Short-Term Rentals In Florida - What You Should Know
By Christopher Carter - Real Estate Broker Associate
August 3, 2023
Renting out your Florida house or condo to others for their vacations sounds like a pretty profitable idea. Just be fully aware of the multiple compliance issues involved. Due in large part to the popularity of online vacation rental sites such as Airbnb, VRBO and others, many homeowners with properties in desirable locations want to become amateur hoteliers and landlords by offering short-term rentals to the public. And because Florida benefits from historic and continued popularity as a vacation destination, private Short-Term Rentals across our State have become a headline-producing topic.
When it comes to Short-Term Rentals in Florida, property owners have a number of compliance issues to take into account because all of the following have some level of jurisdiction and control over short-term residential rentals:
• State, County, and City where property is located
• Mortgage Lender
• Property Insurance Company
• Condominium or Homeowners Association
State, County, & City
Chapter 509 of the Florida Statutes identifies a Short-Term Rental ("transient lodging establishment") as a housing accommodation rented to tenants for stays of 30 days or less, more than 3 times per calendar year, "...or which is advertised or held out to the public as a place regularly rented to guests."
However, Florida's Department of Revenue considers a transient rental as any paid agreement to occupy living quarters that lasts for 6 months or less to the same tenant. For any transient rental, the State requires standard 6% State Sales Tax to be collected and sent to the Department of Revenue.
Based on either (or both) definitions above, private home or condo Short-Term/Vacation Rentals can be classified the same as hotels and motels.
Here is a direct link to the Florida Department of Revenue information sheet on housing accommodations Rental Taxes:
In addition to State Tax, most local Counties levy their own taxes on short-term rentals. This additional County Tax ranges from 2% in less populated rural Counties like Glades and Hardee, to 6% in more populated visitor-attraction Counties like Orange, Miami-Dade, Collier, and others. These transient Rental Taxes apply to hotels, motels, private homes and condominium units offered for Short-Term Rental.
On top of State and County Transient Rental Taxes, some incorporated Cities require separate registration and levy their own tax on rental accommodations. For example - in the City of Miami Beach, a 4% Resort Tax is charged in addition to the State 6% and the County 6%. That's a total of 16% Transient Rental Tax within the City of Miami Beach. Private owners offering their properties for Short-Term Rental must comply with all 3 jurisdictions' requirements and remit all 3 taxes.
Recently, many Florida Counties and Cities have applied more direct oversight and enforcement of proper registration by owners advertising their properties for Short-Term Rental.
An example of this went active last year for Collier County in Southwest Florida. In addition to the existing obligation for property owners to collect and pay the County Transient Rental Tax (6%) and State Sales Tax (another 6%), Collier County now requires owners to submit a Short-Term Vacation Rental Registration Application for each property offered for vacation rental.
The intended purpose is to provide County administration with owner contact information in the event there is an emergency, problem, or complaint while the property is tenant-occupied. Whether the property owner is local or lives out of the area, Collier County requires the identification of a Designated Responsible Party who is able to respond quickly to any issues reported to the County. They must be serious about this because unregistered rentals are subject to fines of $500 per day.
Local rules and applications for STVR Registration can be found on City or County websites.
Lenders identify 3 categories of occupancy when making residential mortgage loans:
• Primary Residence
• Second Home
• Investment Property
Primary Residence loans present less default risk to lenders than Second Homes, and Second Homes present less risk than Investment Properties. When lenders see less risk, they offer lower interest rates to borrowers.
When applying for a mortgage loan, a statement of the buyer/borrower's intended occupancy and use of the property becomes a material part of their signed application. Misrepresenting one's use and occupancy in order to receive better loan terms is mortgage fraud, a violation of Federal law that carries severe penalties.
Owners intending to offer their properties for Transient Rental in Florida are strongly advised to first consult their mortgage lender for applicable guidelines and restrictions. Just about all lenders restrict and may even prohibit Transient Rentals under Primary Residence occupancy, and most also have specific restrictions under Second Home occupancy. Investment Property loans (also known as Non-Owner Occupied) are the proper way to go when a buyer/borrower knows that a financed property will be regularly offered for rent to the public.
Current owners should thoroughly research the exact language in their signed mortgage documents before offering homes or condos for Short-Term Rental. Violations of those restrictions can create a loan default, triggering the Acceleration Clause and making the entire loan balance immediately due and payable.
If the mortgage on a property is FHA-insured, Vacation/Short Term Rentals are expressly prohibited for the life of the loan.
Along with hazard coverage, Homeowners Insurance policies include liability protection in the event a visitor or guest is injured while on the property. Rent-paying tenants in Primary Residences and Second Homes are very different from socially invited non-paying guests in the eyes of insurance companies.
Unless an owner also has coverage for tenant occupancy (usually a "rental to others" endorsement), liability claims brought against owners by tenants may be denied by the homeowner's insurance company. After that, the company may consider whether or not it will renew coverage at all based on tenant occupancy not being disclosed.
At the very least, insurance companies expect owners to notify them when renting out an insured residence. Depending on the circumstances, your company may:
• Allow limited rental occupancy
• Require a rental endorsement (at additional cost)
• Prohibit rentals altogether.
Insurance companies may also consider Short-Term Rental activity to be a business, which would be excluded by a standard homeowners policy. Speak with a licensed Florida insurance agent for details and application to your specific circumstances.
In Condo buildings and HOA communities, the Association's liability insurance for its common areas and recreational amenities may not cover transient tenants who have not filled out the Association's required application. This is especially true if the short-term occupancy violates the Association's published minimum rental period. Often, COA and HOA liability coverage only extends to owners, non-paying guests of owners, staff, vendors, and longer-term tenants.
Condominium & Homeowners Associations
This is probably the most important consideration for Florida property owners thinking about offering a house or condo for vacation short-term rental to the public.
Condominium and Homeowners Associations have restrictive covenants and rules in their Governing Documents that outline allowed and prohibited owner actions. When buying into a condo building or Association-governed community in Florida, all buyers agree to follow those rules. One of the most important covers the minimum lease period that individual owners may offer potential tenants in the building or community.
All COA and HOA Governing Documents (that I have ever read) require applications to be submitted and approval given before rental occupancy within the building or community.
Minimums in most Florida condo buildings and HOA-governed communities usually range from 30 to 90 consecutive days for rentals to the same tenant. Associations establish these minimums to protect all owners' interests, security, and comfort. Owners Associations also limit the number of times an individual home or condo may be leased in one calendar year, regardless of the length of each stay.
It is important to note that throughout our discussion today, minimum rental periods and number of allowed rentals count each occupancy by a different tenant individually. Renting to 4 different vacationing tenants each for a week at a time is NOT a 30-day rental. If the Association's rules say a 30-day minimum limited to 3 times a year, the property owner has already violated the rules.
Remember the Chapter 509 definition above (30 days or less), then compare that with the Department of Revenue definition (6 months or less). Many (most?) Associations' minimums are intentionally based on avoiding classification as transient lodging under Chapter 509, yet those same rules do not usually reference the Department of Revenue's 6-month interpretation for collecting and paying State Sales Tax.
In condos, rental terms of less than 30 days or more than 3 separate rentals within a year can cause the Association and property to be classified as a Resort Condominium and Public Lodging Establishment (regulated under FS 509 and the Condominium Act FS 718), which exposes it to much stricter inspections, compliance, and public safety standards.
Condominium developments that allow STRs and have a managed rental pool in which unit owners participate are often called condotels.
Residential Associations may impose stricter (longer) minimums than the surrounding County or City, though cannot allow more lenient (shorter) minimums. If they do, they will likely be considered Public Lodging Establishments as described above and have to comply with increased regulation.
Individual owners following their Association guidelines must still register their properties with the State, County, and City as required.
Depending on how their Governing Documents were drafted and amended over the years, Associations may be able to impose fines, bring suit, or restrict access to common areas and amenities when owners violate the written rules.
Owner's Homestead Status
There is another important consideration when deciding whether or not to offer your house or condo for public rental. Florida extends very strong Homestead benefits for owners who establish a residential property as their Permanent Residence. These benefits include significant property tax savings, limits on property value assessment increases, protection from forced sale due to certain legal processes, and spouse/minor child rights.
Private owners who rent out their Homestead properties for too long or too frequently can be seen as "abandoning" their Homestead status, and lose the very attractive property tax and protection benefits that go along with it. Speak with a Florida-Licensed attorney for details on Florida's Homestead Law and its application to your specific circumstances.
There we are - a quick look at the various guidelines and rules affecting private short-term rentals in Florida. It is VERY important that owners thinking about offering their properties for Short-Term Rental do the necessary research to avoid violating applicable rules and restrictions.
Editor's Note: Christopher Carter is NOT an attorney. He does not give legal advice. For interpretation and application to specific circumstances of anything you read in this article, you must speak with a Florida-Licensed attorney.
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