Arizona Vacation Rentals: A Primer

In 2016, Airbnb worked with the Arizona legislature and a bill was enacted to take effect on Jan. 1, 2017 at 00:01AM.

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SB1350 made it legal throughout the state of Arizona to allow vacation rentals (less than 30 days) in every county, town, and city in the State.  The exceptions are HOAs.  More about the HOAs later.

“VACATION RENTAL” OR “SHORT-TERM RENTAL” MEANS ANY INDIVIDUALLY OR COLLECTIVELY OWNED SINGLE-FAMILY OR ONE‑TO‑FOUR‑FAMILY HOUSE OR DWELLING UNIT OR ANY UNIT OR GROUP OF UNITS IN A CONDOMINIUM, COOPERATIVE OR TIMESHARE, THAT IS ALSO A TRANSIENT PUBLIC LODGING ESTABLISHMENT OR OWNER‑OCCUPIED RESIDENTIAL HOME OFFERED FOR TRANSIENT USE IF THE ACCOMMODATIONS ARE NOT CLASSIFIED FOR PROPERTY TAXATION UNDER SECTION 42-12001.� VACATION RENTAL AND SHORT-TERM RENTAL DO NOT INCLUDE A UNIT THAT IS USED FOR ANY NONRESIDENTIAL USE, INCLUDING RETAIL, RESTAURANT, BANQUET SPACE, EVENT CENTER OR ANOTHER SIMILAR USE.

SB1350 will affect the following statutes:  ARS 9‑500.38; ARS 11‑269.15; ARS 15-1650.01; ARS 42‑2003′ ARS 42‑5005; ARS 42‑5009; ARS 42-5010; ARS 42‑5014: ARS 42‑5070; ARS 42-5076; ARS 42‑6009; ARS 42-6013; ARS 42‑12003; and ARS 42‑12004.

It must also be disclosed at this writing that there is another bill passed by the Arizona legislature that shows just how far the legislature intends to go to make this and other issues work throughout the State:  SB 1487 which enforces through the AZ Attorney General’s office, “… ANY ORDINANCE, REGULATION, ORDER OR OTHER OFFICIAL ACTION ADOPTED OR TAKEN BY THE GOVERNING BODY OF A COUNTY, CITY OR TOWN THAT…VIOLATES STATE LAW OR THE CONSTITUTION OF ARIZONA.”  Our Sedona City Attorney calls this law, “Draconian”.

So you have a property and you want to vacation rental it?

First, ask yourself if you want to handle it yourself, or if you want someone else to manage it.  Consider these options:

  1. Self-manage:  This means you are available 24/7 when a guest is on the property.  They will expect you to run it like a hotel.
  2. Hire an unlicensed person to manage the property for you:  There is a lesser-known Arizona Statute ARS 32-2121(A)15 which says:  “A person who, on behalf of another, solicits, arranges or accepts reservations or money, or both, for occupancies of thirty-one or fewer days in a dwelling unit in a common interest development” is exempted from having to have a real estate license.  What’s a “common interest development”?  Because Arizona does not have a statutory definition, we will refer to Nolo.com:  “A type of housing, composed of individually owned units, such as condominiums, townhouses, or single-family homes, that share ownership of common areas, such as swimming pools, landscaping, and parking. Common interest developments (also known as community interest developments or CIDs) are managed by homeowners’ associations.”  Not just any single family home will meet the exemption.  Be careful who you hire.
  3. Hire an Arizona licensed real estate agent.  While you think this is more expensive and you want to monetize the property to the max, you may find that choices 1 and 2 are not worth the management and supervision hours you are required to put into a successful vacation rental.  Property Management is highly regulated by the State of Arizona and those companies are audited regularly for violations.  The Statutes require a Broker Trust Account if the licensee is to handle ANY landlord or guest monies.  Yes, it can be done without a Trust Account, but the owner must be responsible for all monies and basically the Property Manager will do the reservations, manage the property, do the monthly accounting, and invoice for a commission.

Long term rental vs short term vs vacation rental

Big difference.  Let’s get “long term” and “short term rentals out of the way.  If you lease a property for 30 days or more, your rental will fall under Arizona’s Residential Landlord Tenant Act.  So you get a call from someone who wants to rent your property through Airbnb for 30 days.  You book them.  You must abide by the requirements of the ARLTA and one of the most important provisions is ARS 33-1321 as it relates to security deposits, move-in, move-out, and penalties.  An agent asked me in a class if you could write up 2 vacation rental “stays”, but the people are the same people, just different agreement periods.  Or could you move them to another unit for the longer stay…  Suffice to say, I told them that the Court could decide that the intention was to circumvent the law.  The ARLTA is quite a balanced law and if done properly should be easy to follow.  Many people think that Arizona has balanced landlord and tenant wants, needs, requirements, and remedies.  Long term rentals are for another article.  This is an excellent site for long term rental information to get you started.  This includes any rental period of 30 days or more.

Vacation rentals are stays of 29 days or less

Vacation rentals fall under Transient Lodging which is an exemption under the ARLTA, ARS 33-1308(4).

It is further defined in ARS 44-5070(F):  “transient” means any person who either at the person’s own expense or at the expense of another obtains lodging space or the use of lodging space on a daily or weekly basis, or any other basis for less than thirty consecutive days.”

Note:  SB1350 will apply to this statute below.

ARS 42-5070(A):  The transient lodging classification is comprised of the business of operating, for occupancy by transients, a hotel or motel, including an inn, tourist home or house, dude ranch, resort, campground, studio or bachelor hotel, lodging house, rooming house, apartment house, dormitory, public or private club, mobile home or house trailer at a fixed location or other similar structure, and also including a space, lot or slab that is occupied or intended or designed for occupancy by transients in a mobile home or house trailer furnished by them for such occupancy.

ARS 42-5070(B)3:  Leasing or renting four or fewer rooms of an owner-occupied residential home, together with furnishing no more than a breakfast meal, to transient lodgers at no more than a fifty per cent average annual occupancy rate.

The Arizona Innkeeper Statute ARS 33-303:  Discrimination by landlord or lessor against tenant with children prohibited; classification; exceptions

A. A person who knowingly refuses to rent to any other person a place to be used for a dwelling for the reason that the other person has a child or children, or who advertises in connection with the rental a restriction against children, either by the display of a sign, placard, written or printed notice, or by publication thereof in a newspaper of general circulation, is guilty of a petty offense.

It should be noted that ARLTA applies to residential tenancies of 30 days or longer and the Fair Housing Act also applies (race, color, religion, national origin, sex, disability, and familial status).  Because your vacation rental may not fall under the Fair Housing Act, be assured that you need to consider non-discrimination as your business policy.  To help you understand, read this.

Under commercial situations, the Americans with Disabilities Act applies.  Disabilities must be considered and it is highly recommended that whether you do the management of the vacation rental yourself or have someone else do it for you, we would strongly recommend that you use both an application form and  a reasonable accommodation request form for service animals or therapy animals who are NOT pets and you cannot collect a pet deposit.  The reality is that many people on vacation want to bring their pets.  Many people are “buying” reasonable request forms online so they don’t have to pay a pet deposit.

Insurance.  Your homeowner’s insurance policy will not cover vacation rentals.  Be sure to let your insurance company know you are doing vacation rentals and make certain you are covered for “vacation rentals”, which are viewed differently from long term or short term rentals.

Taxes.  You will be required to have a business license and pay TPT (Transaction Privilege Tax).  You will have to contact Arizona Department of Revenue to obtain a tax number.  You must be certain that your vacation rental is listed as a vacation rental property with the county assessor.  If you use Airbnb or any other portal, they will collect the taxes and pay them directly to the Arizona Department of Revenue.  ADOR then sends the proportionate tax monies to the appropriate county, town, or city.  If you do your own management you will be required to file with ADOR.

Sound easy so far?

Consider that every guest will be rating you and your rental unit.  Your success will depend upon the review written about your property.  Do an online search of complaints so you can avoid the issues that are mentioned.  Be prepared to have people “scam” you to get a reduction in the nightly or weekly rate.  Be prepared to have someone threaten to give you a bad review even though your rental was in great shape and you thought everything went very well.

An Attorney.  You will have reason to find one at some point and since you should probably have operating policies, check around and be sure to find someone who can advise you on sticky issues.  The cost of good advice is worth the money spent.

I promised to tell you about Arizona HOAs and I will… in another post.

Bon chance mes amis!

May you be greatly successful in whichever choice you make regarding your property.  Planning is always the best way to be successful.

 

Kathy Howe, Owner/Broker/Educator/Administrator

Happy holidays from those of us at how2educate LLC and Lifestyles of Arizona LLC

  • 1120 W SR89A
  • Sedona, AZ 86336
  • 928-274-4088
  • kathy@kathyhowe.com

 

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