As of July 1st, Los Angeles' new short-term rental law went into effect, and Airbnb is enforcing that new law. While the ordinance makes it legal for homeowners who secure a permit to list their properties on home-sharing websites such as Airbnb and VRBO, if you rent your space, you must prove you have your landlord’s written permission before you can create an Airbnb listing.
As stakeholders in the short term rental markets adapt to new regulations, they must keep in mind that the industry is maturing and evolving into a permanent part of the real estate fabric going forward. There will be growing pains to say the least, but the adoption of regulations means that the short-term rental market is here to stay for those who can comply. Here’s how for renters….
The ordinance explained
The LA home-sharing ordinance is relatively flexible compared to other regulations seen in other regions. The primary requirements to rent out a space are that the property is zoned for residential use; is not subject to rent control or other affordability programs; and that the host resides in the property for at least six months of the year. The property also cannot have outstanding citations for safety or code violations.
The core of the law is a new permit system that goes into effect on November 1, 2019. Hosts after that date must register their properties online with the city. That registration number must be posted on all their listings platforms such as Airbnb.
The standard city fee for a home-sharing permit is $89 per year — which covers rentals for up to 120 days annually. If a host wants to rent their space more frequently, they have to pay an additional fee of $850.
Hosts are not required to be onsite during a guest stay. However, they are required to prove that they live in the space for at least six months of the year.
Properties listed and/or used for home-sharing must be real flats, apartments, condos or homes: Vehicles parked on the property, storage sheds, and temporary structures aren’t eligible for rental.
When the host applies for their permit, they’re required to submit documentation such as a lease agreement, vehicle registration certificate, or a utility bill, in order to verify their residency. The full list of acceptable documentation is outlined in the law’s administrative guidelines.
In addition to proving residency, hosts are also required to collect Transient Occupancy Taxes from the guests. Airbnb does this for you automatically, but if you are not going through Airbnb you get a Transient Occupancy Tax registration certificate.
Extended home-sharing eligibility
While many cities and municipalities have hard caps on nightly rentals on a property, the LA home-sharing ordinance does not. Instead, Hosts that rent for more than 120 days a year, must follow the guidelines for what is known as extended home-sharing.
In addition to paying an extra $850/year, the host must do the following:
- Maintain a valid home-sharing registration for at least six months or had at least 60 active rentals.
- Mail notices about their intent to rent the property for extended periods, to adjacent, and abutting owners and occupants.
- Ensure that their home-sharing registration must have not been suspended or revoked at any point in the past two years.
- If issued more than one citation in the prior three years, they must apply for a discretionary review. This is a process where the Department of City Planning considers the facts of the case, and in some cases, schedules a public hearing. Discretionary reviews cost $5,660.
Other essential information
Although the LA home-sharing eligibility requirements are straightforward, registering your property doesn’t mean you can just rent out space blindly. Hosts are expected to provide guests with a Code of Conduct that contains information such as safety and security requirements, as well as guidelines on being a good neighbor.
Hosts are allowed to have multiple rooms listed on home-sharing services; however, they can only rent one space at a time. If they have two separate bedrooms listed, and one is booked for a week, then the other listing must also be blocked off.
The LA ordinance makes renting out investment properties prohibitive due to the primary residence requirement. If a property owner has been using multiple apartments exclusively for short-term rentals, they will no longer be able to do so under the new law. These property owners will likely fill those units with long-term tenants. However, landlords can have the best of both worlds if they provide their new long terms tenants with the option to host Short-Term Rentals within the law. As long as the renter is a primary resident of their rental unit, and they possess a short-term rental lease addendum signed by their landlord, the renter is eligible to be a host. Therefore, landlords who formally used units as short-term rentals are wise to experiment with allowing their new long-term renters the ability to host giving the landlord the benefits of both activities at the same time.
Making sense of it all
Compared to many other home-sharing regulations that were passed in other municipalities, the Los Angeles regulations are generous with some of the provisions. Given that hosts have the option to host as much as they want, don’t need to directly own the listed property, and don’t need to be onsite during a guests’ stay, most short-term rental hosts can continue operating without issue.
All that in mind, if a renter is looking to list their space on a home-sharing website, they still need approval from the landlord. The new law also requires renters to get their landlord approval notarized before submitting it online to the city. This can sound daunting. But one way to make this step easier is to use a mobile notary service to streamline the process. We suggest that renters pay for the notary service to increase their chances of getting landlord approval.
Although asking a landlord for permission to list space can be difficult, using a third-party service, such as Letulet, will make it easier for renters and their landlords to craft a mutually beneficial agreement.
Using Letulet, renters can set the percentage of revenue to share with their landlord in order to increase their chances of getting landlord approval to host. Owners can also use the proposal to agree on Hosting Limitations and House Rules for subletting - something the new ordinance also requires. Once the terms are set, the service helps to generate an Airbnb lease addendum, which provides written proof of permission.
Navigating the new regulations from short-term rental laws can be onerous. But with some work, and help from apps such as Letulet, one can evolve and ultimately comply with the law. Doing this one opens up the door for hosting short-term rentals with the satisfaction that it is done in a legitimate and, most importantly, legal way.