Home-sharing for short-term rental has become a major industry. Even in today’s informal sharing economy, renting your property can have legal consequences. A little bit of homework can help prevent serious problems. Here are a few things to check before listing your property with Airbnb or similar online platforms.
1. Zoning law and other local regulations. Make sure you know how your property is zoned, and that short-term rentals are permitted in that zone. Find out what other regulations your city has in place.
For example, the city of Columbus, Ohio is planning to regulate short-term rentals. Early discussions suggested that Columbus may limit each property to 90 days of rental each year. As of Jan. 19, City Council member Mike Stinziano said “Everything remains on the table,” and Columbus’ regulations may include a longer or shorter limit, or none.
Cleveland, Ohio’s 2016 ordinance allows home-sharing arrangements in single family districts, and sets a series of requirements on such topics as smoke and carbon monoxide detectors, maintenance, trash collection, and furnishing the renter with the owner’s contact information. Click here to learn more about Cleveland’s requirements.
2. Is there an occupancy tax? The state of Ohio levies a sales tax on hotel stays of less than 30 days. Your house is not a hotel, right? Don’t be too sure.
If you have five or more sleeping rooms listed for home-sharing, Ohio sales tax law considers your property a hotel, even if the rooms are in several structures. Even one room can make your property a hotel for purposes of city or local sales tax, since local jurisdictions can set their own definition.
The city of Cleveland, taxes all short-term rentals, even if only one room is held out for rent. Airbnb has agreements with some cities, including Cleveland, calling for Airbnb to collect the taxes for the owner and remit the taxes to the city. But as the owner, you would still be responsible for paying any state or county taxes on the transaction.
3. Do you need to register? If five or more rooms are made available for short-term rental, Ohio sales tax law may consider your property a hotel, and you may need to register with the Department of Taxation as a vendor.
Cleveland requires owners to register with the city if the property is rented more than 90 days in any year, regardless of the number of rooms. Columbus has not yet decided what registration to require. Be sure to comply with any registration requirements in your city.
In counties with a population of 200,000 or more, landlords must also register with the county auditor. Does your county consider home-sharing to be within the definition of a landlord?
4. Will your insurance protect you if someone is injured? Remember that you can be sued for personal injury or property damage to your home-sharing guest. Even if you were not at fault, you’ll still have to pay the cost of defending the lawsuit, which can be substantial.
Your homeowner’s insurance might not cover claims resulting from business activities. Find out whether you need special coverage. While you’re at it, make sure that the policy limits are high enough to give you the protection you need.
5. Is your property up to code? If your property does not meet local building codes, you may be opening yourself to liability if your renter is hurt as a result.
6. Are you risking your lease or mortgage? What about your owners’ association? Most residential leases prohibit subletting. Make sure you have any necessary prior written consent from your landlord. If your lease has special provisions for home-sharing arrangements, make sure that you comply with them.
Most home mortgages give the lender the power to declare the loan due if there is a transfer of ownership or any interest in the property. A home-sharing rental may fall within that definition. Some mortgages allow the borrower to grant leases for terms of up to three years, which would permit the short-term rental. Make sure that nothing in your mortgage gives the lender the right to declare the loan due for whatever rental you are planning.
If you live in a condominium, a planned unit development, or a community with a homeowners’ association, the association documents may restrict your ability to rent to others. Make sure to review the association documents and comply with any restrictions.
7. Review the fair housing and anti-discrimination laws. In addition to federal and Ohio laws against housing discrimination, many cities have their own anti-discrimination laws protecting additional categories of people. It should go without saying, but don’t reject, discourage or discriminate against a qualified prospect.
Home-sharing can be a great way to earn extra cash and to meet interesting people. Doing some homework in advance can help prevent unpleasant meetings with the enforcement authorities.
- Of Counsel
Jack S. Levey has literally "written the book" on Ohio real estate law. A co-author of "Baldwin's Ohio Practice, Ohio Real Estate Law," he is recognized as a leading commercial real estate attorney, successfully negotiating and ...
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