The Significance of a Rental Agreement
One of the primary reasons why anyone decides to make a short-term rental is history like Airbnb is because of money. Nothing wrong with that! However, it is of utmost importance to have a rental agreement in place once you have prequalified a potential guest for your Airbnb property.
The rental agreement is a guarantee that the guest understands and accepts your terms for renting your house/dwelling. Having a carefully thought-out rental agreement will therefore prevent or at least minimize potential misunderstandings with the guest. A formalized rental agreement will also protect you against any legal liability. When you click the little blue button that says "Accept" on Airbnb.com , you are giving an indirect consent to what will later be set out in writing as the rental agreement between you and the guest. In other words, clicking "Accept" may arguably set you up for liability, which is something you want to avoid at all costs!
Now, also like anything in life, there are plans for the unexpected. If and when things do not go as you planned, you need some sort of clarity. Something that will help you out is a rental agreement that clearly, plainly and concisely sets out who is responsible for what.
Suffice it to say, having a rental agreement will help make your Airbnb business a success.
Essential Features of an AirBnB Rental Agreement
Whether your rental is on-air or off, a solid Airbnb rental agreement is a crucial document for your business. Although not required by Airbnb itself, it serves as an important legal protection for you and your guests. If you are ever forced to pursue compensation due to damaged or lost property, the agreement you established will be the first piece of evidence the court will review. So what does a solid rental agreement contain? You need to aim for a thorough agreement that does not miss any of the critical information you need. Here are some of the most important sections to include when you sit down to write your rental agreement: Guest Names. It is a good idea to include the names of all guests who will be staying in the property in addition to the primary guest. This will help you in the event that you need to pursue reimbursement from the loss or damage caused by your renters. Property Description. You should list all major property details, such as square footage, available space, number of bathrooms and bedrooms, amenities such as appliances, internet access and pools, nearby attractions and parking details. Rental Terms. State the terms of the agreement, including first day fees, arrival and departure times, check-in and check-out procedures, cancellation policies and what happens if the guests break a rule. Payment Details. Your agreement should itemize rent, taxes, cleaning fees and any other charges not included in the rent itself. Be clear about how you accept money, how you process refunds in the event of a cancelled agreement and who pays for rent-related fees such as PayPal charges and the like. House Rules. It is wise to include your house rules directly in the rental agreement to ensure your guests have easy access to them. This helps avoid misunderstandings over the duration of their stay. Frequently Asked Questions. Although you could save these for your Airbnb listing, it is also wise to include these in your rental agreement so your guests have an additional source of information. Consider including the following questions: By taking the time to include all the essential information in your rental agreement, you can reduce the chances of misunderstandings and disputes that might become costly for you in the long run.
AirBnB Rental Agreement Template: A Sample
Finding the right sample Airbnb rental agreement template can be a valuable timesaver for those new to Airbnb hosting, while also providing those experienced in the game with a jump start on developing their own rental policies. While there are a wide variety of places to find sample agreements, not every source is equally reliable. It pays to spend some time picking a good template that will not steer you wrong in setting up your rental policies.
The most reliable samples are located on websites belonging to property and real estate attorneys. For example, Taylor & Ring, a Los Angeles based real estate firm, offers a rental agreement template, as does the Frana Group in Chicago. You can also find some good ones through general legal resources such as Rocket Lawyer and LegalZoom. Though many of the rentals in these sample agreements are simple apartments, they still serve as a good, workable starting point for Airbnb rentals. In addition, Rocket Lawyer and LegalZoom both offer the option of working with an attorney online to obtain customized legal documentation. This may be a worthwhile investment if you do not feel comfortable using a template or want something more personalized.
Keep in mind as well that even if you like the template you are using, it should not be locked in stone. As you become more familiar with Airbnb rentals, you may choose to develop your policies to include: This allows for maximum flexibility and accomplishment of both your goals as a property owner and your guest’s need for a worry-free vacation.
Tailoring Your AirBnB Rental Agreement
It is important to note that every Airbnb rental property is unique, and accordingly, every rental is different. The provisions of your Agreement should reflect the specific characteristics of your Rental Property. These provisions may have a different impact on your Rental Property from an economic, legal and/or safety and health perspective.
For example, consider the following: Your Rental Property may be pet friendly, and your Agreement should reflect this fact expressly. Similarly, is your Rental Property’s pool a major selling point? Your agreement should specifically reference the pool and risks associated with it. Like pet friendly properties, travelers frequently like to make last minute reservations, and you should advertise this fact prominently in your Agreement. At the same time, it is up to you to determine at what point you are going to ask for money and it does not take much to increase an already significant inconvenience into a real headache (like the appearance of angry guests or surprise last minute cancellations). Your Rental Property may be located in an area where residential units are bounded by multiple commercial structures (think: downtown). Your Agreement should address Commercial Plazas rights to use cleaning equipment when they need to wash their sidewalks, or have their commercial tenant conduct building maintenance. This is particularly important when having observed this scenario firsthand, that residential tenants are quick to call the police if their pets are disturbed during the wee hours of the night. Finally, consider building restrictions. What rules must your guests abide by, like smoking or capacity restrictions? Are you personally effected by these restrictions?
Ensuring a particular provision will be included in your written Agreement or the manner in which it is presented is always an option. So too, is adding a provision that may protect your interests in a particular area. A good example of this happened early in September, when I read about a guest who hurt themselves while traveling, and tried to sue the host after narrowly avoiding paralysis. The guest claimed that the host was at fault for their injuries. However, it is my belief that the presence of well-placed warning signs (like "Caution – Wet Floor") would limit the proprietor’s liability (if not, completely keep them out of court) and therefore, should be included in your Agreement. It is my belief that the notice should be posted in a prominent area on the entrance of the Property, and not concealed in a cabinet (lest the renegade guest dispose of the sign when displeased by a gloomy day). It should go without saying that a hot tub or other high risk items must also be addressed in your Agreement. You can always use it in an indemnification clause to limit your risk of exposure to injury claims.
Navigating Legal Requirements and Compliance
Whether you are a host or a guest, it is important to know the various legal considerations associated with short-term rentals. The discussion here assumes you are a host.
Local Regulations
Excise taxes. Depending on where your rental property is located, you may need to register with the local government and collect excise taxes and lodging taxes. Recently, the Washington State Legislature passed new laws that state that platforms like Airbnb are responsible for collecting and remitting the taxes for its hosts. That said, hosts must still register with the Department of Revenue and obtain a Business License Registration, which requires a unique Business License Registration Number. It is also important that hosts note check-in and check-out dates in the booking and provide an invoice to the guest for their records. Both of these are standard business practices that likely will be required when the state rules are implemented.
Landlord-tenant laws. Make sure you are familiar with landlord-tenant laws in your municipality, county, and state. Consider any applicable laws that may apply to contracting with a tenant to rent out your apartment, like whether a security deposit is necessary, whether increase of rent might require notice, whether a summary eviction is necessary, etc. Most of these laws will require you to issue a warning to a guest instead of a notice to vacate until you are comfortable with the threat of litigation.
Occupancy limits. Many counties and cities impose caps on the number of guests who are permitted to stay at a single residence for short-term rentals. For example, in Seattle, occupancy is limited to two people per bedroom plus two additional people, not to exceed 10 people . Enforcing this provision might be a challenge due to the method of booking and enforcement. If 10 guests need to stay in one room and they are willing to pay the higher fees, you may benefit from accommodating their request, but it does allow the guests to invoke their rights as a default guest. You should consult an attorney to discuss method of enforcing this provision.
State laws. In addition to your local laws, there may also be state laws that you need to comply with. For example, Washington state has laws pertaining to bed-and-breakfast establishments, furnished apartments, and vacation and recreational rentals. These laws may provide special requirements as compared to ordinary landlord-tenant law if you rent your residence for rent on a regular basis.
Insurance Considerations
Advertising. Platforms such as Airbnb do not generally assume liability for any disputes that are created by direct communication or interactions between a host and guest. They typically reserve the right to investigate violations of their policies.
Loss of use. Most insurance policies offered in Washington do not cover loss of rents under a landlord policy. Likewise, condominium Bylaws and CCRS generally do not cover loss of rents or short-term rentals.
"Rider" for loss not covered. One insurance agent stated that ACE Insurance offers riders for loss of use, which is ordinarily not covered by a policy. That said, there may be some exclusions that apply to loss arising from more than four separate trips.
An important thing to remember is that "all risk" policies usually exclude losses relating to a disturbance of public order or use of the premises for anything unlawful. To the extent the rental use is considered commercial, you may not be covered under your existing policy.
Pitfalls to Avoid
Common mistakes to avoid include: Not being clear and avoiding vague language. An Airbnb rental agreement is a legal contract and it’s in your best interest to be clear and to avoid as much vagueness and ambiguity as possible. Airbnb arbitrators and judges will typically side with the guest if a dispute arises and there is even a little ambiguity in an agreement. For instance, the question of whether or not the host must provide access to the kitchen can make the difference between winning or losing a Small Claims Action. I had an Arbitrator recently hand the win to the guest on a claim for $50 ($50 being small claims court’s minimum jurisdictional amount). Why? The word "or" was used in one of the rental agreement provisions. Yes, the Arbitrator said that she could have ruled the other way, but the ambiguity in the agreement made it unclear and the Arbitrator didn’t want to "guess" what the parties intended and risk making the wrong assumption in favor of the host – something a court doesn’t have the luxury of doing.
Not having your rental agreement reviewed by an attorney before use. If an arbitration award is issued in favor of a party because the contract between the parties is unclear and unenforceable, that party also has the right of appeal. And, upon appeal, the judge reviewing the agreement will look at the entire agreement to determine whether or not that award was issued fairly. If the judge determines that the rental agreement was unclear and unenforceable, the award will be overturned. In this scenario, the contract is void and void contracts are as if they do not exist. So, the parties are placed in the position of needing to start all over again to try to negotiate a binding contract, where they should have sealed a deal the first time. Having an attorney review and revise the agreement from the beginning can save you time and money in the long run, especially when receiving damages on the same point in multiple rental agreement disputes.
Modifying and Updating Your Agreement
You’ve crafted a detailed and legally sound Airbnb rental agreement. You have even created a comprehensive and enforceable Short Term Rental Agreement that shields you from liability. But how do you manage and enforce it? When you need to make updates, how do you go about it?
We recommend that you regularly review your rental agreement with your attorney to ensure that it continues to meet the recommended safety requirements, and keep the language current. Laws by state may change over time. The rental agreement should be periodically evaluated to reflect these and any other changes in the law (e.g., the tax implications of earning income through a Rent Period). A periodic reevaluation should also include revisiting the rental price. Beyond rental price increases , you may want to reevaluate the planning that went into creating your rental agreement in the first place. Have your plans and goals changed since then? Is there something that is now appearing in other rental agreements that you wish to add to yours? Even if your agreement has no new provisions, its review can act as a refresh on something that is no longer top of mind. If you make a few yearly modifications to your rental agreement, you’ll be able to make flood your guests with a brand new document every other year or so, as the changes will be spread out over two years rather than piled upon each other.