commercial activity

Started by DeniaF • 9 replies • 1631 views

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DeniaF (South Carolina)
Posts: 2

Posted:

We have a resident that is wanting to sign up with airbnb but our covenants do not allow commerical activity. We do have a couple houses that are on long term lease and they are arguing that that is commercial activity. Has anyone else had this situation?

TimB4 (Tennessee)
Posts: 21,059

Posted:

Do your governing documents specify anything about length of leases or other rental restrictions?
If they do, what specific document has what restriction?

Tim

DeniaF (South Carolina)
Posts: 2

Posted:

No. The only restriction is for commercial acitvity.
No commercial or enterprise of any type or nature shall be permitted to be conducted on or about any of the lots and the same is hereby specifically prohibited.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

What is the punishment? Is that defined? Just because it is banned doesn't mean it has a punishment to it. Example: You can't rent your house out. That is fine and dandy but what happens if you do? Ya need to have a fining schedule in place defining fines and distributed. It has to be within legal definitions of your state. Which differs for each state.

Your HOA can forbid this kind of activity till the cows come home, but until it has a punishment/preventative action to it, doesn't mean much. It may be enough profit to pay the fine.

Former HOA President

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By DeniaF on 09/23/2016 10:11 AM
We have a resident that is wanting to sign up with airbnb but our covenants do not allow commerical activity. We do have a couple houses that are on long term lease and they are arguing that that is commercial activity. Has anyone else had this situation?

There is a long-standing principle in the courts that when one asserts a fact that it is up to him to prove it. You have a person arguing that long term rentals are commercial activity so let him prove his case by citing statutes or case law that supports his claim. Since property rentals have been around since the beginning of time I doubt that he will find anything to support his argument. Long-term rentals are examples of using a home for its intended use.

A Bed-and-Breakfast operation is a commercial use. It alters the use of a home from its intended residential use to being a motel with meal service. Even if the long-term rentals are furnished, I doubt that the owners are preparing meals for their tenants or changing the sheets on the beds.

Has the person who wants to sign up with Airbnb made any sort of request to the board for permission to do so? That act alone would tell me that he/she is seeking permission from the board to violate the covenants, a power not usually given to the board. What I mean is that he/she already knows that the b-and-b operation is not allowed, otherwise there would be no reason to seek permission. Your board would be on solid ground if they deny the request.

LetA (Nevada)
Posts: 2,679

Posted:

Check with your state or local ordnances, more and more municipalities are enacting "party house" ordnances to limit short term rentals and leases.
airbnb's are trying endruns around the laws like uber tries to run around taxi and livery hired car laws.

Good luck maybe your board needs to pass some CC&R that define rental homes & leases and minimums, maybe a rental application fee along with a background check if allowed by law.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By LetA on 09/23/2016 6:10 PM
maybe your board needs to pass some CC&R that define rental homes & leases and minimums, maybe a rental application fee along with a background check if allowed by law.

They already have a prohibition on commercial use of the properties. A B-and-B differs from a property rental in that it provides furnishings, linens, meals, and janitorial services to a transient clientele. A real estate rental may or may not include furnishings but almost never includes meals or janitorial service. A long-term lessee will typically install his own phone and cable services, use the home as his mailing address, be responsible for keeping the premises clean, and provide his own linens and meals. A B-and-B is clearly a commercial use while long-term rentals are not.

KerryL1 (California)
Posts: 14,550

Posted:

I like your reply, Larry! It's logical and makes a lot of sense. And also, at least in my city, airb&b Owners are supposed to pay some sort of occupancy tax--can't remember the name of it, and that certainly indicates to me that they are running a business.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

I believe one of the ways to prohibit short term rentals is that in some state they must register as a hotel/motel/boarding house for taxing purposes. Once this is done, it seems logical that it is a commercial business thus banned by most covenants.

TimB4 (Tennessee)
Posts: 21,059

Posted:

I think John hit the nail on the head for your situation.

Per AB&B website, taxes are paid on AB&B rentals in SC. As a normal rental agreement does not collect taxes, the Board can utilize that argument (those activities where sales and other taxes are paid, or should be paid) as adefinition of commercial business.

The link is provided above (which covers all States).

However, this is what it posted about SC:

State of South Carolina

Guests who book Airbnb listings that are located in the State of South Carolina will pay the following taxes administered by the State as part of their reservation:

South Carolina State Sales and Use Tax: 5% of the listing price including any cleaning fee and guest fee for reservations 89 nights and shorter. For detailed information, visit the South Carolina Department of Revenue website.
South Carolina State Accommodations Tax: 2% of the listing price including any cleaning fee and guest fee for reservations 89 nights and shorter. For detailed information, visit the South Carolina Department of Revenue website.
Local Taxes collected by the State: 0.5-8%, per Local Tax type, of the listing price including any cleaning fee and guest fee for reservations 89 nights and shorter. One or more of the following Local Taxes may apply: Capital Project Tax, Catawba Tribal Tax, School District Tax, Education Capital Improvement Tax, Transportation Tax, Local Option Tax, Tourism Development Tax. Note that Airbnb is only collecting the Local Taxes that are administered or collected by the State at this time. For detailed information, visit the South Carolina Department of Revenue website and the Sales and Use Tax Manual.

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