The popularity of websites such as Airbnb.com, Homeaway.com, and VRBO.com have made short-term rentals a topic of discussion among common-interest associations. By conveniently bringing unit owners and prospective tenants together, these online services can convert a condo or home into a profit center without much effort. However, short-term rentals can present a plethora of challenges to community members, boards, and management companies.

Below are four concerns associations need to address regarding short-term rentals.

  1. Safety and Maintenance

When a host makes their unit available for short term accommodations, they typically allow paying guests to utilize association services and amenities. This includes parking, laundry, exercise facilities, pools, rooftop decks, hallways, lobbies, and elevators. Security and upkeep concerns arise when unknown parties are granted access to areas that are exclusively shared and maintained by community members.

  1. Insurance

Some home sharing online services provide insurance protections for claims during a guest’s stay up to a certain dollar amount. Hosts are even encouraged to carry landlord insurance. However, based on how the property is managed or claimed, insurance providers may view short term rentals as commercial operations akin to a hotel business. This can lead to the denial of an insurance claim.

If the accident occurred on the association’s common areas or there was damage to the association’s property, short term rentals can affect an association’s insurance liability, coverage, premiums, and claims processing.

  1. Local, City, or State Regulations

There are jurisdictions, cities, and states where short term rentals are:

  • restricted due to zoning laws and municipal codes;
  • regulated through registration, permits, and licensing;
  • taxed differently due to occupancy hotel, and tourism laws.

For example, Chicago adopted a Home Sharing Ordinance in 2016 allowing the city to track rental units, nuisance complaints, and violations. Associations can request to be added to the “Prohibited Building List” by having an authorized representative submit a notarized affidavit to the City of Chicago Department of Business Affairs and Consumer Protection.

  1. Governing Documents

Concern about the impact of short-term rentals has forced association board members to face this issue head on. What boards can and should do is unique to each community and largely dependent upon their governing documents. Thoughtfully drafted and consistently enforced short-term rental policies should address:

  • minimum lease terms;
  • rental restrictions (ex. use of common areas);
  • whether guests need to be accompanied by unit owners;
  • fines and enforcement procedures.

It’s imperative that Board members proactively work with legal counsel to ensure these policies are in place before a short-term leasing issue arises.

If your association has any concerns regarding short term rentals and/or would like to update your governing documents, do not hesitate to contact KSN. Since 1983, our law firm has been a legal resource for community associations throughout the Chicagoland area. We have multiple offices including downtown Chicago, Mundelein, and Naperville. Please call 855-537-0500 or visit www.ksnlaw.com.

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