airbnb san francisco Photo: Carlos Pacheco/Flikr

San Francisco is a tourism hot spot, and short-term rentals are an attractive hotel alternative for visitors. Similarly, hosting platforms like Airbnb or VRBO  are an attractive option to many property owners and tenants looking to generate extra income.

In July, San Francisco Mayor Ed Lee announced they the city would establish an Office of Short Term Rental and Administration Enforcement in the Planning Department. This enforcement team will have a heavy hand in monitoring the city’s vacation rental market.

Michael J. McLaughlin is a lawyer that specializes in real estate. Under the current legislation, a short-term rental is considered 30-days or less in a residence. While there are several conditions to be considered eligible and additional terms to remain in compliance, McLaughlin highlights three key points that landlords and tenants need to consider.

Permanent residents (owners and tenants) must register with the City.

A permanent resident must live in their home for 75 percent (275 days) of the year. McLaughlin explains, “Property owners must register with the city. If a tenant is looking to sublet a space, they may be in violation of their rental agreement if there are any subletting provisions. Tenants who engage run a risk without prior written approval.”

They will also need to obtain a business license. Additionally, the permanent resident is responsible to remit transient occupancy taxes to the city, if it is not offered through the hosting platform.

Must maintain liability insurance for no less than $500,000.

McLaughlin poses the hypothetical: what if a short-term rental guest injured themselves on the permanent resident’s property? “Everyone — landlord and tenant — must carry the proper insurance. You should not assume that your existing insurance policy will provide coverage… If you aren’t properly covered and something goes wrong, you tender the claim and discover it’s only for the owner occupied, and the side business claim is denied.”

There is a restriction on the number of days guests can stay in one year.

If the entire unit is rented out, the duration will be limited to a maximum of 90 days per year (may be reduced to 75 days if the November ballot passes). McLaughlin explains, “at this point in time, there is no restriction for number of days if it is a portion of the property.”

The red tape will drive away some from pursuing a short-term rental venture, while other property owners and tenants will continue on. Whether they are in compliance or not is to be determined by the city’s future enforcement team.

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