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McPherson
McNeill, P.C.

RISKS AND REWARDS - AIRBNB RENTALS

Posted on Thursday, September 29, 2016 by Robert S. Lipschitz , Robert J. Guanci

            On the surface it may seem like a great idea for a property owner to make a few dollars renting out a house or apartment while out of town.  Some property owners have even purchased properties as an investment specifically to rent them out on the short term online marketplace AirBNB.  However, cities and towns all over New Jersey are beginning to take notice of the online listings and are cracking down on how an owner may utilize their property. 

            It has been widely publicized recently that Newark and Jersey City have legalized the short term rental market, setting out the rules to be followed by the property owners and instituting a tax upon the rentals similar to a hotel occupancy tax.  Other towns in Northern New Jersey, where bargain hunting New York City tourists look for an alternative to punitive hotel prices, have taken the opposite track and are passing specific regulations outright banning the use of AirBNB.  These towns, including Fort Lee, Union City, North Bergen, and Leonia have passed or are considering legislation prohibiting short term AirBNB type rentals.  In San Francisco, AirBNB is challenging (in Federal Court) an ordinance barring these rentals.

            In municipalities where no specific legislation permitting or banning short term rentals has been passed, prospective AirBNB landlords should still be aware of local zoning laws which often place requirements on property rentals.  These requirements may include the need to obtain a certificate of occupancy for each new renter, which usually requires making an application to the municipality, paying a fee, reporting the name of the prospective renter, and conducting a fire/safety inspection.  Additionally, renting single family homes to more than 15 people, or for large scale social events may trigger regulations aimed at hotels and boarding houses which themselves require additional permitting.

            Municipalities also have a range of enforcement mechanisms at their disposal to discourage short term rentals.  These include notices of zoning violations and property maintenance tickets such as failure to separate recyclables.  Neighboring property owners may also take exception to unruly renters and file noise complaints with the local authorities requiring time consuming and potentially costly court appearances which may consume any profits from the rentals.

            It seems likely that restrictions specifically directed at AirBNB rentals in New Jersey will spawn considerable litigation and it is yet to be seen whether courts would uphold such restrictive zoning ordinances.  Newark and Jersey City’s decision to legalize short term rentals and collect taxes on the income generated by property owners was likely compelled by concern over litigation costs as well as a desire to collect what could amount to considerable income for those urban Cities.  However, suburban communities, with their more serene settings and lower potential for revenue generation from short term rentals, seem less likely to permit any rentals which would affect neighborhood character and the property values inherent in stable homeowner occupied residences.          

Please feel free to contact us if you have any questions.

Contact Info:

Robert S. Lipschitz, Esq.

Email: rsl@lawwmm.com

Phone: (201) 330-7455

Robert J. Guanci, Esq.

Email: rguanci@lawwmm.com

Phone: (201) 330-7463



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