New AZ Legislation Stops Municipalities From Banning Short-Term/Vacation Rental

On May 13, 2016, Governor Doug Ducey signed into law SB 1350, which prohibits municipalities from banning the listing and use of short-term rentals. 1

Prior to SB 1350, short-term rentals were essentially “flying under the radar” in most areas of the Valley, including Scottsdale, which prohibited less than 30 day rentals. Despite city ordinances, online services such as AirBnB, VRBO, HomeAway, and others were displaying hundreds to thousands of listings of this type on their sites. The use of these sites not only placed homeowners in violation of the law, but also created an unfair playing field for the hotel industry where they are required to collect and remit additional taxes related to short-term lodging. This piece of legislation takes away the controversy as to whether private property owners are allowed to rent out their home, as they see fit, on a short-term basis. Additionally, now a city, town, or other taxing jurisdiction can more effectively levy and collect a transaction privilege, sales, use or similar tax/fee (in Scottsdale, this is commonly referred to as the “Bed Tax”) in relation to what is considered transient lodging (rentals of less than 30 days). This translates to more revenue for communities, which is a positive outcome of this change.

Historically, federal and state laws are designed to protect and defend the rights of property owners to use their property as they see fit. Currently in our area, we see many owners using their primary and vacation homes as a short-term rental to offset their costs. This legislation strikes a balance to allow for more flexibility in the use of one’s home and restores private property rights to owners who wish to take advantage of this type of rental income.

What does SB 1350 do?

• Prohibits a city, town or county from restricting the use or regulation of vacation rentals and short-term rentals.

• Allows the local government to determine regulations governing vacation and short-term rentals if the regulation is meant to protect public health and safety.

• Provides a mechanism to collect rental taxes and remit to the Arizona Department of Revenue.

• Creates more economic opportunity and inclusiveness, while protecting the private property rights of the homeowner.

 What does SB 1350 NOT do?

• Prohibit Homeowner Association’s (HOAs) from banning the practice of vacation rentals and short-term rentals within their community.

What does this actually mean for homeowners living within an HOA? It means, if an HOA’s CC&R’s prohibit or restrict the rental of a member or unit owner’s property, then the property may not be rented without complying with the restrictions. If the CC&R’s currently do not restrict the rental of property2 and the HOA seeks to amend its CC&R’s to include such provisions, they may do so, but it will require a statutorily higher vote count of the unit owners.3

See information sources:

1 Senate Bill 1350: Online Lodging; Administration; Definitions

2 A.R.S. 33-1260.01. Rental property; unit owner and agent information; fee; disclosure

3 A.R.S. 33-1227. Amendment of declaration

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National Association of REALTORS® (NAR)’s consultant firm of Robinson & Cole, LLP (2015) white paper – “Residential Rentals | The Housing Market, Regulations, and Property Rights” published report