Q.  My buyer client wants to purchase a condo to rent on the short-term rental market. What do I need to know?

A. There are several factors that you should take into consideration. Alert your buyers that they should research these issues:  

(1) Buyers should first ensure that the neighborhood, building, and/or locality allow short-term rentals. Condos and HOA boards commonly prohibit short-term rentals, and some jurisdictions have ordinances that also prohibit them.  

(2) If the purchase is being financed, buyers should talk to their lender, as the lender may require additional insurance coverage. 

(3) Buyers should determine whether they will need a license or permit to use the property as a short-term rental, and whether they will have to pay an occupancy or similar hotel tax.  

Buyers should also determine whether the following requirements apply to the jurisdiction where the property is located:
• Short-Term Rental Business Registration.  Owners or operators of a short-term rental business may be required to register. A business license may be required in cases where the proceeds of the short-term rental become significant.
• Record-Keeping. Owners of short term rentals may be required to maintain records relating to the frequency of rentals, guest identification, dollar amount of the rentals and taxes assessed, among other information. 

Taxes. Most counties and cities impose a transient occupancy tax on hotels, inns, vacation homes or houses that offer lodging for four or more transients at any one time. The current tax rate in Arlington and Prince William is 5 percent on the total amount paid by the guest. In 

Fairfax that tax rate is 2 percent.  In the city of Alexandria, it is 6.5 percent, plus one dollar per day. A “transient” is defined as a person who occupies lodging for less than 30 days. 

Q.  I have been contacted by homeowners who would like me to help them advertise their property for short-term rentals. What do I need to know?

A. While the agency statute in Virginia does not specifically address working with short-term rental landlords, the provisions apply equally. The relationship you have with a client in the context of a short-term rental is no different than the one you would have with a landlord leasing property for a long term. Therefore, you will need to enter into a listing agreement that describes the terms under which you are authorized to advertise the property for a short-term rental, the listing agreement duration, any compensation structure, etc.  

                     

Sarah Louppe Petcher is general counsel for NVAR