Vacation Rental Agreements

Short-term Rental Properties: Innkeeper Laws and Protecting Rental Investments

Welcome to peak vacation rental season! It’s a hassle, we know. We’re with you. Whether you utilize the service of a property management company, or list your property on websites like AirBnb.com or VRBO.com, the high traffic through your short-term rental property can add to the stress of the holidays. However, there’s no better time for extra income, and you can help simplify the season by ensuring your property investments are protected with an appropriate short-term lease agreement.

There are several important differences between a regular (long-term) lease and a short-term (i.e. vacation) rental agreement. Short-term rental properties are considered “transient lodging,” as they pertain to rentals for a period of less than 30 consecutive days, according to the Arizona Revised Statutes § 42-5070. As a result, they are not governed by the Arizona Residential Landlord-Tenant Act [A.R.S. § 33-1308], which lays out the requirements for traditional rental agreements.

For example, unlike with a long-term rental, property owners of a short-term rental property may immediately terminate the agreement and the renter must immediately vacate the property in the event that a criminal act occurs on the property, payment is not made as agreed, the property is not properly maintained, or occupancy limits are not observed, etc. Long-term leases, however, are subject to Arizona’s Residential Landlord-Tenant Act [ARLTA; see A.R.S. § 33-1301 et seq.], and require 5- to 10-day notice and a formal forcible entry and detainer (aka eviction) action, in order to terminate.

Furthermore, certain “innkeeper” laws apply to short-term rentals, as defined in A.R.S. § 33-301 et seq. These rights and responsibilities include the property owner’s (innkeeper’s) responsibility to post lien laws and rates for tenants, the amount an innkeeper can be responsible for lost or stolen items, guidelines governing the installation of a fireproof safe for tenant use, etc. Traditional leases are inappropriate for vacation rentals since they fail to address these unique issues, as well as insurance, lock-out, and other possible scenarios.

Tax Implications for a Short-term Rental Property

In addition to the basics of maintaining short-term rentals and appropriate agreements with transient tenants, innkeepers should also be aware of the applicable tax law. There are both good and bad sides to operating a short-term rental, enumerated in 26 U.S.C. § 208A, A.R.S. § 42-5070 and A.A.C. R15-5-1002(A). As an example, the term of a rental must be 15 days or less in order to claim a federal income tax exemption [26 U.S.C. § 208A]. The tax code is complex, and an attorney can make you aware of the ups and downs that come with running a vacation rental.

Earning extra income using short-term rental properties can be profitable and rewarding. During the holidays, it can also be hectic and distracting from the more important aspect of the season: quality time with loved ones. If you have a rental property, but do not have a short-term rental agreement in place, need to update your agreement, have a conflict with a renter, or have questions about the applicable tax code, call the real estate attorneys at Harlow Spanier & Heckele.

Please note that the preceding information is informational only, and it is not intended to be legal advice. The Tucson real estate attorneys at Harlow Spanier & Heckele can help property owners who need assistance setting up a short-term lease agreement, or on most other legal matters for that matter. If you’d like to schedule a consultation regarding vacation rentals, please call (520) 314-3710 or e-mail [email protected].