NOTE: Even though “short-term” can refer to any rental period of 90 days or less, this memo deals only with true vacation rentals in which rentals are weekly or monthly. If the rental periods are greater than this, refer to the memo on “Long-Term Leases (Managed)”
Things to Know:
- The Vacation Rental Act applies. [The Vacation Rental Act Memo is addressed in a prior post]
The Listing Agent Should:
- Assuming the property is being sold rented and/or subject to reservations, you (on behalf of the seller) must:
- Before contract ratification, disclose in writing the property is subject to a rental management agreement;
- Before contract ratification, disclose in writing all rental reservations;
- Inform your seller client that, within 14 days of contract ratification, the seller must disclose the buyer’s name and address to the management company (this disclosure must be made in writing); and
- Inform your seller client that, within 14 days after closing, the seller is required to disclose the buyer’s name, address and the date the deed was recorded to the management company (this disclosure must be made in writing).
2. Have a complete, signed and readable copy of the Management Agreement.
3. If a buyer wishes to specify that no further reservations should be booked, be aware the buyer might fail to close and the seller could be left with a loss of revenue. Therefore, it is better to respond that reservations (at fair rental value) will continue to be accepted and, upon closing, the buyer can avail him/herself of the right to cancel those rentals beginning more than 90 days after the closing date.
The Buyer’s Agent Should:
- Inform the buyer of the Vacation Rental Act (you can do this by furnishing a copy of the Vacation Rental Act memo);
- Make sure you have been provided with the Management Agreement;
- Make sure you have been provided with all rental reservations (for your client’s benefit, it is smart to calendar to require an updated list of rental reservations just prior to closing);
- Inform the buyer that the current management company will be handling the rentals at least for the 90 days following closing. If the buyer does not wish to honor reservations beyond the 90 day protected period, he/she should notify the management company;
- Inform the buyer that the management company will prorate rent for the period of closing (the closing attorney will not prorate rent because the seller does not have the rent); and
- Prepare an addendum containing an inventory of which furnishings convey.
The Closing Attorney:
- Unless asked to provide some unusual service, the closing attorney has no duties with regard to the rent/rentals.
- Because reservations will almost surely continue to be accepted up until the date of closing, be aware some sellers might “reserve” the unit for themselves or a family member or friend at no charge or a reduced charge. If the buyer wishes to guard against this, it can be done through an addendum stating the property can only be reserved for fair rental value and with a standard deposit.
- After closing, the buyer should notify the Management Company that the buyer is the new owner. This is best done in writing and should: a) include a demonstration of ownership; and b) provide the buyer’s contact information (in order to ensure the net rents come to the buyer).