Vacation Rentals Hitting a Little Too Close to Home?

By: Bujar Ahmeti, Esq.

More and more Coloradans are skipping traditional hotels when booking their next vacation in the mountains, and instead, are using sites such as AirBnB and VRBO for lodging needs. The convenience of staying in a traditional residence can be appealing when making a quick get away up I-70. However, the boom of short-term vacation rentals has found its way to the Front Range and owners within community associations are looking to cash in.

Our clients will regularly ask us what can be done to prohibit owners from using their unit as a short-term vacation rental. The typical inquiry begins with: “Can the Board adopt a rule or policy that prohibits residents from advertising their unit on AirBnB or VRBO?”

The Colorado Court of Appeals addressed this issue in Wilson v. Mesa Ranch Homeowners Association. In Wilson, the board of directors adopted an amendment to their administrative procedures to prohibit short-term rentals. However, the Court of Appeals stated that the amendment to the administrative procedures was unenforceable because “[f]or short-term rentals to be prohibited, the covenants themselves must be amended.” Unless the declaration expressly prohibits short-term rentals or includes a minimum lease term, then an amendment to the declaration will be necessary to prohibit residents from leasing their unit through a service such as AirBnB or VRBO.

The follow up inquiry from boards of community associations that want to restrict short term rentals is based on a common covenant in declarations that prohibits owners from running a business out of their unit or from using the unit for a commercial purpose. Unfortunately, the Court of Appeals stated that the receipt of money does not transform residential use into commercial use. Thus, use of a unit as a short-term rental would not violate that particular covenant.

Most declarations were recorded prior to the widespread use of AirBnB and VRBO leaving a Board of Directors with little recourse to curb their use. If short term rentals have become an issue in your community, give us a call to explore what options you may have to either stop short term rentals or address the concerns that come with short term rentals.