Protect Vacation Rentals

Don't wait until the eleventh hour. Act now

A number of our readers have contacted us in the past couple of weeks asking (1) how they can fight New York’s short term rental ban;  (2) should they join a trade association as well as (3) what trade association they should join?

As to whether they should join a trade association or a group to combat the ban, the answer is a resounding yes.  As we all know, there is power in numbers.  As to what trade association or group they should join, this decision is of a personal nature.  One trade association might have goals and ideals that are better suited for some and not for others.   We will do our best to provide you with information on trade associations that are committed to fighting the New York short-term rental ban.    Stay posted.   In the meantime please read our article titled “a short guide to joining a trade association.”

As always, we welcome any suggestions regarding how to fight this ban and/or how to better regulate the short-term rental industry.

A short guide to joining a trade association

Generally, a trade association participates in public relations activities such as advertising, education, as well as lobbying.  The majority of trade associations are tax exempt, nonprofit organizations.

There are multiple benefits to be gained by joining a trade association:

•    Networking opportunities
•    Access to conferences and workshops
•    Marketing support etc.

Do conduct due diligence to ascertain the legitimacy of the trade association and do keep in mind that some trade associations may be better than others at furthering your interests as well as the interests of your profession in the long term.

You might want to ask the following questions to the trade association’s representative:

(1)    Is the trade association a tax-exempt, nonprofit organization? (you can determine its status by either contacting the local office of the IRS or asking the trade association to provide you with its “Letter of Determination from the IRS”[1])
(2)    Year when the association was incorporated?
(3)    State where the association was incorporated?
(4)    You might want to read the bylaws and other materials (newsletters, mission statement etc.) to better ascertain the goals and ideals of the trade association.
(5)    How many members does the trade association have? What is the profile of a typical member (real estate professional, vacation rental property owner or operator etc.)?
(6)    What are the requirements to join the association?
(7)    What are the membership fees?
(8)    Do they organize conferences or workshops?  How frequently?  On what topics?

Joining a trade association to fight a vacation rental ban or restriction.

If you want to join a trade association for a specific purpose (e.g. to fight a vacation rental ban or restriction implemented or contemplated in your community) do ask the association’s representative if any of the income of the trade association is/ will be devoted to this end (Percentage of the income of the trade association used to this end annually, etc.?).

You should also ask what means will be used in order to fight the ban or restriction: Lobbying? Legal action? Both?  Don’t be afraid to ask for specifics.

The short-term rental ban becomes effective in New York on May, 1 2011.  The clock is ticking and it is more important than ever for all owners to come together to fight this ban.

Let us not forget what Sarra Hale-Stern, the district office director for Senator Krueger, a co-sponsor of the legislation, asserted in an interview: “[t]he bill makes it clear that even one transient unit in a residential building is not legal.” [2]

Having the agency in charge of enforcing the new legislation go after you if you rent on a short-term basis is not the only concern you should have.  If an owner does rent his co-op apartment for less than thirty days, he will be found in breach of the proprietary lease (and will bear the risk of having his lease being terminated) as proprietary leases must comply with applicable zoning laws, building codes and other rules and regulations of government bodies.   New York owners, you need to roll up your sleeves and participate in the fight against this short-term rental ban.  Join a trade association.  Let your voice be heard.

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[1] Donations to tax exempt, nonprofit trade association are not tax deductible. However, a company may deduct them as business expenses if they are necessary for running the business.  Membership dues that merely cover the cost of privileges or benefits received by the donor are not deductible. However, membership dues that actually constitute a contribution for which the donor receives little or no benefit of monetary value in return are deductible. The trade association should be able to answer any and all questions you have regarding the possibility of deducting your dues and other contributions as an ordinary and necessary business expenses.
[2] http://www.crainsnewyork.com/article/20100702/FREE/10070995

Below is an excerpt from How to Rent Vacation Properties by Owner, 2nd Edition: The Complete Guide to Buy, Manage, Furnish, Rent, Maintain and Advertise Your Vacation Rental Investment (Kinney Pollack Press, © 2007, ISBN: 0-9748249-9-2, $26.00). Used by permission of the author, Christine Hrib Karpinski

Vacation property owners all around the world are facing impending laws restricting the ability to rent their homes on a transient basis.  If you think that your area is immune, think again.  Communities in many states including Arizona, California, Florida, Hawaii, Maine, Nevada, New Mexico, New York, Oregon, Pennsylvania and even parts of Canada, Europe and Australia have imposed restrictions and outright bans on vacation rentals.

There are 3 main issues driving vacation rental restrictions.

The permanent residents.
It seems that many people who live permanently in the vacation rental areas are upset that people are moving in on their secret little paradises. They don’t like to deal with the crowed roads, stores, restaurants, the noise, etc.  What usually starts the wheels in motion for such a restriction is a permanent resident filing a formal complaint with his local government or HOA.

The main disadvantage for vacation rental owners, though they do pay property taxes, is that most are not voting members of the community.  Even if an area had 25 percent of the homes owned by permanent residents and 75 percent owned by out-of-town residents, it doesn’t matter—the out-of-towners have no “vote.”  The permanent residents win every time.

Economics.
With the demand for vacation homes so strong, especially in what used to be sleepy little towns, the prices are driving out the locals. They can no longer afford to live in those areas.  Two places that come to mind are Hawaii and the Florida Keys.  Both have limited the number of vacation rental licenses they are issuing.

The hotel and bed and breakfast (B&B) industries.
Most people who rent by owner think that their main competitors are property managers.  While property managers do share the industry, it’s really hotels and B&Bs who are our biggest competitors.  Vacation rental owners are edging in on their territories.  And watch out, hotels especially have deep pockets and plenty of money to lobby against short-term rentals.

The biggest problem vacation rental owners face in this situation is that it’s difficult for individual owners to band together to fight the cause.  This is when it’s imperative that individual owners and property managers work together.  For example, Big Bear, California had a group of B&B owners who lobbied against vacation rentals.  Thankfully Big Bear had a good number of property managers and they worked with individual vacation homeowners to fight it together.  It was an ugly debate, but for now they have been successful in legally having the right to rent their properties on a nightly or weekly basis.

Defense?
One thing you may want to consider is networking with other owners and property managers to band together to lobby against any proposed regulations.  But your number one defense against vacation rental bans in your area is to collect and pay sales taxes!  And encourage all other owners in your area to do the same.  In every case I have seen regarding vacation rental bans, the sales tax revenue has been a heavily weighted deciding factor on whether or not the laws get passed. The areas where the majority of the property owners collect and pay sales taxes usually don’t lose their right to rent.  For instances, in 2005, Polk County, Florida reported that the vacation home industry contributed more than $3.5 million in tourism development taxes (sales tax) to their region.  That’s some serious money for the county.  I would venture to guess that Polk County Florida would have a hard time passing a vacation rental ban. Let’s face it, once the county, city or town is used to the revenue stream from the sales taxes collected via vacation rentals, no one like to give it up, especially not politicians.

And probably equally important is to get socially and politically involved in your vacation rental community.  Attend meetings, volunteer events, etc. that can help the community get to know you.  Let them see that you’re not just some monster investor who cares nothing about their community.  Be sensitive to their gripes and annoyances and try your best not to add to the problems.  Be sure to clearly inform your renters of any parking, noise, or other ordinances within the community.  Remember, even though you don’t live there full time, it’s your community too.

We are very thankful to Christine Karpinski for sharing an excerpt of the second edition of her book with us.  Please listen to bestselling author Christine Karpinski’s interview of an owner who fought a vacation rental restriction in Oklahoma and eventually won: http://media.podcastingmanager.com/45826-84299/Media/Dian%20Jordan.MP3

Alone, you can survive. Together, we can prosper.
Vacation Rental Managers Association Annual Conference to address rental restrictions—and how you can fight them.

Ever feel like you’re fighting every battle by yourself? Whether you are a new property manager or an industry veteran, imagine how much stronger your efforts to combat anti-vacation rental legislation would be with more than 600 other industry experts in your corner.

Join the Vacation Rental Managers Association at the upcoming Annual Conference in San Antonio, Texas Oct. 31-Nov. 4 for a session presented by industry experts on what you can do today to protect your company from unfair rental bans and restrictions. This session, entitled “Rental Bans and Restrictions are Spreading: Act Now or Forever Lose Your Business,” will highlight the real threat of vacation rental bans and the need for managers in every market to be proactive and work together to stay ahead of rental restrictions. Hear from managers and industry leaders about successful programs to protect your business before, during and after zoning restrictions, bans and regulations are imposed.

Photo courtesy of San Antonio Convention and Visitors Bureau

There is no way you can fight restrictions on your own. But together, we can stand up against unfair regulation. That’s exactly what vacation rental managers did in Venice, Fla. when local officials and hotel lobbyists tried to require sprinkler systems in all vacation rentals: Together, they defeated that legislation.
With three general sessions, forty concurrent sessions, dozens of exhibiting suppliers and opportunities for both facilitated and informal discussions with your peers, the Annual Conference is sure to leave you with concrete take-aways you can implement immediately to protect and improve your business. More than 600 attendees are expected at this year’s Conference, making it one of the vacation rental industry’s premiere events. To learn more about the Conference or to register, visit www.vrma.com/?AnnualConference. Members receive a significant discount for the event; register by Sept. 30 for lowest registration fees.

The Vacation Rental Managers Association (VRMA) is the professional trade association of the vacation rental property management and hospitality industries. Founded in 1985, the VRMA has more than 600 property management and associate members throughout the United States, Canada, Mexico and Caribbean representing approximately 150,000 vacation rentals, condos and villas.

As the united, authoritative voice of the vacation rental industry, the VRMA works to advance the lodging category by providing memberswith invaluable educational and networking opportunities, promoting the value of the vacation rental experience through its public awareness initiative, Discover Vacation Homes (www.discovervacationhomes.com), and by fostering broad professionalism and growth.

Do you think vacation rentals (rentals of properties by the night or by the week) should be allowed in New York?

While conducting our last poll on whether the Governor of New York should have vetoed a Bill that would ban rentals of under 30 days duration in New York City, we were surprised to see that people all over the globe representing 39 countries took part to cast their vote and give their opinion.

Clearly many of you see the global impact that the passing of such a law could trigger as other cities and counties around the world choose to follow this example. We are already seeing time limits and even complete bans of vacation rentals popping up in communities.

Please let us know how you feel about this topic by voting in our poll and encourage your friends no matter where they live to vote and post their comments too. We’d love to see how travelers and property owners from around the world feel about this topic!

Graph: stats from the vote system on protect vacation rentals (as of August 4th 2010)

Assemblyman Richard Gottfried and Senator Liz Krueger promoted the new law as a measure giving New York City the “greater power to crack down on illegal hotels.”[1]

The new Law as written would make it illegal for any multiple dwelling (any building with over 2 rentals units) to rent even 1 of their units out for under 30 days (including brownstone and townhouse owners unless their property has 2 or fewer units).

Proponents of the Bill state that it will “fulfill the original Intent of the law”:

The memorandum accompanying the bill stated that “this bill will fulfill the original intent of the law, as construed by enforcing agencies, including the New York City Department of Buildings, by modifying the specific provisions of the Multiple Dwelling Law and applicable local codes […].”

However it seems that in the process of clarifying the “intent” of the law, this storm of controversy has turned into a tornado, ever broader and more encompassing, sweeping up owners of individual Condos, Co-Op units, and rental apartments alike in the process.

The Multiple Dwelling Law was enacted in 1929. At the time the legislative intent of the law was stated to be the following:

“It is hereby declared that intensive occupation of multiple dwelling sites, overcrowding of multiple dwelling rooms, inadequate provision for light and air, and insufficient protection against the defective provision for escape from fire, and improper sanitation of multiple dwellings in certain areas of the state are a menace to the health, safety, morals, welfare, and reasonable comfort of the citizens of the state; and that the establishment and maintenance of proper housing standards requiring sufficient light, air, sanitation and protection from fire hazards are essential to the public welfare. Therefore the provisions hereinafter prescribed are enacted and their necessity in the public interest is hereby declared as a matter of legislative determination.” [2]

The mention of “intensive occupation” seems to indicate the law was geared toward large buildings with multiple units being used in a way that was unregulated, leading to substandard conditions that were a threat to health, safety, and public welfare. Clearly it doesn’t look like it was meant to target individual and small property owners, so how did the “little guy” get caught up in all this mess?

Laws can’t be effective if they are not enforceable. (The alleged intent behind the new legislation)

City of New York v. 330 Continental LLC, 60 AD3d 226, 231 (1st Dept. 2009) . [3]

In 2007, a lawsuit was brought by the City of New York against a group of so-called illegal hotels to prevent them from renting some of the units for stays less than 30 days.  The court in City of New York v. 330 Continental LLC, 60 AD3d 226, 231 (1st Dept. 2009) refused to enjoin these three SRO apartments buildings for renting short-term stating:

Stays of less than 30 days in Class A multiple dwellings do not amount to a violation of local zoning laws or the buildings’ certificates of occupancy as long as only a minority of units in these buildings are used for short-term occupancy.

The Court found that the City failed to demonstrate that most of the units in any of the buildings were rented for such short-term occupancy and that the rental of a minority of a building’s units for nonpermanent occupancy would violate neither the ZR nor the certificate of occupancy, due in part to the following:

The ZR permits “apartment hotels” (such as the buildings in question) in general residential districts, and the ZR defines an “apartment hotel” as a building whose units “are used primarily for permanent occupancy”  (ZR § 12-10 [emphasis added]).

Multiple Dwelling Law § 4 (8) (a) requires that a class A multiple dwelling be “occupied, as a rule, for permanent residence purposes” (emphasis added). Here again, the statute’s use of the phrase “as a rule” indicates that a secondary use of the building, different from the specified primary use, is permitted.

The Court cited these examples of vagueness and ambiguity and further pointed out the City failed to identify any legal authority that defined what constituted “transient” and “permanent” occupancy, relying instead on a definition derived from the affidavit of an architect employed by the Department of Buildings.

The Aftermath

The proponents of the new Bill claim it was drawn up to address the recent ruling in [City of New York v. 330 Continental LLC].” The  memorandum accompanying the new law  provided “[i]t is impossible to enforce the law against illegal hotels if the law is interpreted in the manner compelled in  this case” [4]

Legislators craft and propose the law but it lies with the Courts to interpret the law. It seems it will take another case brought before the courts by either the City or its residents to determine the new interpretation of this Law and if it is truly fulfilling its “intent”. Only time will tell what the devastating aftermath of this storm we have weathered will be, and if New Yorkers and property owners worldwide will be left standing in the rubble to pick up the pieces.

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[1] http://www.lizkrueger.com/2010/07/victory-governor-paterson-signs-illegal-hotels-bill/
[2] New York State Multiple Dwelling Law
[3] http://scholar.google.com/scholar_case?case=17747922563446768523&q=new+york+city+%22330+continental%22&hl=en&as_sdt=100000000000002
[4] Ibid

Yesterday evening July 23, 2010, we received the news that  Governor Paterson Signed Bill S 6873. The law will ban New York apartment rentals for less than 30 days, effective May 1,2011.

Our determined group of professionals sprang up in reaction to the shocking news that  this bill had passed  the Assembly and Senate. The entire legislative process leading up to the passing of the bill caught us somewhat off guard.

Our rapid response was  well-executed and focused. If we had had additional time, we are certain that we could have convinced Governor Paterson to veto the Bill.  We now need to continue our work and roll up our sleeves.

Let us coordinate our ongoing efforts in the 10 months before the effective date of the new law.

We will regroup next week and keep you updated, stay tuned to protect-vacation-rentals.com.

We would like to thank everyone who got involved and kept the movement and the momentum going. This is just the beginning!

Special thanks to Jay Karen, Arthur and Pauline Frommer, Stephen Kaufer, Greg Jarboe for their support.

More very soon!

In these difficult times we tend to educate ourselves and read about laws which have been passed or contemplated in other US cities and abroad to limit the ability of homeowners to rent short term.

I’d like to introduce myself, my name is Marie Reine Jézéquel and I am the owner and founder of New York Habitat, a company that offers vacation rentals, furnished apartments and rooms for rent in New York, Paris, London and the South of France , one of many companies that will be greatly and adversely affected if the proposed legislation banning rentals under 30 days passes.

Last May, I attended the HomeAway Owner’s Summit in Austin. Homeaway had prepared discussion panels raising awareness on a lot of subjects so that owners could get informed about issues facing vacation rental owners and enhance the marketing of they property. One topic on the agenda was: Protecting Your Property Rights.

They had a panel of speakers informing the audience on this important issue: The speakers were homeowner Stephen Milo, attorney Richard Rumrell [the following blog regarding property rights is hosted by Richard Rumrell: http://blog.rumrelllaw.com/propertyrights] and HomeAway co-founder Carl Shepherd.

Little did I know that New York would now be faced with this very issue, with proposed legislation banning vacation rentals of under 30 days now awaiting the Governor’s approval.

During the Homeaway Q/A session, a Venice Florida case was presented where homeowner Stephen Milo had successfully won a battle with his municipality.

The city of Venice Florida agreed to pay Milo’s group $300,000 in settlement for attorney fees and the diminution in value of properties, and allow the dozen property owners who brought suit to continue renting their properties on a short term basis for 15 more years. [A press release dated August 2009 regarding the settlement reached can be seen at: http://www.prleap.com/pr/139147]. [See the complaint filed by Stephen Milo and eight other plaintiffs against the City of Venice, Florida: [http://www.veniceflorida.com/features/pdf/short-term-filedcomplaint.pdf]

A young eloquent man by the name of Justin Butterworth [https://www.occupancy.com] [http://www.takeabreak.com.au/profiles.htm] then took the microphone and explained his tale on this same subject to a very attentive audience. You could have heard a pin drop as everyone listened intently to him speak about how he is addressing similar issues in Australia.

He said “property owners have nothing to fear from the quality of their service or property presentation, the only thing they should fear is their own inaction. Property owners must work together to present data showing the net benefits and minimal disturbances rather than engaging in emotional debate.“

Justin continued to suggest 3 questions:
-  First, what is the nature and number of disturbances?
-  Second, what is the net economic benefit to the community in terms of jobs, tourism and social contributions?
-  and third, is legislation required or can the industry through best practice guidelines and self regulation meet stakeholder needs?

Justin has opened discussion and engaged the Planning Department, State Tourism bodies, Local Councils, other major website portals, Real Estate Agent associations, consumers and property owners, as well as the media.  While the issue is far from resolved, a more informed discussion has developed in Australia.

When his company Rent-A-Home.com.au later won the 2006 Telstra Business Award, awarded by the Australian government for his innovative online technique and outreach, he used the platform to ask them to reconsider their position on vacation rental bans.

Justin recounted his tale to the group of HomeAway vacation rental owners gathered at this conference last May and advised everyone to team up and get involved before and after the law passes. The strength of an owner community can really make a difference. With the Internet, owners groups are now springing up to protect their rights and choose how long they will rent their property out for.

Marie-Reine Jézéquel
CEO & Founder
New York Habitat