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Short-term Rental Agreement

Short-term Rental Agreement

A Short-term Rental Agreement is a legally binding lease agreement between a landlord/ homeowner and a tenant whose tenancy is for a short period, generally less than thirty days.

This agreement may be referred to as vacation rental agreement as they are mostly used by people on vacation. However, they may used for many other reasons especially with the advent of Airbnb.

Similar to other forms of lease agreements, a Short-term Rental agreement outlines the rights and obligations of each party. These are accompanied by fines/penalties if the stipulated obligations are broken.

Short-term Rental lease agreements are common with people visiting other locations for short business trips, vacationers, people attending short courses away from home or a weekend wedding, etc. Also, homeowners looking to earn some income when they have an extra room are away for a weekend, on a business trip for a couple of days, or on vacation.

Short-term Rentals have especially become very popular since they are better and often cheaper substitutes for hotels. Short-term Rental Agreements are also commonly referred to as Vacation Rental/Lease Agreement.

Why do you need to use a Short-term Rental Agreement?

A Short-term Rental Agreement lays out mutually agreeable terms and consequences of breaking the terms between the tenants/guests and homeowners. This helps mitigate unexpected behavior as well as manage the expectations of the parties involved. There are quite a number of reasons for having a Short-term Rental Agreement;

  1. Tax relief

Some states offer tax relief to homeowners who have rented out their homes to tenants staying for less than fourteen days. Beyond that, they are expected to report the rental income collected when filing their tax returns. The only way to prove this is through having a record of the occupancy via a Short-term Rental Agreement. The Internal Revenue Service also allows for deductions such as interest on mortgage and rental expenses to homeowners paying tax on their rental income. Part of the documentation showing a record of this is the Short-term Rental Agreement.

2. To mitigate property damage

Some tenants may be careless in handling the property in your home while enjoying their short stay. The only way to avoid this liability is through drafting a Short-term Rental Agreement that outlines the expected behavior and consequences of not adhering to the agreed rules. This way, tenants are bound to the property rules hence minimizing chances of property misuse.

3. Court claims

In the event there arises a conflict that will require a court’s intervention to resolve, there will be a need for proof to put up a good case/defense. It is, therefore, very important for homeowners to issue a Short-term Rental Agreement and for the tenant to keep a signed copy of the same. A homeowner will also have it easier instituting a formal eviction process to a tenant who has refused to move out after their tenancy period is over when they have a record of their relationship through the Short-term Rental Agreement.

4. Insurance claims

If the property in the home has been insured against loss and damage by renters, insurance companies will need proof of occupancy leading to the loss or damage. The best way to do this is through a Short-term Rental Agreement since it includes the exact check-in and check-out dates.


What should you include in a Short-term Rental Agreement?

  1. Property details

This section should include a detailed description of the rental property. This is from the physical address of the home, the type (e.g condo, private room in a home, etc.), and an outline of amenities included in the property including furniture. It is good practice to elaborate in great detail the list of amenities. They can be listed down by room allocation e.g list all that to expect in a kitchen different from what is in the bathroom and their condition. You should also disclose any shared outdoor facilities that are available to tenants staying in the property. For example; swimming pool, parking space, terrace, etc.

2. Tenant Information

A Short-term Rental Agreement should capture crucial information about the tenant. This includes; their full name, contact information (phone number/ email address), their home address, etc. This should apply to all the tenants sharing the property during a specific duration.

3. Rental duration

The tenancy rental duration is a very important aspect of a Short-term Rental Agreement. It indicates the date when a tenant arrives at the property and when they leave. Rental duration signifies the validity of the Short-term Rental Agreement. Also, it is important for tax purposes to show proof of tenant duration for tax exemption.

4. Occupancy

This section sets out any maximum occupancy which is the maximum number of tenants that can be accommodated in the property at a time. This is mostly guided by the sleeping space available. Capping the number of tenants to a certain maximum helps in the organization and maintenance of the property in terms of amenities available. Also, tenants are made aware that any unaccounted guest is their liability in case of any incidences.

The occupancy clause can also indicate the minimum stay if applicable.

  1. Rules and obligations

Rules and obligations layout the expected behavior from each party to the Short-term Rental Agreement. For example, a rule prohibiting smoking or keeping pets within the property. Rules should be followed by applicable charges/penalties if they are not adhered to.

2. Payment

A payment clause details; the expected rental amount, when it falls due, how it should be paid, if there is a specified mode of payment, and if there are any other extra charges for example for extra services offered.

3. Security deposit

It is important to have a clause on security deposit which can be used to cover for damages made by the tenant while at the property. This clause should also state the refund process once the tenancy lapses.

4. Cancellation

This section outlines what happens when a tenant terminates their tenancy prematurely or upon booking. It should include a cancellation process, applicable charges or refunds.

5. Fees

Fees are extra charges outside the rent payment and the security deposit. For example a service charge, or laundry fees. All fees should be disclosed and their purpose well described.

6. Access

Some short rental properties are self-check-in and maintained. This clause describes how tenants should gain access to your property. For example, you could have an application managing key access and instructions to tenants and maintenance crew if you are managing the property from a different location.

7. Additional clauses

You can include other clauses such as a list of prohibited areas, additional services that tenants can have access to, a cleaning schedule, and any other relevant clause specific to your property.

8. Signature

A Short-term Rental Agreement is not complete without the signature of the tenant and the landlord. This ensures a mutual agreement to the terms laid out on the document as well as enhances enforceability.

Tips for writing a Short-term Rental Agreement

  1. It is a best practice to maintain proper records of all stays through a Short-term Rental Agreement. Some states such as Georgia have a tax exemption for homeowners renting out their homes for less than fourteen days. This has to be proven using the Short-term Rental Agreement.
  2. Short-term Rental Agreements can also be used to offset some tax obligations. While you will be expected to declare rental income for stays extending beyond fourteen days, you are allowed to make deductions on expenses from rental use.
  3. Including an updated list of all items included in the rental is very important. It comes in handy when checking in and checking out renters.
  4. Short-term rentals may be subject to higher rates of property damage as compared to normal lease agreements. This is due to high tenant turnover. To safeguard this, you can; take up insurance for appliances and other fixed assets in the property, thoroughly vet potential renters before they access your property, have thorough checkout procedures, etc. This will ensure you minimize your losses through unnecessary repairs and replacements.
  5. When determining what amenities to provide in your property for your guests, you can try customizing your space to a certain target group. For example, to attract tenants who are on short business trips, you can provide a comfortable workspace, reliable WiFi, etc.
  6. A good Short-term Rental Agreement should also outline proper communication methods and processes. This is crucial where tenants self-check-in or where the owner is not physically around.

Bottomline

Short-term Rental Agreement should be maintained for short stays ranging between one and 30 days. However, this can be renewable. If a tenant wants to rent for more than 30 days, the best thing to do is to draft the normal lease agreement (month-to-month).
You should be keen to check with your local state laws on the acceptable rules guiding Short-term Rental Agreements. For example, in California homeowners cannot rent out their homes for short stays unless they are also living in the home during the rental duration. Also, Short-term Rentals in Florida attract a tax charge (tourist tax). Some other states require licensing before one can start renting out their home for Short-term Rentals.

Today, one can book online for short stays e.g via Airbnb, VRBO, etc. Homeowners submit their Short-term Rental Agreement while setting up an account on the platforms. This means that tenants who book via these online platforms and agree to the terms and conditions have accepted the terms therein the Short-term Rental Agreement.

The bottom line is, you should always use a Short-term Rental Agreement whether it is for one-day stays, regular tenants, or friends.

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