Making your Home Pay for Itself - Part One: Vacation Home Rentals (VHRs) in El Dorado County
Do you own real estate and need supplemental income? Have you considered renting your home out from time to time, or renting out a secondary dwelling unit on your property? If so, El Dorado County has recently updated its ordinance to allow Vacation Home Rentals (“VHRs”) in the unincorporated areas of the county. EDC Ord. Section 5.056. (Note that the City of Placerville still does not allow VHRs in the city limits, and South Lake Tahoe has a very strict ordinance restricting VHRs not addressed here.) VHRs can be a good option for owners looking for extra income to offset the increased cost of living in this area, particularly in light of the recent rate hikes for homeowner’s insurance. This county is an ideal vacation getaway for outdoor enjoyment and recreation all in close proximity to Tahoe and Sacramento.
Overview. A vacation home rental is different from a typical landlord/tenant arrangement in that it is short term (30 days or less per stay), guests are charged by the day or week, and the owner has flexibility in how and when to make the property available for rent. This arrangement works well for individuals or retirees with a second home, or who may vacation part of the year and wish to draw income on their property while away.
While ordinances across northern California differ, common features usually include a local permit requirement, obtaining a business license, and the need to make appropriate reporting, collection and payment of transient occupancy taxes and business taxes. Some local governments require inspection of the property to ensure compliance with building, zoning, and fire safety requirements.
Given that the focus of this article is El Dorado County, the requirements of the new county ordinance include:
· Applying for VHR permit through Building Departments and pay the permit fee
· Paying an inspection fee and inspection of premises by the local fire district
· Obtaining a business license
· Obtaining the Transient Occupancy Tax (TOT) certificate and TOT reporting (as required)
· Identifying or hiring a “local contact” person to interface with guests, respond to issues and be on the premises within 30 minutes or less. The local contact must be certified through a short exam.
· A VHR may include a secondary dwelling on the same property, so long as the primary residence is owner-occupied.
Operating the VHR. Once you have your VHR approved and registered, you will need to ensure you are operating appropriately. El Dorado County requirements include a written agreement with guests, public advertisement of VHRs, posting of signage, adequate parking, bear canisters as needed, appropriate use of fire pits, quiet hours, restrictions on amplified music/noise, and use of jacuzzi/pool, among other requirements. You will also need to ensure you are completing the quarterly TOT reporting (although AirBnB, among other online marketing sites, can collect these taxes directly from guests), renewing your VHR permit and business license annually, and meeting the requirements for a fire inspection every 2 years. For information on operating a VHR visit El Dorado County’s VHR page.
If you have a property in one of the surrounding counties, click here for a comparison chart of general requirements along with links to the local ordinances and guidelines for more information.
Other Important Considerations in Operating a VHR.
· Community Restrictions. Check whether there are any local or community restrictions that prohibit or limit VHRs in your area. For example, a homeowner’s associations may have covenants, rules or restrictions pertaining to short term lodging. You or an attorney should review these documents before you begin to operate a VHR.
· Insurance. Check your homeowner’s policy. Do you have insurance coverage to protect you, your property, and guests? Short term rentals are generally excluded from a typical homeowner’s policy, but many insurers are now willing to add this coverage. Carefully review your insurance coverage and seek to add a companion policy before you begin to operate a VHR.
· Guest Rental Agreements. A guest rental agreement can protect you and clearly establish expectations, and certain terms are required by local ordinance. Such an agreement should include identifying the number of guests, specific arrival and departure times, all fees and charges, including holdover fees, (daily fee), compliance with all applicable rules, regulations, dispute resolution and costs, and providing guests with the required legal notifications. You should also be mindful of unlawful discriminatory restrictions, for example, excluding guests with children, or a blanket exclusion on pets including support or service animals.
· Be a Good Neighbor. VHRs can have a big impact on your neighbors. VHRs can cause an increase in noise, parking, road, and common area use. It is good practice to get in touch with your neighbors and to have open communication very early on. Provide your neighbors with your contact information and/or that of the local contact so they can get in touch right away if an issue arises. Managing the VHR well, and quickly responding to neighbor complaints will ensure you keep good neighborly relations and avoid calls to the County, the potential for penalties, fines, and even lawsuits between neighbors, all of which can arise from a poorly operated VHR.
If you have questions about vacation home rentals, need a short-term vacation home rental agreement, have concerns about a VHR operating near you, or have a proprietor/guest dispute, contact Crystal Center. This article is general information only and is not intended to provide legal advice. Contact our offices today for more information.
And coming soon...
Making your Home Pay for Itself Part Two: Relaxed Laws on Accessory and Junior Dwelling Units (SB-86). In 2019, California made it much easier for homeowners to convert single-family into multiple dwelling units to increase the pool of available housing. These laws relax the requirements and create an expedited and cheaper permit process to convert that garage or build that second unit on your property. Join us next quarter for a discussion of the new law.
Crystal M. Center is a civil attorney and real estate broker in Placerville, CA. She can be reached at firstname.lastname@example.org or (530) 295-6400.