Can Your Lease Ban Short-Term Rentals?

The Basics: Can Your Lease Ban Rentals?

Your lease is a contract that states what you can and cannot do with the home you are renting. As a general rule, you can do anything your lease does not prohibit. Lease terms you need to watch out for include the following:

• Not being able to add a roommate without the landlord's permission.
• Limits on the number of guests you can have at a time.
• Limits on the amount of time guests can stay.
• Restrictions on using your home for business purposes.
• Restrictions on subleasing your unit.
• Bans on specific activities such as sharing apps.

For short-term rentals, you should also be aware that state and local laws and ordinances may prohibit them or set restrictions. You would need to follow those laws even if your lease has no restrictions on short-term rentals.

Why Is Your Landlord Worrying about You Renting Out Your Home?

Landlords have several valid concerns about tenants renting out their rented home. If your landlord will not let you do it, ask them why. If you can address their concerns, they may be willing to change their rules or make an exception. Landlords may be worried about tenants renting out the property for the following reasons:

• Inability to screen renters – Before you signed a lease, your landlord probably ran a background check for past evictions, lawsuits, criminal convictions, and income verification. They wanted to know that you would pay the rent and would not cause problems for them or your new neighbors. Allowing someone else to move in, even temporarily, without going through your landlord means they cannot do their usual screening process, which may be far more thorough than what you intend to do.
• Squatters – The screening process is not just about what happens during the lease. Landlords also worry about a guest overstaying their welcome. Once someone stays beyond the minimum length of time required by your state, the landlord cannot remove them without going through the legal eviction process. This costs them time and money that they may not be able to recover in court if they never got a chance to screen the squatter for their ability to pay.
• Damage – While you might treat and care for the place you are living in as your own, a short-term guest may not. Even if they do not cause intentional damage or throw a wild party, they often will not exercise the amount of care that a long-term renter would. While your landlord could come after you for any costs, they would rather avoid having to deal with damage in the first place.
• Annoying neighbors – Having people coming and going like a hotel can add extra noise and traffic that poses a nuisance to your neighbors. If neighbors are also tenants of your landlord, then that could mean the landlord has to deal with complaints or may lose rent if they move out. Even if your neighbors are separate owners or tenants of someone else, your landlord risks losing goodwill in the community and may be responsible for noise violations occurring on their property.
• Legal violations – As the owner of the property, your landlord may be personally responsible for not allowing activities that violate local laws on short-term rentals or business activities in residential areas. By allowing you to engage in such activities or not stopping you when they become aware of them, they could end up having to pay fines out of their own pocket.

What Happens If You Break the Rules?

If you violate your lease with unauthorized short-term rentals or subletting, it could lead to your eviction. At a minimum, your landlord has the right to serve you with a notice to cure or quit. This means that your options are to stop your rental activities or to leave the property you are renting. If you choose to leave, you will be liable for the remaining amount of the lease just as in any other situation where you broke a lease by moving out early. Depending on the terms of your lease and local laws, your landlord may have the option to go directly to court to seek an eviction without giving you an opportunity to remain in the unit.

What If Your Lease Is Silent?

If your lease is silent on short-term rentals or subletting, it generally means they are permitted by your lease if they are legal in your area. Your landlord got a chance to say no when they signed the lease, and their failing to do so implies consent.

Can Your Landlord Change the Rules?

A lease is a binding contract through its expiration date. Neither you nor your landlord can change it on your own.

If you want a change to your lease, such as being allowed to rent out your second bedroom on an app, you can negotiate with your landlord to change the lease or sign a new lease. If your landlord wants to make a change, such as banning short-term rentals, they can either negotiate with you to make the change or wait until the lease expires.

Once the lease expires, your landlord can amend your lease by adding new terms as a condition of accepting it. You can try to negotiate, but your landlord has the right to make it a 'take it or leave it' offer. If your landlord was particularly upset by your rental activities, they can refuse to renew your lease under any circumstances. Keep this in mind if your lease is silent on short-term rentals and you are deciding whether to talk to your landlord or just do it.

What If Your Lease Goes Against the Law?

As a general rule, if a provision in a lease breaks the law then that provision of the lease is invalid, but the rest of the lease remains in effect. Some jurisdictions do not allow restrictions on guests, roommates, or sub-letters or restrict a landlord's ability to withhold consent. For example, you may have to add someone to the lease, but the landlord may not be able to say no to doing so if that person can pass their usual background checks.

These laws were not passed to allow short-term rentals. Instead, they were passed to allow for situations like someone having to move for a new job, or a family member or significant other moving in. If you try to push the boundaries of the law to force your landlord to allow short-term rentals and end up in court, the judge may not be sympathetic to your argument if it falls in a legal gray area.

What Should You Do If You Want to Rent Out Your Home?

Whether you want to rent out a room or your entire home, or you want a short-term or long-term renter, then if you are a renter yourself it all comes down to your lease agreement. In addition, there are a few more steps to take to protect yourself.

• Lease between you and your landlord – Spell out in your lease exactly what type of short-term rental activities you want to do. This is especially true if you are looking for something closer to a roommate rather than a constant stream of temporary guests. For example, you might be in a college town and want to have students stay for a single semester. Having the lease restrict activities you do not want to do may eliminate the things your landlord is uncomfortable about. You may also be able to offer something like an increased security deposit to provide financial assurance.
• Lease between you and your renters – Anyone who is not on your main lease should have a sublease agreement with you. For a roommate or long-term sub-letter, this will probably be a formal subleasing agreement that you write out on your own. For short-term rentals through an app, there will likely be a standard agreement within the app that you should review carefully to ensure it meets your needs. In some cases, you may be able to add additional house rules that become part of the rental terms. These should address any restrictions in your lease, things to keep your landlord and neighbors comfortable, and any local rules or laws.
• Check for permitting requirements – Even if your local laws allow short-term rentals, you may need a permit if it is considered a business activity. Check with your city or county as it will vary by locale.
• Don't forget taxes – In addition to reporting your rental income on your income tax return, you may need to collect sales or lodging taxes as well as pay business taxes. Check with your accountant, because this will vary based on where you are, how long your rentals are, and how frequent your rental activity is.
• Remember that you are a landlord – If you rent out your couch for a single night, you have become a landlord. All of the things your landlord worries about when deciding whether to allow short-term rentals become your worries. Even though it is not your property, you are still financially responsible for anything that happens. If there is property damage, your landlord has the right to sue you instead of trying to chase down your renters who caused the damage. Be sure to screen your renters and to enforce any rules set by you, your lease, or the law.
• Listen to your neighbors – Neighbors will often be uneasy about short-term rentals because of possible noise or strangers coming and going. Even if you are allowed to do short-term rentals now, irritated neighbors may try to convince your landlord to stop you or petition the city council to change the law. You can prevent this by being a good neighbor. Let neighbors know what you are doing, to call you if there are any problems, and address any problems that happen.
• Know your eviction laws – If a problem does happen, you want to be able to act quickly. Know your local eviction laws including when you can ask a short-term guest to immediately leave and when you need to go to court to file a formal eviction proceeding. Knowing your rights now will save you from having to figure things out in an emergency situation and avoid the possibility of being sued for a wrongful eviction.