DANGERS OF SHORT TERM RENTALS and MORE FAIR HOUSING: A VIEW TOWARD THE HORIZON

Posted By: David Fritsche Industry ,

SHORT TERM RENTALS:


The Dangers:

Short term rentals (“STRs”) utilizing platforms such as AirBnB and VRBO pose serious challenges to owners and management companies in Texas. First, because STRs have exploded on the scene, there is not yet any broad form statutory framework that governs their operation; municipalities like San Antonio currently have minimal regulation for STR operators within the city limits, but San Antonio is considering a major overhaul of their STR ordinance. In addition, STRs on site implicate statutory duties for the property under the Americans with Disabilities Act (“ADA”). The San Antonio area has a unique problem as it is a desirable vacation spot attracting tourists year round leading to residents utilizing STRs.

 

The problems with STRs are numerous; when you or one of your residents utilize an STR platform, you must be concerned about:

 

  1. Losing control over the back-ground of the STR renter and the attendant problems that can arise if an unqualified individual or individuals are occupying your unit;
  2. Losing control over the number of persons using the unit;
  • Creating noise and practical nuisances for residents when the unit is utilized for social events such as all night “bachelor parties;”
  1. Whether your financing documents allow STRs, or, do STRs create a default under the deed of trust;
  2. Whether your liability insurance policy provides any exclusions for perils that arise from allowing or consenting to STRs and the problems that can arise from STRs;
  3. Registration of an STR usually requires a fee, the city’s inspection of the STR and the installation of safety items such as exit signs and fire extinguishers;
  • Who is responsible for remitting STR hotel occu-pancy taxes, compliance with city ordinances governing STRs and how is the risk and responsibility for the STR allocated under those ordinances.

 

ADA Implications of STRs:

            The most concerning aspect of STRs is the application of the ADA. Once STRs are introduced into the community, your entire community becomes an “area of public accommodation” that is subject to the provisions of the ADA. For instance, instead of only your office, the entire community and all amenities must be accessible to the entire public, including, but not limited to, the club room, the workout room, the business center, the pool and the spa. You will likely have to install, or have available, a lift at the pool and spa to allow a mobility-impaired person to access the pool or spa.

 

TAA Lease Provision on STRs:

            The current TAA Lease provides a complete prohibition of any STR:

 

30.3 Rental Prohibited. You agree that you won‘t rent, offer to rent or license all or any part of your apartment to any­one else unless otherwise agreed to by us in writing. You agree that you won‘t accept anything of value from any­one else for the use of any part of your apartment. You agree not to list any part of your apartment on any lodg­ing rental website or with any person or service that adver­tises dwellings for rent.

 

Consequently, you currently have the right to either issue a Notice to Vacate for Non-Delinquency Breach of Lease or a Lease Violation when this provision is violated.

 

Developing an STR Policy:

You will likely need to develop a comprehensive policy on STRs if you:

  1. Completely prohibit STRs;
  2. Utilize or allow STRs; or
  • Simply “look the other way” if STRs are occurring on the property.

With items ii. and iii. above, be prepared to address ADA concerns as there are multiple disabled advocates that regularly “shop” properties for ADA and Fair Housing Act Design and Construction compliance and file lawsuits when properties are out of compliance.

 

            The area of law around STRs will continue to evolve and develop; keep informed by monitoring SAAA, TAA and NAA advisories regarding this rapidly changing area of the law.

 

FAIR HOUSING ACT HORIZON:

The Fair Housing Act continues to evolve with the change in presidential administrations and with new Secretary of Housing and Urban Development (“HUD”) Ben Carson. Notwithstanding the general Trump administration theme of less regulation of business in general, HUD has been slow to change or revise the rules and guidance that issued during the Obama Administration under Secretary Julian Castro. Fair Housing advocates, such as non-profit Fair Housing Initiative Programs like the Fair Housing Council of Greater San Antonio and private attorneys continue to file complaints under existing law, regulations and guidance. This article discusses the issues that are on the horizon in the realm of Fair Housing and which you need to have on your radar screen.

 

Occupancy Standards:

            Under the protected class of familial status, the occupancy standards for the number of adults and children per bedroom has been fairly settled law since HUD re-adopted the 1991 Keating Memorandum in effective in 1999. The Keating Memorandum was issued by the general counsel of HUD to instruct HUD investigators regarding the considerations when a complaint was filed regarding discriminatory occupancy standards. The Keating Memorandum requires that multiple factors be taken into account when considering the occupancy restrictions imposed by a community regarding the maximum number of persons per bedroom. The Keating factors include size of unit, size of bedrooms and whether there are any bonus rooms such as studies or dens that could be utilized as a bedroom.

 

Lawsuits for violations of occupancy standards have recently taken off again in the Midwest United States. It may be that in the nineteen years since the Keating Memorandum’s adoption there has been another generation of owners and managers introduced to the industry who are neither aware of nor familiar with the limitations under Keating, which basically state that the legal limitation is “two persons plus a child under the age of [insert number] per bedroom,” with a minimum of “two years” being the age of the child to place you in a safe harbor.

 

If you are not familiar with the Keating Memorandum, access it here: https://www.hud.gov/sites/documents/DOC_7780.PDF and conduct a Keating audit.

 

Children’s Rules:

Children’s rules continue to be a basis for lawsuits, most recently in Federal Court in the Rio Grande Valley; specifically, improper age limitations for use of the pool, workout room and other amenities may be the basis for a lawsuit. If your company has not created a consistent, non-discriminatory policy regarding age limitations, you should do so now.

 

Serious consequences concerning children’s rules sometimes occur after takeover of a property; you must carefully review during the due diligence period what rules are in place before takeover and if they are in any way discriminatory or inconsistent, or, the rules have inconsistencies with the lease or your policy, you should immediately revise the rules to place you in a safe harbor so that no prior management company rules that could be deemed to be discriminatory will be applied to you.

 

Criminal Background:

HUD is currently considering revisions to the 2013 guidance it issued regarding applicants with a criminal background and the resulting disparate impact on persons within certain protected classes. A public comment period ended in August and there will likely be significant revisions to the guidance issued sometime this year.

 

HUD Guidance in General:

Since February of 2018, the multi-family housing industry has been told by HUD to expect significant changes in guidance on Fair Housing issues. The author anticipates changes that will significantly and favorably affect your practice and walking back the “gotcha” mentality that has reigned on the advocacy side.


                       

  1. David Fritsche is an attorney with The Law Offices of R. David Fritsche, General Counsel to the San Antonio Apartment Association, and engages in the practice of landlord/tenant law and civil litigation. He can be reached at (210) 227-2726, facsimile (210) 227-5550.