Understanding the Legal Landscape of Month+ Rentals in California – Are You and Your Property Management Company Compliant?
By: Brad Greiner, CEO of Open Air Homes and OpenAiRE Brokerage
The Legal Requirement: DRE Licence and Broker of Record
To legally accept Month+ rentals in California, property management companies must be real estate brokerages with a valid Department of Real Estate (DRE) license and have a Broker of Record. At Open Air Homes, this role is filled by our Broker David Manduca, a veteran in the industry. This ensures that both homeowners and tenants are protected under the stringent legal framework governing real estate in California.
Airbnb and the Shift Towards Month+ Travel
When COVID-19 struck, the travel industry was greatly affected, leading platforms like Airbnb to invest heavily in month+ travel. In California, these types of reservations are only legal if you are a homeowner renting out your own home and choose not to have the tenants sign a California Association of Realtors (CAR) form for the rental. This, however, can be a gray area that leads to potential legal challenges, and we recommend that even if you are a homeowner renting out your own home in California, you take the extra step of hiring a Broker of Record to help you complete these forms with your guests staying over 30 days.
Transient Rentals and Taxation in California
Stays under 30 days are considered transient rentals, and every city in California with short-term rental (STR) rules charges a different transient occupancy tax (TOT), typically between 8-10%. In most cities, except for places like Palm Springs, platforms like Airbnb remit this tax on behalf of the hosts, but the amount comes off the top before the payout to the host. Understanding this tax structure is vital for both hosts and property management companies.
The Importance of the CAR Form
The CAR form is a vital document that protects all parties involved: the tenant, the homeowner, and the property management company. It outlines the terms of the lease, the rights and responsibilities of both the landlord and tenant, and provides clear procedures for resolving any disputes. Without this form, legal protection can be significantly diminished, exposing all parties to unnecessary risks.
Not to worry, at Open Air Homes, we make this CAR form easy on the guest! It is sent shortly after booking via DocuSign, and guests understand the legal requirements of this form once explained to them.
The Risks of Non-Compliance
As of now, the DRE has not specifically targeted companies operating without a licensed brokerage, but property management companies (and homeowners personally, but less so) are taking Month+ rentals without proper compliance and are putting their homes at risk. From eviction challenges to legal disputes, the absence of a clear legal structure can lead to serious complications.
Rialto by Open Air Homes
Open Air Homes: A Compliant Approach
Open Air Homes is committed to legal compliance, offering both short-term rentals in cities with a permit and Month+ rentals that don’t require a STR permit in California, thanks to their duration of over 30 days. Open Air Homes has been a Real Estate Brokerage for over 4 years, and began preparing for this shift to Month+ travel long before Covid. Many homeowners are now opting to take longer rentals on their secondary homes now, especially with the rise in the work-from-home industry and a preference for longer-staying groups.
The Trade-Off: Occupancy and Revenue
While Month+ rentals may lead to slightly lower occupancy and net revenue compared to STRs, they offer the advantage of legal tenancy and often attract guests who respect community norms. The trend towards longer stays promises stability and often leads to a better overall experience for both the homeowner and the community. Plus, as a homeowner renting for longer stays, you can still block out your calendar and use your second home as you wish!
Investing in Medium-Term Rentals: Open Air Homes’ Vision
Open Air Homes is actively investing in our Month+ portfolio or medium-term rentals. With an increased interest in longer-term stays and legal compliance at the forefront of our priorities, we invite homeowners working with non-brokerage companies to reach out. We’re here to ensure that your rentals are set up for legal success quickly and efficiently.
Conclusion: Embrace the Legal Path
As California’s real estate landscape continues to evolve, understanding the legalities of Month+ rentals is crucial for homeowners and property management companies. Open Air Homes provides a compliant and forward-thinking approach, aligning with the state’s regulations and the changing needs of the rental market. By choosing a legally compliant path, homeowners can enjoy peace of mind and seize the opportunities presented by the growing Month+ rental industry.
