An ongoing question: Can Short-Term Rentals Be Stopped?

One of the most frequently asked questions from our association clients over the last year or two is “What can we do about all of the short-term rentals in our community?” In a typical lawyerly fashion, we often respond with “it depends”. Unfortunately, the answer to this common question really does depend almost entirely on the language found, or not found, in your association’s CC&Rs. To further complicate the issue, the law was changed a few years ago making it more difficult for associations to regulate rentals and it does not appear that the state legislators will be reversing this trend any time soon. So, if your association is experiencing this problem, what can you do?

Start by reviewing your CC&Rs. According to current Arizona law, owners in an association are allowed to use their property as a rental property unless prohibited by the CC&Rs and owners are required to use their property in accordance with any rental time period restrictions found in the CC&Rs.[1] Therefore, in order to limit or restrict short-term rentals, you will need to search the CC&Rs for any applicable language. Common language, which is typically found in the “Use Restriction” section of the CC&Rs, will either prohibit rentals all together or will require a lease agreement be in writing for a certain minimum term. The association will be limited by whatever language currently exists in the CC&Rs. Please also understand that any language restricting rentals found in a governing document other than the CC&Rs (i.e. Bylaws, Articles of Incorporation, etc.) is not enforceable.

Assuming you find language in the CC&Rs you can rely on, a violation of said language should be treated as any other violation of a restriction or rule in your community. Depending on the documents of your association, this may include sending notices of violation, imposing fines, suspending certain rights of the owner, or filing a lawsuit if the violation persists. If you are experiencing short-term rental violations in your community, you will need to document the violations as best as you can. You should look for and save the rental ad from websites such as Airbnb or VRBO. You can document the frequent turnover of tenants on the property. You should also save any and all communications with the owner regarding the violation. Hopefully, these violations can be resolved without having to resort to litigation as these types of lawsuits can be difficult to win and are expensive for the Association.

What if your association’s CC&Rs does not adequately address the issue of short-term rentals? The association does have other options it may consider. First, Arizona law allows the association to demand certain information from the owners renting their property. The owner can be asked to disclose the name and contact information of the adults occupying the property, the time period of the lease, including the start end dates, and a description and license plate numbers of the tenants’ vehicles. In age-restricted communities, the age of the tenant can also be verified. Realistically, with short-term rentals this may not be feasible and may not be helpful. Nevertheless, the association should enact this policy for all rental properties in the community.

The association may also consider amending its CC&Rs. This option is more realistic for planned communities than condominiums as a condominium association will likely need the approval of 100% of its owners to insert or amend rental restriction language in its CC&Rs.[2] Amending the CC&Rs can be a very difficult proposition due to the approval requirements, but if the problem with short-term rentals in your community is big enough, the option may be worth at least considering.

The association can also look to other restrictions in the CC&Rs that the owner and his or her tenants may be violating. It is very common with short-term rentals to experience problems involving traffic, parking, trash, noise, and other nuisances. Chances are your CC&Rs contains use restrictions that govern and or prohibit these issues. Associations can also look to see if an owner has registered the property as a rental with the county assessor. Failing to do so is a violation of Arizona law and may trigger language in the CC&Rs that requires owners to abide by the law. While enforcing these violations may not reduce the number of short-term rentals in your community, it may help with the negative repercussions of the underlying issue.

The current law certainly favors owners being able to freely use their property as a rental, despite the harmful impact short-term rentals can have on a community. Efforts can be made to try and change the law regarding rentals or change the law making it easier for associations to amend the CC&Rs. Residents of a community impacted by this problem can and should get involved in the legislative process. You can contact your local representative and make your concerns known. There is power in numbers.

The issue of short-term rental properties is plaguing many associations and meaningful solutions may not exist. However, if you are a member of your board of directors and your community is struggling with this issue, I would recommend you meet as a board and talk to your community manager and the association’s legal counsel to explore your options and see if the problem can be remedied.

 Quinten T. Cupps is a partner at Vial Fotheringham, LLP whose practice focuses on representing homeowner and condominium associations throughout the state of Arizona as general counsel and in the areas of enforcement, collections, and civil litigation.

[1] A.R.S. §33-1806.01 & §33-1260.01

[2] A.R.S. §33-1227(D)

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