What is a Short-Term Rental?
A short-term rental is generally when you rent out a residential property or part of a residential property for less than 30 days. Laws exist and continue to be made that can restrict short-term rental properties. Let’s walk through an example. Ms. Mother lives out of the State of Colorado but has a son who is married and lives in Colorado. She visits often and has long-term plans to move to Colorado to be near her son, her daughter-in-law and any future grandchildren, but she isn’t quite ready to move to Colorado at this time. Ms. Mother thinks it would be a wise investment to purchase some property in the same neighborhood as her son, use it when she visits for extended stays, but rent it out to people who may want to vacation or rent the place for less than 30 days at a time. Ms. Mother may not be able to do this, depending on where son’s neighborhood is located. It is important to seek the advice of a real estate broker and an attorney to navigate plans to purchase an investment property intended to be used for short-term rentals. What happens if son lives in Denver in this situation? Under this scenario, Ms. Mother would not be able to move forward on her specific plans.
Currently, the City and County of Denver requires owners to obtain a license in order to offer short-term rentals and you cannot get a license unless the short-term rental property is the owner’s primary residence. What exactly is a primary residence? In my Denver example, whether the property is the owner’s primary residence is determined by what the owner’s motor and vehicle registrations list as that person’s home address, what the owner’s driver’s license lists as the home address, and other documents can be reviewed such as the owner’s utility bills. Can Ms. Mother have 2 primary residences with one of them being in Colorado? In Denver, the answer is no. A host of a short-term rental property can only have 1 primary residence. It is unlawful to operate a short-term rental in any location that is not the owner’s primary residence. See, Code of Ordinances and specifically, Code of Ordinances Chapter 33 – LODGING, at Article III, Short-Term Rentals. Section 33-46 defines a Short-term rental to mean a primary residence used for lodging accommodations to transients for a period of less than thirty (30) consecutive days. Section 33-47 requires a license to operate a short-term rental in the City and County of Denver. Section 33-48 requires an application to be submitted in order to get a short-term rental license, and requires that property where the licensed premises are located to be the applicant’s primary residence. The applicant must also certify that the information on the application is accurate and truthful under penalty of perjury. Under Section 33-49, it is unlawful to operate a short-term rental in any location that is not the applicant’s primary residence.
What can Ms. Mother do now? In the above example, other neighboring properties can be reviewed to see what if any short-term rental laws apply or may be under review and soon may apply. An attorney can help Ms. Mother navigate other options such as whether another nearby property with an Accessory Dwelling Unit (“ADU”) property may be a better investment if Mother could long-term rent out the main property and use the ADU only for her visits, whether a large property nearby could be purchased and a duplex or other building could be constructed with the laws to allow for her visits and her desire to be near her family. The options can be larger than originally anticipated despite the speed bumps caused by short-term rental laws. Zoning laws and municipal ordinances should be reviewed carefully and care should be taken to contact municipal and county governments as needed before taking that step to purchase an investment property. Currently, for example the municipal code for the City and County of Broomfield does not allow for short-term rentals of properties that are not the owner’s principal residence. The person’s driver license, voter registration and where any dependent’s school’s records show the home to be will be reviewed. A person’s spouse or domestic partner’s address may be reviewed. See, Chapter 5-39 – Short Term Rentals 5-39-120 – Penalty for violation. The key point to take away from this article is to research your possibilities and the varying laws in place before assuming that you can use a property as a short-term rental. New laws may be on the way as well, as laws can change that can impact your property.
If you have any questions regarding short-term rentals and possible alternatives, please contact me.