After more than three years of fact-finding and amidst intense lobbying from many constituencies, the Los Angeles City Council passed an ordinance on Dec. 11, 2018, to permit and regulate short-term rentals within the City of Los Angeles. Short-term rentals of housing units for periods less than 30 days had been unlawful in most areas of Los Angeles. The City Council was pressured to act by the popularity of online rental platforms such as Airbnb and by residents who wanted to participate in home sharing. Opponents of the practice have long voiced concerns about the impact of short-term rentals on the city's limited rental housing stock and the residential character of neighborhoods in which short-term rentals may occur.
The new ordinance permits a person, the "host," to provide some or all of his or her primary residence to transient users for no more than 30 days at a time. Short-term rentals will be allowed in all zones in which residential uses are permitted by right. In most cases, a host is limited to a maximum of 120 short-term rental days in a calendar year. The host will be responsible for collecting and remitting the city's transit occupancy tax, but it is expected that hosting platforms such as Airbnb will collect and remit the tax on the host's behalf. If signed by Mayor Eric Garcetti, the ordinance will take effect July 1, 2019.
Multifamily owners and operators have voiced concerns about the impact of home sharing upon management and operations of their rental properties, and the new ordinance contains several qualifications to address those concerns. Most importantly, a tenant may not provide its unit as a short-term rental without obtaining the landlord's prior written approval. A landlord may proactively prohibit short-term rentals at any or all of the landlord's properties by submitting a written notification to the Los Angeles Department of City Planning. Additionally, units that are subject to affordable housing covenants, Los Angeles' Rent Stabilization Ordinance, and/or are income-restricted under city, state or federal law are not eligible to be used as short-term rentals.
Landlords and multifamily operators should understand that the new ordinance affords them the right to prohibit short-term rentals in their properties. Most owners and operators of multifamily properties worry about the impact of repeated move-ins and move-outs for short-term occupants in addition to added burdens on maintenance and management staff posed by short-term rental activity, as well as the potential impact upon repossession following a tenant default if additional occupants are present in an apartment. It is recommended that standard lease forms be amended to include a prohibition against short-term rentals. Where indicated, landlords should contact the Department of City Planning about an outright prohibition of all short-term rental activity at a given location.
If you have any questions or would like guidance with respect to the operation of your property in the face of this new ordinance, please contact Holland & Knight Partner Andrew Starrels.
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