What are your recommendations?
Omar: What boards can and should do is unique to each community. I would recommend that an association consult with its attorney to determine the best approach to deal with short term rentals and also see how the interplay is with short term rentals and their existing governing documents. To that end thoughtfully drafted and consistently enforced short term rental policies should address the following; minimum lease terms, for example, oftentimes we see associations adopt amendments to their declaration, such that lease terms must be for at least 30 days. In addition, rental restrictions, such as the use of common areas moreover whether guests need to be accompanied by unit owners, that’s another strategy that can be employed. And finally, the fines and enforcement procedures where associations can levy fines for each day that a unit is rented out on a short term basis.
Bernie: All right. And what would you recommend for association board members or even property managers who are looking for more guidance on how to approach short term rentals?
Omar: I would say that associations should be proactive in generating policies when it comes to unit owners leasing their homes short term, or otherwise. An attorney can assist an association review it’s governing documents to first and foremost, see whether or not short term renting is permissible under the existing governing documents and make updates if necessary.
Bernie: And I think it’s important to make the point that short term rentals are probably not going anywhere anytime soon.
Omar: From what we’re seeing on our end, in my years of experience, hotels are often viewed as the primary lodging, but more and more frequently we’re seeing people use these short term leasing solutions as an alternative to hotels, whether it be Vrbo or Airbnb. So I think that they are just becoming more and more popular and it’s a trend that’s not going to go away. If anything, it’s becoming more and more popular. We’re seeing them very common in areas that are high in attractive tourist destinations and things like that. Whether it be downtown, the city of Chicago, for example. During Lollapalooza, a lot of our downtown associations will experience an uptick in Airbnb rentals where people want to stay close to the grounds and the festivities. They can just walk over to Lollapalooza. So from what we’re seeing on our end, these are something we’re going to have to learn to live with and they’re going to continue to be commonplace.
Bernie: And I think another point to note is that short term rentals for some people is now actually a viable business venture where they actually use their units as essentially a profit generator where it’s not only necessarily like a side hustle, a side gig where they make money on the side this is actually their primary revenue option.
Omar: Yes. So we’ve actually seen some owners who are renting out their units on a short term basis. They can make more renting out their unit on a popular weekend than they would through renting it out on a month to month basis or a year to year basis. So they may make more in a single weekend than their rental amount would be for an entire month.
Bernie: Which is more reason why associations need to be proactive.
Omar: Yes, associations should be proactive and I think the first step in all of this is reviewing your governing documents. When I’m talking about governing documents, I’m talking about the association’s declaration, any amendments there too, it’s rules and regulations. To that end, the best way to audit your governing documents to see what policies are currently in place is to consult with your attorney. Or if you want to review it yourself, oftentimes your declaration will not strictly use the words short term rental, or won’t specifically reference Airbnb or anything like that. Oftentimes it’s phrased as short term rentals or it’ll talk about transient rentals or something like that. It doesn’t exactly use the words that are extremely clear and specifically reference short term rentals in and of itself.
Bernie: And that’s why it’s important that however you want to restrict or control short term rentals, short term leasing in your community, it has to be reflected in the governing documents.
Omar: Yes. And when I’m talking about governing documents, I know I just specifically define them as your declaration, amendments, rules and regulations. The best way to restrict or control or term rentals is in the actual declaration or an amendment there too. The reason I say that is because rules can be adopted by board approval alone. We’ve seen short term leasing restrictions that are in association’s rules and regulations challenged by the courts. As a result, the proper way to do it and what our recommendation is to adopt a short term leasing restriction in the amendment itself. So that’s an amendment to the declaration and we can tailor this short term rental restriction amendment to the specific needs of the association. So it’s not a cookie cutter approach or anything like that. Each one can be designed to deal with a specific situation of a particular association.
Bernie: So that was KSN attorney Omar Malik. He practices condominium, townhome and homeowner association law in the city of Chicago and the surrounding suburbs. Kovitz Shifrin Nesbit is an experienced legal resource ready to provide you with quality advice and exceptional service. We look forward to demonstrating how we have earned the trust of thousands of clients over the past 35 years. If you’d like to reach Omar or any of KSN’s experienced attorneys, please call 855-537-0500 or you can visit our website ksnlaw.com. Thanks for listening.
Bernie: The music for this show is brought to you by freepodcastthemes.com. Please note that the material contained on the KSN podcast is for informational purposes only and does not constitute legal advice. No attorney client relationship is established by your review or receipt of the information contained on the KSN podcast. You should not act on the information discussed on the KSN podcast without first obtaining legal advice from an attorney duly licensed to practice law in your state. While Kovitz Shifrin Nesbit has made every effort to include up-to-date information on the KSN podcast the law can change quickly, accordingly please understand that information discussed on the podcast may not yet reflect the most recent legal developments. Material is not guaranteed to be correct, complete or up to date. Kovitz Shifrin Nesbit reserves the right to revise or update the information and statements of law discussed on the podcast at any time without notice and disclaims any liability for your use of information or statements of law discussed on the podcast or the performance of the podcast generally. The KSN podcast may be considered advertising in some jurisdictions under applicable laws and or ethical rules and regulations.
Please note the material contained on the KSN Podcast is for informational purposes only and does not constitute legal advice. No attorney-client relationship is established by your review or receipt of the information contained on the KSN Podcast. You should not act on the information discussed on the KSN Podcast without first obtaining legal advice from an attorney duly licensed to practice law in your State. While KSN has made every effort to include up-to-date information on The KSN podcast, the law can change quickly. Accordingly, please understand that information discussed on the podcast may not yet reflect the most recent legal developments. Material is not guaranteed to be correct, complete, or up to date. KSN reserves the right to revise or update the information and statements of law discussed on the podcast at any time, without notice, and disclaims any liability for your use of information or statements of law discussed on the podcast, or the performance of the podcast generally. The KSN Podcast may be considered advertising in some jurisdictions under applicable law/s and/or ethical rules/regulations. © 2020 Kovitz Shifrin Nesbit, A Professional Corporation.