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District Court Comments on Short-Term Rentals

  • District Court Comments on Short-Term Rentals

    District Court Comments on Short-Term Rentals

    As residential communities and complexes struggle to deal with the growing trend of short-term rentals from companies such as Airbnb, organizers turn to courts to codify the limitations of these types of arrangements. In regards to this growing issue, the First District Court of Appeal issued a ruling in the case between the Santa Monica Beach P.O.A v. Acord. The case involved the Acord family listing their home on a short-term rental website and obtaining a transient rental license in a corporate name, while collecting certain state and local taxes. The Santa Monica P.O.A stated that this violated a restriction in their covenants which said that the land can only be used for residential purposes instead of business or manufacturing purposes.

    The court granted a motion to dismiss with prejudice, stating that the use of the property for short-term rentals was still a residential usage, rather than a commercial or business usage. More broadly, the court determined that short-term vacation rentals did violate the restriction against business usage. In its decision, the court focused mainly on the fact that the renters use the property  as a home instead of something closer to a hotel, and cited other law saying that a rental does not transform a property from a residence to a business.

    The district court commented that, in the case of Santa Monica Beach, the association didn’t have a specific part of their rules that specifically governed short-term rentals. Santa Monica Beach, along with many other business struggling with the issue, are trying to restrict and govern these kinds of rentals using outdated contracts, such as the one commented on by the court. It can be hard to deal with renters when they have left in a short period of time using specific restrictions, which is why it’s recommended that associations get ahead of the trend and create specific restrictions dealing with short-term rentals in their properties, before it becomes a larger issue within heavily-trafficked areas. If it can be spelled out to those renting the property what is or is not allowed, confusion and legal battles can be avoided. As well, associations can provide better service and assistance to those engaging in short-term renting, which can increase the overall quality of stay for those renting and others within the residential community.