A Summer of Short-Term Rentals: Planned Community Considerations – Real Estate and Construction

Industry experts predict strong demand for short-term rentals in 2021, largely due to the reopening of the economy and pent-up demand for travel. While the decision to encourage or restrict short-term rentals will vary from project to project, at a minimum, the impending influx of vacation renters warrants a discussion and review of short-term rental policies at a minimum. the approach of summer.

Regulation of short-term rentals requires intentional action

Prior to 2018, many communities relied on restrictions and bans on “single-family dwellings” and “commercial uses” to regulate short-term rental activities. However, in
Tarr vs. Timberwood Park, the Texas Supreme Court has unanimously ruled that a “single-family residential” restriction applies to the type of structure, not the length of occupancy. This effectively ended the argument that unsustainable conditions in deed restrictions can limit short-term rentals. In short, if a community wants to regulate short-term rentals, there must be intentional action, and this action can take several forms.

Regulation of short-term rentals: by elimination

There are several methods to limit or eliminate short-term rental in single-family communities. The broadest form of regulation is prohibition. This is accomplished by amending the restrictions of the act. The amendment should, at a minimum, provide for a specific duration for prohibited leases, and should also define “single-family” to specifically regulate the use of the dwelling, not just the type of construction. For example:

“A dwelling, or the land on which the dwelling is located, or any part of the dwelling or the land (including any other building or structure on the land), may only be leased for single-family residential purposes. does not include, and expressly excludes, a Lease for temporary accommodation (including, but not limited to, a hotel, motel, tourist residence, tourist land, lodging house, inn , a rooming house, a bed and breakfast, a vacation rental such as AirBnb, VRBO, etc., or corporate accommodation), for a period of less than ninety (90) days. “

The above provision addresses several issues that arise in the context of short-term rental. First, it includes an express term of 90 days as a minimum lease. Second, it encompasses not only the dwelling, but also the “lot”, thus preventing an exterior lease. Third, it specifically defines the uses prohibited by the expression “single-family residential purposes”. And fourth, it specifically mentions short-term rental sites, thereby avoiding the argument that the provision simply prohibits owner-occupied traditional guesthouses.

Caution should be exercised when implementing a blanket ban. Exceptions may be necessary. For example, when a landlord sells their home and delivers the home to the buyer under a temporary residential lease until closing, this may technically violate the above provision, but it is not. the kind of behavior that was supposed to be prohibited.

To deal with emergency situations, the amendment may include a provision that gives the registrant or association the power to grant exceptions to the requirement that a lease must be for a term of at least four – ninety (90) days in the event of significant difficulties, for example an unexpected delay in the construction of a house requiring short-term accommodation.

As a final guarantee, the amendment may require that each lease be in writing and may further allow the Association to request a copy of any lease within a prescribed period (eg three working days).

Regulation of short-term rentals: by limitation

If the community would be better served by reducing the number of short-term rentals, but not eliminating all short-term rentals, a registrant or association may choose to limit rather than eliminate.

In the context of condominiums, the Texas Uniform Condominium Act gives an association the power “to adopt and modify the rules governing the use, occupation, rental or sale, maintenance, repair, modification and the appearance of units and common items, as long as the settlement actions affect common items or other units. ”This authority extends to limiting the percentage of units available for rental, to minimum lease term and the requirement that all leases be in writing and subject to disclosure upon request.

In the context of single-family homes, a community may want to allow rental in one section, but not in another. By modifying the statement for specific sections, long-term residents can restrict short-term rentals to a certain area within the community.

Regulation of short-term rentals: by incorporation

A final option is to develop a “build to rent” section from the start. The development of building to rent maintains the look and feel of the single family community, while expressly providing for rentals. In 2017, 37,000 rental units were built. In 2018, that number increased to 43,000. According to the Urban Institute, approximately 16 million rental units are single-family homes today, and an additional 13 million rental households are expected to be formed by 2030. With this projected growth , build-to-rent is a proactive and forward-looking concept.

Conclusion

The battle over whether short-term rentals are good for communities rages on. But if the pandemic has shown anything to the real estate market, it’s that these businesses are resilient and successful – and will only grow in numbers. Taking a proactive approach after careful consideration of the needs of the intended community, especially during the registrant’s control period, is essential to preserving and protecting the character of the development – whether through elimination, limitation or incorporation.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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