It’s important to understand potential legal pitfalls of short-term rentals

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By Josh Lonon
Wyche Law Firm

Nationwide, listings for short-term rentals on marketplaces such as Airbnb continue to grow, especially in destination hot spots like Greenville. Currently, a search of Greenville Airbnb and HomeAway online listings yields more than 300 results. While these platforms are designed for ease of use by hosts and lend themselves to do it yourself leasing, hosts should recognize that widely varying laws and regulations may apply.

Greenville has different regulations for short-term rentals depending on the zoning district; for example, the short-term leasing of an entire home is allowed only in commercial and office districts. The most commonly used regulation is the occupational limitation, which limits the number of guests a short-term rental can have. In addition, there can be durational limits that emphasize minimum and maximum stays for guests. In some cities, such as Asheville, N.C., short-term rentals have been banned in some districts and violations can result in hefty fines.

In some areas, an Airbnb host may be required to register and/or obtain a permit or license to operate. A registration requirement is being considered in Mauldin as part of its attempt to regulate short-term rentals. Some municipalities may also require operators to register for a business license and/or submit to an inspection. This is the case in Charleston, where hosts are required to obtain a special license from the city and include their registration number on their home-rental ads.

As for tax obligations, Airbnb, as part of the reservation process, will collect certain state and local taxes. These taxes, however, do not cover all jurisdictions. For example, Airbnb collects sales and accommodations taxes on behalf of hosts but does not include local accommodations taxes. Greenville has a 3 percent accommodations tax that is not collected by Airbnb, which leaves hosts responsible for coordinating these fees.

It is imperative that Airbnb hosts ensure that their properties meet local building codes and that they have adequate insurance coverage. Typical homeowners’ insurance policies often exclude liability coverage for business pursuits. There is always a possibility that guests can be injured or incur damage to their property while visiting, and hosts can be sued. Airbnb offers host protection insurance that covers liability up to $1 million, but it is still recommended that hosts obtain their own insurance due to the number of conditions, limitations, and exclusions.

Along with local laws, hosts should be knowledgeable of covenants, restrictions, and bylaws governing the use of their properties. More commonly, these rules regulate short-term rentals by requiring tenants to be registered, limiting the minimum time of the stay, and limiting the use of common areas by the tenants. Violations may result in fines and other legal action by the property owners’ association. If the property is a rental property, as opposed to being owned by the host, it is likely that the existing lease has limits on the number of additional guests who may be allowed on the property and on subletting the property to others. Violation of these clauses could result in eviction.

As with any significant investment, consultation with a knowledgeable attorney and tax professional is advisable. Would-be hosts should and are expected to be knowledgeable of applicable laws, regulations, and rules, and operating otherwise is at the host’s peril.

Josh Lonon regularly represents developers and others in real estate acquisitions, financing, incentives, and leasing involving a broad range of commercial properties. He also has extensive experience in the title insurance industry as a longtime agent and as in-house and outside counsel, giving him keen insight on complex title and insurability issues. Lonon has held various representative positions with the South Carolina Bar and serves as chair-elect of its Real Estate Practice Council.

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