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How Restrictions on Short-Term Rentals Can Affect Property Managers and Real Estate Agents

A growing number of locations are introducing tighter restrictions on short-term rentals. This is posing significant challenges for property managers, especially those who work across different districts. And for real estate agents selling properties that could potentially be used as short-term rentals, it’s important to understand restrictions in your market areas.

In this blog, we’ll explore how short-term rental restrictions can impact property managers and real estate licensees, as well as  strategies to help mitigate the risks. 

Why Regulations Exist

As the holiday rental market has matured, many local governments have begun to increase the regulation of short-term rentals in their areas. Regulation helps to maintain community harmony and prevent community complaints, noise violations, and the worsening of the housing crisis. Regulations vary across locations. For instance, short-term rental rules in Aspen, Colorado, are completely different to the regulations in San Diego, California. This creates a complex landscape for property managers to try and navigate. 

What Could Go Wrong?

Property managers act on behalf of the landlord and have an obligation to ensure all tenancies comply with local regulations. If something goes wrong, you could face lawsuits coming from multiple directions — from the tenant, the landlord or the local government. 

So, what could go wrong when dealing with short-term rentals?

A busy property manager might inadvertently:

  • Rent a property for short-term use in an area where that is not allowed. 
  • Incur safety code violations if short-term rental safety regulations are non-compliant 
  • Fail to obtain (or cite) the correct permits from the landlord before proceeding with short-term tenancy
  • Become embroiled in noise or nuisance complaints

Property managers could also be sued by clients/landlords if they feel they have been negligent or breached their contract in any way. 

Tips for Property Managers and Real Estate Agents

Lawsuits are expensive and stressful and can cause severe reputational damage to your real estate business. It’s always better to be proactive and manage the risks, so you can act quickly and minimize the consequences to your real estate business.

Keep Abreast of Changing Regulations

As the short-term rental landscape is constantly evolving, property managers and real estate agents must keep a close eye on potentially changing regulations. This means following local government announcements and information via your real estate network. Staying well-informed can help to protect yourself and your clients from costly lawsuits. 

Document Communication with Landlords

Encourage open and honest communication with your clients. It’s a good idea to document your conversations and practice good record-keeping. This means requesting a copy of any relevant permits from landlords, rather than just accepting their word that they have them. Good records are not only good practice, but they can help you defend against a lawsuit if you face one in the future. 

Seek Legal Advice

If you are uncertain about an aspect of short-term rentals, seek professional legal advice. A qualified real estate attorney can be a useful asset to help you navigate the intricacies of complex tenancies. 

Regularly Audit/Review Your Short-Term Rental Procedures 

Property managers should regularly audit/review short-term rental procedures to ensure compliance. This means that any compliance issues should be fixed before they become complex problems leading to a lawsuit. 

Double-check Your Marketing 

When marketing a property for lease, property managers must ensure information is accurate and not misleading to prospective tenants. That means making sure permits are in place well before marketing begins, so tenants know exactly how long they can stay at the property before they commit to renting it. 

fOf course, property managers aren’t the only real estate professionals who need to navigate short-term rental regulations. Real estate licensees who are selling properties also need to be aware and be very cautious when marketing a property with short-term rental potential. 

Protect Your Real Estate Business and Defend Lawsuits

Real estate professionals face risks every day. To make sure your property management and real estate business is protected in case of a lawsuit, it is essential to have the right  insurance protection.

With CRES Errors & Omissions Insurance + ClaimPrevent®, you can also access legal advice when needed from a team of highly qualified real estate attorneys. These expert attorneys are available to help you prevent claims and give you peace of mind you’re doing all you can to minimize the risks in your business.

As part of one of the largest insurance brokers in the world, CRES has access to more real estate E&O and property manager E&O options than just about anyone else. Let us find you the best protection for the best price.

Contact CRES for a confidential discussion today on 800-880-2747.

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