Short Term Rental Bans & What Realtors Need To Know

short term rental bans

What Real Estate Agents Should Know About Short Term Rental Regulations

 

The sharing economy has been a topic of widespread interest as it has grown and become a part of everyday life for many Americans.  In real estate, organizations like Airbnb and VRBO allow homeowners to rent out their homes on a short to medium term basis to vacationers and others.

This has provided a nice option for homeowners in Southern California to defray costs in an expensive real estate market.  This is especially significant for those who live elsewhere and purchased a home here as an investment property, for those who purchased their home in Southern California as a second home, and those with a second home elsewhere.

However, unintended consequences of this model have surfaced — from the decrease in housing stock in a tight market, to neighbors expecting to be living in a nice quiet neighborhood, finding they are essentially living next to a hotel — cities in Southern California have moved to crack down.  This is particularly relevant to renters in Los Angeles, a city which heavily regulates the ability to rent your home on such sites.

The Law in Los Angeles

Under the Los Angeles law that came into effect on July 1, 2019, hosts must register and pay an $89 fee to the city. Hosts can only register one property with the city at a time and the property must be their primary residence (where they live at least six months out of the year). Rentals are limited to a 120-day annual cap, meaning that a host who otherwise complies with all other regulations still cannot rent the home out if it has been rented for 120 days in a year.

Essentially, you can only rent out your primary residence, and even then only for 120 days per year.  For many purchasers who do not intend to live in a house full time, this may affect the calculus as to whether it is worth purchasing a home in Southern California.

What Agents Should Know and Disclose

For real estate professionals, these bans are important because one would arguably have a duty to disclose this to a client if one has reason to know that they are purchasing the house not as their primary residence and may be planning to rent it out on a short term basis.  In such a situation, the agent should disclose these laws to the client both in a conversation and in writing.

For instance, if you have a client abroad that you know is purchasing the home as an investment property it would be a good idea to have a conversation about the law and send a brief written communication advising them of the law (basically the brief description of the law in this article is sufficient) with other relevant disclosures. Similarly, if the client at all mentions they are thinking of buying a property and renting it out part of the time, such a disclosure should be made.

Of course, if your clients are planning on purchasing a home as their primary residence and make no mention of renting it out, then an agent likely wouldn’t have much responsibility to disclose. Still, it always pays to be aware of these kinds of laws and disclose both in conversation and follow up with written communication that references the conversation if you think it at all could be an issue.

About John Maseredjian

John is the Vice President here at JohnHart, and as such is responsible for managing and directing the firm towards obtaining its ultimate goals. He is also one of our main contributors on the Gazette, and a licensed real estate agent. (please see his agent page on the main site for more information.)

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