It seems as if everyone wants to rent out their spare room for cash. If you have ever wondered whether you could legally rent out an extra room or your entire house on a short term basis, this article is for you. Recently we were asked by a client to assist with some regulations around operating a Bed and Breakfast. During my research I came across a business that I didn’t know existed. The business of renting out rooms in your private residence via the internet to strangers from all over the world.
There are numerous companies that provide the service of connecting hosts and guests such as AIRBNB, Homeaway, VRBO (Vacation Rentals by Owner) and Roomorama to name a few. Most are paid by the guest. Hosts offer an entire home, apartment, single room, shared room or even a couch for rent. A potential guest would search a site online and reserve a room, no one pays until after the guests arrives to make sure everything was as promised. Just for the heck of it, I ran a search today at AIRBNB for a room to rent in Boston for next Friday night and came up with 182 rooms. The price for these rooms started at $50 per night and went up from there. If you are traveling on a tight budget, you might not mind a twin bed in Dorchester decorated with numerous stuffed animals, but what is the downside?
If you are a host you need to consider whether there are local approvals required to rent out rooms such as permits, a change of use, zoning and parking. If you plan to do this long term, you may want to create an LLC for your business and prepare to collect and pay any local taxes that are required. If your property is a condominium, check the condominium documents to make sure the practice is not prohibited. Consider what taxes need to be paid, Massachusetts General Laws c 64G §§ 1-4 regarding Room Occupancy Excise differentiates between a Bed and Breakfast Establishment, defined as 4+ rooms let, and a Bed and Breakfast Home, defined as 3- rooms let. The Massachusetts Department of Revenue and the City of Boston impose an Excise tax on Bed and Breakfast Establishments. Repairs, insurance, utilities, cleaning, depreciation, and snow and trash removal may be tax-deductible.
If you do not own your home you need to be certain your lease allows you to rent out rooms, have roommates and/or sub-lease. One gentleman in Brooklyn New York wrote an article describing how he earned $20,000 in just nine months renting our his two spare bedrooms but was evicted when his landlord found out. Another article found at www.gothamist .com by Jake Dobkin fielded the question of whether it was acceptable for one NYC roommate to rent out her room to AIRBNB guests and thereby subjecting the other roommate to a constant flow of strangers in her apartment (the answer was no it is not acceptable and perhaps evil) and he noted this situation can be avoided with a roommate contract.
Landlords may want to make sure their leases contain language to prevent investment properties from being used as a short term rentals. Tenants and roommates need to review their lease carefully if they are considering renting out a portion of their leased premises and to prevent eviction. If you are a guest, check your hosts’ reviews and consider the safety of the rental along with the price. Make sure the room has a smoke detector and know the egress in case of a fire. Note who to call in the event of an emergency before you agree to the rental.
Whether you are a landlord, tenant or roommate, call us at Rudolph Friedmann LLP before executing your next lease so that we can review it to make sure the appropriate language is included.
