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New York’s short-term rental ban – Update

Some residential buildings that have historically operated as hotels prior to the enactment of the Multiple Dwelling Law [1], or were legally operating as hotels under the pre-1961 zoning can register their units for other than permanent residence purposes with the Department of Building.  Applicants that register by January 12, 2011 will have until July 16, 2012 (with possible extensions) to comply with relevant building codes for transient use.

The other criteria to satisfy in order to convert a class A dwelling (for permanent residential use) into a class B dwelling (for transient use) are the following: (a) the dwelling is of a fireproof construction and was of fireproof construction on 1/1/2009; (b) the dwelling units have at least two lawful means of egress and had them on 1/1/2009; (c) the dwelling has operational exit signs and a fire alarm system that comply with local law for existing transient occupancies and had the signs and alarm system on 1/1/2009.

The relevant registration form and other documents to be submitted can be accessed on the New York City Department of Building Website:

http://www.nyc.gov/html/dob/html/forms/forms_permits.shtml

The MDL1 Form: http://www.nyc.gov/html/dob/downloads/pdf/mdl1.pdf

The MDL1 Instructions: http://www.nyc.gov/html/dob/downloads/pdf/mdl1_instr.pdf

The MDL1 form, satisfactory supporting documentation as well as the PW1, PW3, and ASB4 forms must be submitted to the Department by January 12, 2011.

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[1] The Multiple Dwelling Law was enacted in April 1929.

You cannot ride someone else’s wave

An interesting ruling from the Circuit Court in Sarasota County, Florida
Martha L. Gwynn vs. City of Venice Code Enforcement Board

Background

In the summer of 2009, the City of Venice, Florida, issued an ordinance banning rentals for less than thirty (30) days in residential neighborhoods. The ordinance defined a legal non conforming resort dwelling as a dwelling in a residential zoning district “which is rented to guests more than three time in a calendar year for periods of less than 30 days […] or which is advertised or held out to the public as a place regularly rented to guests for periods of less than 30 days […].”

This was the City’s second attempt at prohibiting vacation rentals in single-family districts. The first attempt was thwarted by a group of homeowners led by Steve Milo — in 2007, Steve Milo et al. brought a lawsuit against the City of Venice claiming it had infringed on their property rights.

In August 2009, Milo et al. reached a settlement with the city after a judge ruled in their favor, finding that the City of Venice had acted “erroneously” in interpreting their existing code to ban short-term rentals. The city agreed to pay Milo’s group $300,000 and allowed them to continue renting their properties on a short-term basis.

A month prior to this settlement being reached, the City of Venice passed the above-mentioned ordinance banning short-term rentals.

As stated in a press release, “[w]hile Milo and his group of property owners recovered money and retained their rights to rent their properties on a short term basis for 15 more years, other Venice property owners lost their rentals rights. On July 17, the Venice City Council passed a new ordinance that banned the practice of short term rentals in single-family residential neighborhoods.”[1]

Property-owner Martha L. Gwynn

Martha L. Gwynn had been renting her property on a short-term basis prior to the ban taking effect. In August 2009, she was cited for violating the new ordinance.

The main claims brought by Martha L. Gwynn against the City of Venice Code Enforcement Board

(1) The Ordinance was facially unconstitutional

She argued that the ordinance is unrelated to any legitimate objective of the city and therefore violates the due process clause of the state and federal constitution. The court disagreed stating, “the United States Supreme Court has recognized that the protection of a residential neighborhood is a legitimate objective of a land use ordinance.”

Her second argument was that this ordinance discriminates against certain persons who rent property. The judge rejected this claim noting that courts in Florida and elsewhere have upheld numerous ordinances regulating short-term rentals.

She also alleged that the ordinance was a regulatory taking restricting a homeowner’s freedom in the use of his or her property and enjoyment of the proceeds. The court disagreed.

The court refused to find the ordinance facially invalid and to strike it down in its entirety but instead ruled that it was unconstitutional as applied to her.

(2) The Ordinance was unconstitutional as applied to her.

The court stated that the ordinance (i) has a significant economic impact on her, by restricting the duration and frequency of rental periods; (ii) interferes with her expectation that she could rent to seasonal visitors.

The court added that because she was renting her property on a short-term basis prior to the ban coming into effect, the ordinance could not be enforced against her as written.

Conclusion

Courts are very reluctant striking down ordinances banning short-term rentals. However, when a homeowner brings a lawsuit challenging an ordinance, courts are often willing to find it to be unenforceable against him or her as long as he or she can prove that the ordinance interferes with his or her reasonable investment-backed expectations.

It is time for New York City property owners to let go of the mistaken belief that they need not be concerned about the short-term rental ban to be implemented in New York City in May 2011 as some other property owners will likely bring their own legal challenge to declare it unconstitutional. We should all keep in mind that the legal victory of individual property owners may remain their victory alone.

[1]  http://www.prleap.com/pr/139147/

Changing the Public Perception of Short-Term Rentals

Non-profit organizations such as the West Side Neighborhood Alliance and Housing Conservation Coordinators contributed to the passage of the short-term rental ban in New York City by launching an effective PR campaign to discredit short-term rental owners and managers.

Proponents of the short-term rental ban have among other things alleged that “illegal hotels” (a misnomer for short stay accommodations in residential buildings) have damaged New York City’s reputation among tourists and that short-term renters do not care about security and building upkeep.  Needless to say, very little data were collected by the ban’s supporters to substantiate their claims.

It is important to turn the tide around and show our local politicians how New York City has been and is benefiting from the short-term rental industry.

We are currently designing questionnaires to evaluate (1) the economic impact of the short-term rental industry on New York City; (2) the public perception of the short-term rental industry; (3) the motivations behind renting on a short-term basis.

We welcome your ideas on how to create these questionnaires.  Please email us your suggestions at info@protect-vacation-rentals.com

Cover page for the June 2008 Report prepared by the Illegal Hotels Working Group to describe the impact of short-term rentals in residential buildings on New York City residents, the City’s economy and the City’s housing stock.  The Report was sponsored by, among others, Assemblyman Richard Gottfried, Senator Liz Krueger, Housing Conservation Coordinators and the West Side Neighborhood Alliance.

VRMA offers resources for fighting restrictions at upcoming Annual Conference

The Vacation Rental Managers Association Annual Conference Oct. 31-Nov. 3 at the San Antonio Marriott Rivercenter will offer several resources for property managers to learn what they can to do protect their businesses before, during and after zoning restrictions are imposed.

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 will leave you with concrete take-aways you can implement immediately to protect your business. Hear from the top minds in the business, including property managers who have successfully fought restrictions in their own communities. Sessions addressing restrictions include:

– Rental Bans and Restrictions are Spreading: Act Now or Forever Lose Your Business

Vacation rental restrictions continue to spread across the country and threaten to regulate your business out of existence. Rental managers can no longer ignore this issue and hope that zoning restrictions or regulations only apply to unfortunate peers in other markets. In this session, we 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.

Presenters: Jeremiah Gall, Co-Founder and COO, FlipKey.com, Amy Gaster, Co-Owner, Tybee Vacation Rentals, Steve Milo, President & CEO, Vacation Rental Pros, Rick Rumrell, Attorney; Rumrell, Costabel, Warrington and Brock, Carl Shepherd, Co-founder & Chief Strategy and Development Officer, HomeAway.com

– Untaxed Rentals: How You Can Help Level the Playing Field

Underground “untaxed” rentals occur through RBO sites and in rental programs where homeowners hide rentals as “owner” weeks. Through lower rents, untaxed rentals divert renters from tax-compliant homes. In this session you will hear about the not-so-obvious ways that underground rentals evade detection, the financial incentives for listing sites to protect underground rentals, why the nation’s most successful tax compliance systems today rely on vacation rental managers, and what new solutions can be employed by all vacation rental managers to eliminate underground rentals and restore an even playing field by removing both the incentive and the opportunity for homeowners to advertise lower rents by not charging tax.

Presenter: George T Volsky, Director of Research, Instant Software, Inc.

– Building Bridges with Local and State Tourism Bureaus to Promote Your Business and Elevate Vacation RentalsProactively engaging with local and state tourism bureaus not only can boost your business, but can protect it in times of crisis. In this session learn from VRMA’s PR committee members how to get your foot in the door with destination marketing organizations. Learn how to take advantage of these opportunities to help your company become a leader in your region, and to build recognition for vacation rentals as a viable lodging segment for the travel industry.

Presenters: Amanda Drake, Account Executive, Ypartnership, Amy Gaster, Co-Owner, Tybee Vacation Rentals, Sara Moore, Vice President of Marketing, ALL STAR Vacation Rentals, Tristan Webb, Owner and General Manager, Utah Vacation Homes

Additionally, the VRMA Annual Conference will offer two opportunities for “Collaboration Tables,” specifically addressing rental restrictions during the Conference. Join a small-group discussion with other managers and industry leaders led by Carl Shepherd, Co-founder and Chief Strategy and Development Officer for HomeAway.com.

Online registration for the VRMA Annual Conference ends Friday, Oct. 22; after this date, attendees must register on-site. To register online or to learn more about Annual Conference programming, visit http://www.vrma.com/?AnnualConference

New York owners, you need to roll up your sleeves and participate in the fight against this short-term rental ban!

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

Excerpt from How to Rent Vacation Properties by Owner by Christine Hrib Karpinski.

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

Vacation Rental Industry ramps up to fight Short-Term Rental Restrictions?

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.