Short-term rentals on the Suncoast
As Sarasota beaches continue to rank among the best globally and with Spring Break right around the corner, many buyers are looking to invest in short-term rental property along our sunny coastlines. Here are a few things to watch for when buying or selling short-term or vacation rental property.
What to look for when buying or selling rental property:
Paragraph 6 of the FR/BAR Contract requires the seller to check whether the “Property is subject to a lease(s) or occupancy agreements (including seasonal or short-term vacation rentals) after Closing…”
If you see Paragraph 6(b) checked, the seller is required to turn over to the buyer the facts and terms of any leases in writing, along with copies of the leases, within five days of the effective date of the Contract. The buyer then has an additional five days from receipt to review this information with the option to cancel the Contract in their sole discretion if any of the details are not acceptable to them.
What if the seller takes longer than five days to provide leases or occupancy agreements?
It doesn’t matter when the seller provides the leases. The buyer will still have five days to review and cancel if they disapprove of the terms. Therefore, it is always essential to give these items as soon as possible and avoid any last-minute cancellations.
Seasonal and Vacation Rental Rider
If a property is currently in use for short-term and vacation rental, you may want to encourage the buyer to utilize the “Seasonal and Vacation Rental” Rider to the FR/BAR Contract.
Attaching this Rider to the Contract is necessary for two reasons:
- It clarifies whether the seller may continue to enter into new seasonal or vacation rental agreements after the Effective Date and before Closing and
- It requires the seller to provide the buyer with any Property Management Agreements for the property within five days after the Effective Date.
Property management companies can be beneficial for overseeing bookings and reservations. If a Property Management Agreement is in place, a buyer can review the Agreement and has five days from receipt to terminate the Contract if the terms are not acceptable. If a buyer chooses to move forward, they are subject to the terms of the Agreement for the Agreement’s duration at the time of Closing.
Therefore, the buyer should carefully review the terms of any Property Management Agreements to avoid being subject to any unfavorable terms.
Properties booked through Airbnb or VRBO
Remember that rental reservations made through Airbnb or VRBO can be slightly more complicated to transfer to the new buyer, but that is a topic for another blog! Be sure to check with the buyer or seller ahead of time to confirm how these reservations will transfer.
Local Requirements and HOA/Condo Rules
Buyers looking to purchase short-term rental property should also consider any local restrictions on short-term rentals. For example, some municipalities require property owners to register the rental property with the city and comply with inspection and safety requirements before approving a rental. If the property is in a Condo or HOA, there may also be rental restrictions in place that can impact rental options. Buyers and agents can prevent future surprises by researching the local requirements and association rules ahead of time to ensure they comply.
If you are working with a buyer purchasing short-term or vacation rental property and have questions about the preceding, please contact your local real estate attorney.
Jill Bowen primarily practices in the areas of residential real property transactions.