Do you want to rent a residential property to “Snow Birds”?
Do you want to rent your property on VRBO, Airbnb, Flipkey and/or others?
Do you want to rent a house for “a few days” to tourists for special events?
(e.g., Super Bowl, Phoenix International Raceway events, Phoenix Open, etc.)
Then you need a “Short-Term Rental Agreement.”
(also known by these names: vacation rental agreement, vacation lease, recreational lodging agreement, recreational housing agreement, VRBO rental agreement, VRBO agreement, VRBO lease)
But it is NOT that simple.
The consequences of doing this wrong are severe and may even constitute a crime!
I have been a practicing Arizona real estate attorney for more than twenty-five (25) years. I have been working on drafting a short-term rental agreement – that is legal – for the last five years. Until 2016, I had not drafted, seen, or even heard of a short-term rental agreement that complied with Arizona law.
Why is it so hard? Because of the many variables!
What are those variables? Your ability to use ANY short-term rental agreement depends on three variables: (1) you, (2) the property, and (3) the guests
Let me begin by making abundantly clear that your ability to use my (or any other) short-term rental agreement depends on: (1) actions you must take soon and must continue to take, (2) the rental property itself, and (3) facts about the guests who will occupy the rental property. If you initially meet, and thereafter continue to meet, some very specific criteria, only then may you lawfully use a short-term rental agreement. The consequences of using any short-term rental agreement (mine or anyone else’s), when a regular residential rental agreement should have been used, can be severe and, under some circumstances, may constitute criminal acts (i.e., trespass, breaking and entering, theft, etc.).
For example, if you use a short-term rental agreement, when the law required you to use a regular rental agreement, and you entered the rental property because of a “breach of contract” (e.g., nonpayment or other violation) without notice and for ANY purpose (e.g., to inspect, change the locks, etc.), then you have trespassed, which is a crime in Arizona.
It is not merely a matter of chanting “magic words” in the rental agreement. The facts – and nothing else – determine whether you can lawfully use a short-term rental agreement. Some of those facts you can make happen; others you cannot. The key is knowing what facts you can make happen and which facts you cannot make happen.
The Arizona Residential Landlord and Tenant Act (referred to herein as the “ACT”) provides:
“This chapter [which includes the ACT] shall apply to the rental of dwelling units.” (See A.R.S. Section 33-1304) (emphasis added). This is directly from the statute (go here to see).
According to the ACT, the only facts necessary for the ACT to apply are: (1) rental and (2) dwelling; meaning, if you “rent” a “dwelling” to someone in Arizona, then it is subject to the ACT. Consequently, ALL short-term rentals, vacation rentals, recreational lodging, and other similar short-term residential rental properties are – by definition – a dwelling that is rented and, therefore, ALL of the foregoing rentals are subject to the ACT.
You may be thinking: “But wait, that can’t be right because hotels and motels are residential dwellings that are rented and they are not subject to the ACT.” And you are correct. The ACT expressly excludes SOME (not all) short-term rentals. The ACT provides:
“Unless created to avoid the application of this chapter, the following arrangements are not covered by this chapter [the ACT]: … 4.Transient occupancy in a hotel, motel or recreational lodging.” (See A.R.S. Section 33-1308(4)) (emphasis added). Again, this is directly from the statute (go here to see).
Two important points about the foregoing exclusions:
1. The terms “transient occupancy” and “recreational lodging” are not defined by ANY Arizona statute. “Transient lodging” (not “transient occupancy”) is defined by the Arizona tax statutes as dwellings rented to “transients” for less than thirty days. (See A.R.S. Section 42-5070).
2. VERY IMPORTANT: This language: “Unless created to avoid the application of this chapter,…” is included in the ACT to prevent landlords from trying to “opt out” of the ACT by including language in a rental agreement (or taking other actions) that attempt (unsuccessfully, I must point out) to “force” a rental property to fit within this exclusion, when the true facts demonstrate that the property does not fall within this exclusion from the ACT. That means simply including language in the rental agreement that says: “the ACT does not apply” or “this property is a hotel, motel or recreational lodging” – WILL NOT WORK!
Who cares? Why is this important?
You should care and it is vitally important. Under the ACT, a landlord: (1) cannot lock a tenant out for nonpayment or any other material breach of the rental agreement; (2) cannot collect prepaid rent and deposits in an amount (cumulative) that is more than one and one-half months’ rent; (3) must give the tenant a written notice and a period of time (e.g., five or ten days) to cure any alleged default; and (4) and can only retake possession by going to court, voluntary surrender of possession by the tenant, or when the property has been abandoned for not less than five days. All of the foregoing requirements and prohibitions would make renting ANY short-term rental property difficult, if not impossible.
Conversely, if you and your rental property are not subject to the ACT, then you would be able to: (1) lock a guest out of the rental property for nonpayment or other material breach, (2) collect any amount in prepaid rent and deposits, and (3) enjoy other rights and remedies available to owners of hotels and commercial real property. THAT is why you want the ACT to NOT APPLY to your short-term rental property.
How do you “make” the ACT NOT apply?
The FACTS determine whether a property is subject to the ACT – NOTHING ELSE!
If it were merely a matter of the owner of rental property “selecting” which body of law (i.e., the ACT or the commercial landlord/tenant statutes) applied to the owner’s rental property, then every rental property owner would “opt out” of the ACT and simply claim that their rental property is not subject to the ACT. But the ACT expressly prohibits an owner from “opting out” of the ACT.
Consequently (and it is worth repeating), the facts – AND NOTHING ELSE – determine whether your rental property is subject to the ACT.
The good news is that some facts can be changed. If the right facts are changed, then MAYBE the ACT will not apply to you, your rental property, and/or to your guests.
I know what facts must exist for someone to lawfully use a short-term rental agreement. I have prepared a “Questionnaire” that will gather the facts I need from you. There is no charge to fill out the Questionnaire. Similarly, if you are currently using a short-term rental agreement, there is no charge to have me review it.
- You want to be able to lawfully use a short-term rental agreement.
- I want you to be able to lawfully use a short-term rental agreement.
- We both want the same thing.
VERY IMPORTANT: Don’t select the answers that you “think” are correct. Give me the TRUE facts – as they exist today. If it turns out that you merely need to make a few changes so that the required facts exist, then I will let you know.
Before you start the Questionnaire, which of the following best describes you?
1. I know lots of people who just downloaded a “short-term rental agreement” from the Internet and they have been renting their property without any problem.
2. Arizona law requires drivers to have liability insurance, but I don’t have liability insurance and I am saving a bundle.
3. Arizona (and every other state) requires all vehicles to stop at red lights, but I run red lights frequently and I am doing just fine.
4. I want to set up my short-term rental business correctly; I want to know that my facts allow me to lawfully enter into short-term rental agreements with my guests; and I want a short-term rental agreement that is legal under Arizona law and protects my rights.
If 1, 2, or 3 best describe you, then STOP HERE. Don’t do the Questionnaire. I can’t help you.
Using a short-term rental agreement downloaded from the Internet is like running a red light. So is using a “good” short-term rental agreement when the facts don’t qualify you to use a short-term rental agreement. You may be able to get away with it for a while, but eventually you will run into a problem and the consequences could be severe.
If you don’t believe in insurance (something all responsible people have, even though many people pay a lot of money for insurance and never make a claim), then you won’t see the value of a properly drafted short-term rental agreement.
If 4 best describes you, then GO HERE to start the Questionnaire.