Some years ago new lodging start-up businesses with novel aspects of their industry emerged: AirBnB, Home Away, VRBO, Craiglist, Couchsurfing, Trip Advisor, Flip Key. These and other short-term rental sites became increasingly popular platforms among individuals and companies to offer transient lodging options for tourists and visitors traveling around the world.
Such rapidly expanding and growing businesses, however, have not been immediately followed by an advanced, uniform and clear regulation that could plainly address their concerns. Hosts (i.e., owners of the premises and landlords) are becoming more and more concerned with regulatory uncertainty and sometimes even with a legislative gap or vacuum governing short-term rentals via lodging start-up options. For instance, the example of the State of Florida illustrates that while having general state regulation of short-term rentals, no specific state legislation was adopted to face new issues of such modern transient rental businesses. Moreover, local regulation, if any, remains predominant with regard to vacation rentals in general, though still uncertain. Miami city is rather flexible and allows short-term rentals; Miami Beach adheres to prohibiting short-term rentals, and Monroe County (Key West) is hunting owners and landlords by requiring transient occupancy licenses and paying breakfast and bed taxes. Speaking of Monroe County, it expressly aims at enforcing legislation against transient rentals via Airbnb and other start-up lodging platforms.
Lack of clear legal framework poses a threat to hosts of violating existing regulation and operating illegal activities. What would be best off to face regulatory uncertainty, avoid possible sanctions, remove the fear of arbitrability and make short-term rentals on AirBnB, Home Away, VRBO, Craiglist, Couchsurfing, Trip Advisor, Flip Key and other short-term rental sites legal? Here are some guidelines.
1/ Transient public lodging establishment
Define whether your property falls into the category of “transient public lodging establishment”. For this purpose, consult state, county and city regulations.
Florida Statutes define vacation rental as “any unit or group of units in a condominium, cooperative, or timeshare plan or any individually or collectively owned single-family, two-family, three-family, or four-family house or dwelling unit that is also a transient public lodging establishment”. A transient public lodging establishment is defined as “any unit, group of units, dwelling, building, or group of buildings . . . which is rented to guests more than three times in a calendar year for periods of less than 30 days or 1 calendar month, whichever is less, or which is advertised or held out to the public as a place regularly rented to guests” (Fla. Stat. § 509.013-509.417).
Please, note that “transient public lodging establishment” may be defined otherwise on county and city levels. In City of Key West, a transient rental is described as “commercially operated housing principally available to short-term visitors for less than twenty-eight (28) days”. In City of Marathon, “transient public lodging establishment” refers to “dwelling unit for not less than seven (7) nights and not more than 28 nights”. The residing of any private residence in City of Marathon for a period of less than seven (7) nights is prohibited.
Based on the definitions of transient public lodging establishment provided in the area where your premises are situated, if you rent out your property for short terms via AirBnB, Home Away, VRBO, Craiglist, Couchsurfing, Trip Advisor, Flip Key and other short-term rental sites, you might need to scrutinize the legislation on transient public lodging establishment.
Check whether transient accommodations are permitted in a zone where your property is located by consulting municipality codes.
Bear in mind that while in some zones transient accommodations are allowed without serious limitations or impediments (Miami, Coral Gables), in other zones and neighborhoods short-term vacation rentals are prohibited or restricted (Miami-Beach, Bay Harbour, Surfside, Key West). For instance, pursuant to the Miami Beach City Code (Miami Beach Land Development Regulation – Chapter 142, Article IV, Division 3) vacation/short-term rentals are prohibited in all single-family homes and in many multi-family housing buildings in certain zoning districts of Miami Beach. In City of Layton (Monroe County), no rentals less than 90 days are permitted. In Key Largo, Big Pine Key and the Lower Keys, rental property must be located in “Land Use Districts”.
3/ Business licensing
Obtain licenses as required by Florida State, county and/or city regulations. Normally, you must consider obtaining vacation rental permits and business tax receipts.
Different vacation rentals permits may be required. Pursuant to the Florida State Statutes, in case of vacation rental in Florida, vacation rental permits are to be obtained from Division of Hotels and Restaurants within the Department of Business and Professional Regulation (Department). The Division has created three different classifications for vacation rentals (61C-1.002(4)(a), F.A.C.): single, group and collective licenses. A single license may include one single home or townhome, or a unit or group of units within a single building that are operated by the owner. A group license covers all units within a building or group of buildings in a single complex that are licensed to a licensed agent. Multiple group licenses may be issued to different licensed agents for units located on the same property. A collective license may be issued to a group of houses or units found in separate locations that are represented by the same licensed agent. The Division has divided up the State into seven districts, which each cover several counties. Under the current rule, one license can be issued for up to 75 vacation rentals if they are located in the same district, as determined by the Division.
In addition to state level permit, some counties and cities may also prescribe obtaining special municipal and/or city permits. In City of Key West, for example, in case if property is located in Truman Annex development, the owner of the property shall apply for “Truman Annex residential transient rental permit”.
Bear in mind that obtaining licenses is paralleled by security, sanitation and health inspections and performance of certain obligation. Obtaining state vacation rental permit requires “balcony inspection” unless proven that exterior balconies and stairwells are “common” elements of a condominium. However, pursuant to Florida Statutes Section 509.032(2)(a), each vacation rental shall be readily available for inspection, but vacation rentals are not subject to the same routine inspection requirements of other transient public lodging establishments and a vacation rental will be inspected only if there is a complaint . In Key Largo, Big Pine Key and the Lower Keys, on the contrary, property must be inspected before a “Special Vacation Rental permit” is issued (it should be noted here that).
As to specific obligations, contact state and local authorities to obtain a complete list thereof. For instance, according to Florida State rules, the landlord shall install smoke alarms in every living unit, keep electrical wiring in good repair, install railings on all stairways and around all porches and steps; present a fire extinguisher, properly charged and accessible, keep heating and ventilation in good repair or installed to maintain a minimum of 68 degrees Fahrenheit throughout the building etc.
Also check if applicable legislation prescribes additional covenants with regards to display and advertisement of license numbers. In City of Marathon, vacation rental license number and the vacation rental agent license number shall appear on all forms of vacation rental unit advertising; and each vacation rental must have a notice posted with the contact information of the vacation rental agent or licensee, max occupancy for the unit, max number of vehicles allowed, trash information, notice that occupant may be fined or evicted for creating a disturbance or not following the rules.
Vacation rental in Florida requires payment of tourist development taxes (Section 125.0104, Florida Statutes), convention development taxes (Section 212.0305, Florida Statutes), tourist impact taxes (Section 125.0108, Florida Statutes), collectively referred to as “bed taxes”, and sales taxes (6,5% in Florida) with discretionary sales surtax levied by certain Florida counties.
The amount of “bed taxes” depends on the location of your property. For instance, if your property is in Miami-Dade County, a six percent (6%) tax is collected on the rental amount from any person who rents, leases or lets for consideration any living quarter accommodations in a hotel, apartment hotel, motel, resort motel, apartment motel, rooming house, mobile home park, recreational vehicle park, single family dwelling, beach house, cottage, condominium, or any other sleeping accommodations for a period of six months or less. If the rental is for more than six months, a bona fide written lease must be provided in order to be exempt per F.S 212.03.
While creating an account with tax authorities for the payment of “bed taxes”, you will be likely to provide detailed information on all leased units.
Florida State Statute requires that “bed taxes” be charged by the person receiving the payment and be charged at the time of payment, i.e. owners of the premises. Consider that the process of paying “bed taxes” for renting premises on AirBnB may sometimes be confusing as AirBnB collects “bed taxes” only for a few destinations. Normally, owners and landlords have to manually add “bed taxes” themselves that is not simple and obvious. Thus, we advise you to check carefully whether AirBnB or other short-term rental sites paid “bed taxes” in order to avoid penalties from tax authorities.
Lastly, in Monroe County, many AirBnB rental cases were referred to Tax Collectors Office for tax compliance. These referrals have resulted in the assessment and collection of over $25,000 in bed taxes, penalties, interest and fees. Moreover, the Tax Collectors office may go back three years, or 36 months, in their review to bring units into tax compliance. For this purpose it can use online advertisements and reviews to find properties that aren’t in compliance with tax remittance and build their case. Should the Tax Collector’s audit determine underpayment of taxes, the burden of proof is on the home owner to show tax is not due.
In order to avoid such challenging situations, AirBnB may conclude an agreement with governments according to which AirBnB is in charge of withholding and paying taxes on hosts’ behalf. This practice is particularly spread in New York City. Recently, a similar contract was negotiated by Palm Beach County.
Non-payment of “bed taxes” may lead to penalties provided by F.S. 125.0104 (8) (a), F.S. 125.0108 (4)(a): “Any person who is taxable hereunder who fails or refuses to charge and collect from the person paying for the taxable privilege the taxes herein provided, either by himself or herself or through agents or employees, is, in addition to being personally liable for the payment of the tax, guilty of a misdemeanor of the second degree, punishable as provided in s. 775.082 or s. 775.083”.
5/ Landlord’s consent
If you do not own premises but lease and then rent them out to other persons, be sure that you obtained an express prior written owner’s consent to sublease for short terms. Failure to do so may result in breach of your contract with the owner. In July, 2016, some tenants of North Miami Beach who subleased their premises for short terms, received a notification from the management of the units alerting that tenants who rent out premises for short terms are in breach of the lease agreement, the City of Miami Beach Zoning and Code, and the Rules and Regulations governing the neighborhood. The management also warned that such illegal actions will be circulated to the Code Enforcement Department of the City of Miami Beach, in which fines start at $20,000.00, and to the landlord’s attorney who will proceed with legal actions.
6/ Contact person
Sometimes, for security reasons, it may be required that contact person shall be available 24/7 for responding to complaints (City of Key West, City of Marathon). Village of Islamorada (Monroe County) also prescribes primary and secondary contact person residing near the area be included in the license to respond to any issues.
7/ Homeowner association rules
Examine homeowner association rules that may contain additional, more detailed and stricter rules for short term rentals.
8/ What is illegal?
A various numbers of actions may be considered “illegal”. Below are of some of them:
– Failure to collect and remit Tourist Development Taxes and Florida State Sales Tax or any maneuvers to avoid payment of taxes;
– Failure to obtain and hold necessary licenses or vacation rental permits for the location in which the rental is located;
– Misrepresentation about duration of stay or other attempts to circumvent applicable regulations;
– Renting within zones where vacation rental is banned;
– Any other action that is not in conformity with applicable legislation.
To conclude, let me highlight that following these guidelines do not claim to guarantee you a full protection against violating the legislation that is applicable to vacation/short-term rentals via AirBnB, Home Away, VRBO, Craiglist, Couchsurfing, Trip Advisor, Flip Key and other short-term rental sites. But rather to spark your awareness about the fact that despite legal vacuum and ambiguity, some rules and regulations with penalty provisions exist already, even if they are sometimes not obvious and clear. Thus, if you want to be legal, keep in mind that some research needs to be done.