Short-Term / Vacation Rentals in Florida – what you should know

Renting out your Florida house or condo to others for their vacations sounds like a pretty profitable idea. Just be sure you are fully aware of the multiple compliance issues involved.

Due in large part to the widespread use 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 and vacation rentals to the public. And because Florida benefits from continued popularity as a vacation destination, private Short-Term Rentals have become another headline-producing topic.

Property owners have a number of compliance issues to consider because all of the following have some level of jurisdiction and control over private Short-Term Rentals:

– State of Florida, along with County and City where the property is located

– Mortgage Lender

– Property Insurance Company

– Condominium or Homeowners Association

State, County, & City

Chapter 509 of Florida Statutes defines a Short-Term Rental ("transient public lodging establishment") as a housing accommodation rented to tenants for stays of less than 30 days, 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 6% State sales tax to be collected and sent to the Department of Revenue. There is no minimum number of rentals, all residential occupancy rentals of 6 months or less are subject to State sales tax.

Here is a direct link to the Florida Department of Revenue information sheet on housing accommodations rental taxes:

https://floridarevenue.com/Forms_library/current/gt800034.pdf

In addition to State sales tax, most local Counties levy their own taxes on transient rentals. These County surtaxes range from 2% in less populated rural Counties, to 6% in more populated visitor-attraction Counties like Orange, Miami-Dade, Collier, and others. These transient rental taxes apply to hotels, motels, AND 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 Vacation Rental must comply with all 3 jurisdictions' requirements and remit all 3 taxes.

In addition to the requirement for property owners to collect and pay County transient rental tax and State Sales tax, many Florida Counties now require owners to submit a Short-Term Vacation Rental Registration application for each property offered for vacation rental.

The main purpose for local registration includes ensuring occupant safety through code compliance, along with providing County administration with contact information in the event there is an emergency, problem, or complaint while the property is tenant-occupied. Counties require the identification of a Designated Responsible Party able to respond 24/7 to any reported issues. Unregistered rentals can be subject to fines of up to $500 per day of violation. Yes, really.

Important - Under Florida Statutes Chapter 509, regulation of vacation rentals is preempted to the State. Local laws and ordinances cannot prohibit vacation rentals, nor regulate their duration or frequency outside of State definitions. Local restrictive ordinances on the books before June, 2011 can remain in force. Recently, the Florida Legislature passed SB-280 ("An act related to vacation rentals...") which transfers even more authority to regulate private vacation rentals to the State. If/when the Governor signs it into law, SB-280 will become effective Statewide on July 1, 2024.

Under FS 509 and the proposed SB-280, local jurisdictions can still implement the registration of vacation rental properties and charge local transient rental taxes, though the State will regulate and enforce licensing, advertising platform (online and traditional) responsibility, sales tax collection, occupancy limits, and other compliance details. Stay tuned for my follow-up article shortly after SB-280 becomes law.

Mortgage Lenders

Lenders identify 3 categories of occupancy when making residential mortgage loans:

– Primary Residence

– Second Home

– Investment Property

Primary Residence mortgage 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 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 vacation 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 have specific restrictions under Second Home occupancy. Investment Property mortgages (also known as Non-Owner Occupied) are the right way to go when a buyer/borrower knows a financed property will be offered for tenant occupancy.

Current owners should thoroughly research the exact language in their signed mortgage documents before offering homes or condos for Short-Term Rental. Violations of the mortgage agreement can create a loan default, triggering the Acceleration Clause and making the entire loan balance immediately due and payable. And if the mortgage on a property is FHA-insured, Vacation / Short Term Rentals are expressly prohibited for the life of the loan.

Insurance Companies

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 / Vacation 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 may not have filled out the Association's required application. This is especially true if the 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, all new owners agree to follow those rules. One of the most important covers the minimum lease period that individual owners may offer potential tenants.

COA and HOA owners offering their properties for Short-Term / Vacation Rental must make proper application to their Associations, AND comply with all applicable State, County, and City requirements.

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' security and comfort. Associations also limit the number of times an individual home or condo may be leased within one calendar year, regardless of the length of each stay.

It is important to realize that minimum rental periods and number of allowed rentals count each occupancy individually. Renting to 4 different vacationing tenants each for a week at a time is NOT a 30-day rental.

New Legislation Note - Florida real estate attorneys with whom I correspond have already stated that FS 509 State authority and SB-280's resulting new law cannot over-ride what is already contained in existing Owners Association Governing Documents, though it could affect future Gov Doc amendments regarding rentals. Consult a Florida-licensed attorney for application to specific circumstances.

Remember the Chapter 509 definition above (less than 30 days), and compare that with the Department of Revenue definition (6 months or less). Most Associations' minimum rental periods 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 calendar year can cause the Association and property to be categorized as a Resort Condominium and Public Lodging Establishment, which exposes it to much stricter inspections, compliance, and public safety standards.

Owner's Homestead Status & Exemptions

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 too frequently or for too long can be seen as abandoning their Homestead status, losing the very attractive property tax discounts and protection benefits that go along with it. Here is a direct link to my overview article: New Florida Homeowners - Ready To Apply For Homestead Exemptions?

There we are - a quick look at the various guidelines and rules affecting private Short-Term / Vacation Rentals in Florida. It is VERY important that owners thinking about offering their properties for this type of occupancy do the necessary research to avoid violating applicable rules and restrictions.

This report was first published in The Florida Real Estate Blog by Chris Carter, a real estate Broker Associate and former Key Biscayne resident. For more, visit thefloridarealestateblog.com