CREJ - Journal

March 4-March 17, 2015 —

COLORADO REAL ESTATE JOURNAL

— Page 17

Law & Accounting

he current vanguard of

consumer Internet ser-

vices is those that pro-

vide user-to-user marketplaces

for goods or services. We hear

daily of the market and financial

success of Uber, Lyft, Homeaway,

VRBO.com and AirBnB. These

services connect providers and

users directly with little interac-

tion with or management by the

application’s creators or provid-

ers. This type of service dates

back to Internet pioneers such

as eBay and Craigslist, but the

services on offer these days are

closer to home and reflect a high-

er level of trust by the consumer

in the provider and vice versa.

Where we were once warned

to keep all interactions at arm’s

length, these services encourage

the parties to share spaces as per-

sonal as our cars and homes.

There have been a number of

news stories recently about when

these transactions go awry. The

recent reports of a NewYork City

co-op and even a San Francisco

office being booked through such

apps for wild sex parties relate

the plight of the property owners,

but seldom reflect the impact of

these activities or even the more

benign uses of Internet rentals

on neighbors. These stories may

seem humorous from a distance.

They are less so when they hap-

pen next door.

VRBO.com, Homeaway, AirB-

nB and similar services are par-

ticularly popular in the Colorado

resort communities, where prop-

erty owners have found these

services a ready means by which

to rent their property without

sharing a portion of the proceeds

with an established, full-service

rental management company.

These services also have brought

short-term rentals to condomin-

ium communities in Colorado

where such vacation rentals were

not practical or popular before.

In resort condominium com-

munities, where neighbors live

in close quarters and contact,

impacts or perceived impacts of

these and other short-term rent-

als are particularly apparent and

problems have arisen. These

problems include any number of

the following:

First, such rentals are, by defi-

nition, conducted by nonprofes-

sional landlords. Therefore, from

the initiation of the arrangement

theremay be a lack of attention to

collecting adequate deposits and

informing tenants of the rules

and regulations, parking restric-

tions, how to

access to the

building or

facilities and

other issues.

Professional

rental manag-

ers typically

address these

matters and

have a vested

interest

acting upon

them.

S e c o n d ,

such rentals

often can be on very short notice,

from far remote locations by peo-

ple with few or no ties to the local

community. This raises a con-

cern, real or imagined, regarding

the quality of the tenants and

their sensitivity to the rights of

neighbors.

Third, short-term renters in

general lack an attention to the

condominium rules and regu-

lations. This problem may be

exacerbated with Internet renters

based on the characteristics dis-

cussed herein.

Fourth, such online rentals are

arranged by an owner who is

off-site and often out of town,

out of state or even outside of

the country. Therefore, there is

no one nearby for the renters

to contact for information, ser-

vices or complaints. This often

results in tenants relying on on-

site property managers or neigh-

bors for these services. When

a property manager provides

additional services, the own-

ers association is often billed,

spreading that cost to all own-

ers and neighbors. Many would

agree that these costs should be

borne by the landlord. In some

cases, the accommodations are

not as represented or at least as

expected by the tenant. In such

cases, property managers, who

often are completely unrelated to

the transaction, have ended up

bearing the brunt of the guest’s

displeasure. Likewise, a neigh-

bor with a complaint is unlikely

to be able to contact the prop-

erty owner directly. This leads

to frustration within the com-

munity, and often the aggrieved

owner contacts the association’s

manager, again incurring costs

for the entire association. These

latter issues are exacerbated in a

community that provides front

desk, recreational amenities or

in-house rental services. The cost

of such services is sometimes

defrayed by the owners’ partici-

pation in these programs. Con-

do-hotel, timeshare or borderline

condo-hotel communities pose

some of the trickiest questions in

this area.

What then can a homeown-

ers’ association do to address

these concerns? The first and

most severe remedy is to forbid

short-term rentals. Such restric-

tions are not uncommon in some

higher-end resort communities.

However, this is the blunt-instru-

ment approach and is seldom

reasonable in light of the fact that

many resort condominium own-

ers rely on vacation rental income

in some form to offset the cost of

their unit. In addition, a rental

restriction is a use restriction that

can only be accomplished by an

amendment to the condominium

declaration. Such an amendment

generally requires a super-major-

ity vote of the members. There-

fore, if even a minority of the

members rent or might want to

rent their units in the future, such

a restriction will not pass.

Another approach has been

to attempt to restrict short-term

rentals to those booked through a

certain rental management com-

pany or a rental management

company meeting certain crite-

ria. The criteria might include

approval by the association’s

board of directors or only those

management companies with

an on-site representative or local

office, on-call availability or other

restrictive characteristics. It is

arguable whether such restric-

tions would require an amend-

ment to the declaration or can be

achieved through the association

rules. Beyond that question, there

are economic and political prob-

lems with this solution. First, if

the rentals are restricted to a cer-

tain management company, that

company will immediately lose

many incentives to perform well

on the property. After all, that

companywill have an immediate

lock on all rental business. The

same is true, perhaps to a less-

er extent, with a restriction to a

group of companies approved by

the board. In addition, because

an association is a political ani-

mal, no matter which or how

many managers are approved,

there will almost certainly be dis-

sent within the membership as to

those decisions and the board’s

impartiality in making them.

Finally, with association man-

aged rental programs, there is the

Homeowners’ association options with growth of online renters

Eben P. Clark

Counsel,

BakerHostetler,

Denver

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