Know the Legal Risks for Real Estate Investors Offering Arizona Short-term Rentals

With short-term rental prices at all-time highs in Arizona, it can seem like an easy decision for investors with residential real estate to put their property up for rent on sites like VRBO and Airbnb. There is no doubt they are popular options for renters, but property owners need to know that there are significant legal risks that come along with short-term rentals.

Our firm wanted to share some of the most important things residential real estate investors need to know about offering Arizona short-term rentals and provide some strategies to protect your investment.

Arizona Short-term Rental Laws

Since 2016, Arizona laws have made it hard for cities and towns to place any restrictions on short-term rentals. The state has limited the options for local governments enforce prohibitive zoning ordinances and deal with issues related to public health and safety. Most residential property owners in Arizona can rent their home on short-term rental sites without restriction.

The Arizona House Bill 2672 made updates to those short-term rental laws. Now, website operators like Airbnb and VRBO are required to verify that each Arizona property listed on their site has a transaction privilege tax license. The new law also created civil penalties for verified violations.

Property owners are now required to provide updated contact information to multiple local government authorities for a property before it can be offered for short-term rental. The law also clarified that short-term rentals cannot be used to avoid obtaining the necessary licenses required for hosting large events.

Short-term rentals are creating concerns for neighborhoods around the valley and have kept state policymakers considering ways to regulate the growing industry. In April 2021, a proposed bill was rejected by state lawmakers that would have given local governing bodies the ability to regulate short-term rentals.

Despite this, some cities have begun creating ordinances targeted at short-term rental properties. As one of the most popular cities for vacation rentals in the country, Scottsdale has  that make both the renter and property owner liable fines resulting from a nuisance party violation, which can be as high as $20,000.

Legal Issues Related to Arizona Short-term Rentals

Some people believe that the landlord-tenant act controls the short-term rental industry. However, this act was passed by the government of Arizona for the long-term residential relationship between landlord and tenants. This is why it is not typically regarded as the governing statute for short-term rentals, but the law is still vague on the difference between a tenant and a short-term renter.

This ambiguity has left many property owners using contracts that were not designed for short-term rentals and their specific potential issues. Landlords using contracts not specifically designed for short-term rentals is always a risk and that risk has increased in cities like Scottsdale now.

For landlords that have not been using contracts specifically intended for short-term rentals, it is vital to work with an experienced real estate attorney in Arizona to modify their contracts as soon as possible. Every new renter using an invalid or unenforceable agreement puts your investment in jeopardy.

How Can Arizona Real Estate Investors Secure Better Protection?

Real estate investors might be tempted to save money by not first consulting with an experienced attorney and accountant to assist in managing their investment, but those investors are putting themselves at serious risk. If you own investment property in Arizona, make sure you have a team that includes legal and financial professionals with the right expertise in short-term rentals.

The potential legal issues are growing, and it only takes one problematic renter to create substantial liability for the property owner.

How Arizona Real Estate Investors Can Get Protection

Working with an experienced real estate attorney and accountant can also help identify the optimal insurance needs for any short-term rentals in Arizona. Standard homeowner policies do not cover any activities related to a business purpose. This is one of the biggest legal risks for property owners that do not have the proper policy in place.

Lacking proper insurance can quickly lead to losing your house and taking on personal liability for damages. Thankfully, all of that can easily be avoided with prudent planning. Working with an insurance agent, experienced real estate attorney, and accountant will ensure that you have the right contract and policy that will not leave you exposed to risks down the road. Cutting corners on this essential process is the fastest way to lose your entire investment and more.

Making a Business Decision on Arizona Short-term Rentals

Short-term rentals are a flourishing industry, and they can certainly be lucrative if handled correctly. However, the evolving legal landscape in Arizona can create some risks if investors do not take special care to get all the key details in order before offering their property for short-term rental.

The attorneys at M&G Law have worked with real estate investors of all types to help them maximize the value and utility of their property, while making sure the best protections against legal risks are in place. Contact our firm today at 602-562-7218 to schedule an initial consultation on Arizona short-term rentals or make an appointment on our contact us page.