Vacation Rental Nightmares & How to Avoid Them

This post was written for Tripping by Volo.

There are a lot of vacation rental horror stories online: from guests refusing to leave, to being sued for an accident, or even nasty reviews. Although I’ve personally never experienced a circumstance needing legal intervention (knock on wood), there have been a handful of instances over the years where I was happy to have a solid plan of protection in place.

Legalities are important, and they’re something I cannot adequately speak to. Max Neuhaus, a real estate attorney, has chimed in with some advice to help you properly start your vacation rental business:

NIGHTMARE: A LOOPHOLE IN YOUR VACATION RENTAL CONTRACT COSTS YOU THOUSANDS

Consumers that are “guests” subject to vacation rentals are typically going to have more legal rights than consumers that are subject to other kinds of rentals, such as car rentals or commercial real estate rentals. The only way to be sure your rental contract is protecting you to the fullest is to consult with an attorney licensed in the jurisdiction where your vacation rental is located.

I always advise my business clients as follows: “I know the law, you know the industry. Tell me what you want, and I’ll tell you if it’s legal.” So let’s take some specific vacation rental issues below and see what the law has to say.

NIGHTMARE: YOUR GUEST WON’T LEAVE

First, make sure your lease specifically spells out in easy-to-understand terms what the consequences will be. Consider a provision in your contract that includes a promise that you will call the authorities to have the guest forcibly removed. It is likely that enforcement will consider a guest that has overstayed their welcome an illegal trespasser, and the authorities will forcibly remove them.

That said, be careful that you are not advertising your vacation rental as “residential housing.” If you do so, the trespassing guest may be able to convince the authorities that they are actually tenants. In most cases, a tenant can only be removed by legal eviction, which could mean weeks if not months before the guest would be required to leave.

From Kris: I’ve never personally met someone who this has happened to. Don’t let the thought scare you from starting a vacation rental business. Do consider a provision, as Max suggested, so you are protected from an anomaly.

If you have personally had a guest refuse to leave, I’d be interested to hear the situation and how you resolved the issue in the comment section below!

Police

NIGHTMARE: YOUR GUEST WANTS A FULL REFUND

Make sure your contract clearly states the circumstances where a guest is and is not entitled to a refund. Be careful when you use the word “guarantee” in your advertising. The difference between “you’ll love seeing the whales” and “we guarantee you’ll see whales” is the difference between good advertising (the first) and a legally enforceable promise you are guaranteeing as the owner (the second).

When guests are not entitled to a refund due to unforeseen circumstances, this is called a “force majeure.” It’s a French phrase adopted in American law that literally means “superior force.” If, for example, the municipal water plant has an emergency shut down causing you to close your vacation rental, it will be likely that a displaced guest will not be legally entitled to a refund. Granting a refund would, of course, still be a voluntary option for the owner.

From Kris: My personal contracts are pretty buttoned up to protect me. However, I do objectively look at each situation to determine if I should give a refund.

A guest once booked one of my homes for two weeks in the off-season at a very reasonable rate. Unbeknownst to me, the neighbor had planned a full exterior remodel and landscape project at the same time.

Needless to say, there was a lot of dust, noise, and commotion that irritated the heck out of my guest. Although she didn’t ask to be released from her reservation (nor was I legally liable to release her), I offered it and refunded her payment on a prorated basis. I couldn’t take the thought of getting another phone call from her without being able to remedy the situation. I just don’t want anyone to be miserable at my property.

A different scenario: Some guests’ business plans changed, they cancelled their reservation four days prior to arrival and asked for a refund. Of course, I also had no obligation to refund them but offered to accept last-minute bookings and refund IF rebooked. It didn’t get rebooked, and I did not refund. After all, this was peak season and I was running a business. They understood and appreciated my efforts.

Both guests mentioned above have referred their friends and returned themselves.

It goes without saying that there are people who you just cannot please, even if you have gone above and beyond. Don’t let the fear of a negative review push you into refunding when it’s not necessary.

NIGHTMARE: YOU GET SUED BY THE CITY

As a general rule, the larger the population base of the area in which your vacation rental is located, the more likely there are to be additional county and or city regulations you will have to follow. Additionally, you should verify if there are any environmental regulations you should be aware of by contacting your local United States Department of Agriculture office as well as your local Department of Natural Resources office.

Kentucky Capitol

From Kris: The most common regulations I come across are the need for a business license and charging a transient sales tax. Many owners think that if their vacation home is personally used for a portion of the year that they do not need to do either. However, that is often far from true. In many instances, if the vacation home is rented out for more than a mere 14 nights per year, a license and applicable taxes are required. This is a great time to loop in your accountant for a personalized approach and set up a separate business checking account. (More on that in the next post!)

NIGHTMARE: YOUR GUEST TRYS TO SUE YOU FOR AN INJURY AT YOUR PROPERTY

A rental owner’s first line of defense against liability is almost always going to be to insure against the loss. How you calculate your risk is typically a conversation you have with your insurance agent outside of the counsel of your attorney.

The second most common form of liability protection is for the owner to transfer their interest in the subject real estate into a business entity that is owned by the owner, and with that, modifying all contracts accordingly. In doing so the liability of loss falls on the business and is limited to the assets of the business.

From Kris: There can be tax benefits and consequences to putting your vacation home into an LLC (business entity referenced above), depending on your situation. It doesn’t hurt to consult an accountant before doing this.

Max Neuhaus is a business, family and real estate attorney practicing in western Wisconsin, and has served as corporate council for a number of realtors, real estate companies and real estate managers over the years. You can contact Max by visiting him and his law firm at www.riverfallslaw.com.

Hotel Pasatiempo

Throughout childhood (and predominately still), I was surrounded by a Monday through Friday, forty-hour American workweek model. I will never forget the moment of realization that one does not need to work a 9-5 job, settling for only a few weeks of vacation a year and a one-hour lunch break!

It was Spring Break 2001; I was on a trip to Costa Rica with three housemates. We were staying in Playa Tamarindo at Hotel Pasatiempo, a quaint, quirky boutique hotel.

It was 9am and I was waiting by the pool for my friends to venture into the one-main-drag-dirt-road town,sandwiched between surf shops and the Pacific.

The owner a middle-aged, sun weathered, gentleman from the Dakotas was dressed in board shorts, lit cigarette dangling from his lip, net in hand, and waist deep in the pool skimming out bugs and leaves.

He basically looked at me and said, “Hey, this is the life. I went through a rough divorce, liquidated my retirement funds, and left the US.” He looked pleased and happy, connected to being in the moment. He talked about buying land, building bungalows one-by-one, slowly building his hospitality business.

This man never wore shoes from what I observed and something about his life appealed to me. He was free, he was his own boss, he was peaceful, and he had time to genuinely connect with others.

Attached to the hotel he had a sweet little bar and restaurant, which was the most popular in town, hotel guests, locals, and other travelers gathered to share food, drinks, and nightly open mic sessions. It was simple and brilliant!

What is your ideal vision of flexibility, financial freedom, and connection to life through your hospitality business? Do you have the courage to step outside the role you and society have created for you and choose a new perspective on how you will interact with the world? How do you want to spend your free time, what’s your pasatiempo?

This post was written by Cori Hildebrandt.

Cori Hildebrandt

5 Tips On Prepping For The Spring Rush

A long busy season can cause wear and tear on a vacation rental and its supplies. With the end of the winter season nearing for some and the spring hustle looming for others, this is a great place to start to get your home dialed for the next round:

1. Freshin’ Up Your Linens

I’m a bit of a freak with linens. It’s these details that can make a great stay exceptional! One of the biggest differentiating factors is giving your guests the best night sleep they’ve had since forever… it will keep them coming back, for sure. As such, make sure your sheets, pillows, towels and mattresses are refreshing and in great shape. After the busy season or a few weeks before the new season (giving myself time to make adjustments), I tend to stay at my vacation homes for a weekend to get a true feel of things and replace linens at the first sign of wear and tear. It’s also a great time to change your linens for a more seasonally appropriate option; LL Bean flannels to something with light, natural fibers allowing for circulation during the summer.

2. Double Down on a Deep Clean

In larger vacation rentals, it can be hard to do any variation of deep cleaning during the busy season, so put this at the top of your end-of-season list to keep your home in great shape. Clean out junk drawers and the closets; it’s amazing at how much stuff people leave behind. Pull out appliances and large furniture, scrub baseboards and walls and make a list of what needs the attention of handyman, before it could become a bigger problem (leaks, wiggling porch stairs, and so on).

Again pay attention to the details; rewash everything from the silver wear to crockery. Wash out all the cupboards, drawers and the refrigerator in the process. Guests notice the difference.

3. Stock Up On Complimentary Items

I leave an array of complimentary goodies for my guests. Spices, coffee, crackers and other local luxuries are nice touches, but even in small individual packages, they can go stale. Always check them between seasons (or more frequently, if possible).

4. Replace Utility items

Make sure these items are in working order and that there are additional replacements. Lightbulbs (and the working condition of lamps) tend to be overlooked as well as batteries. Think of all the flashlights, smoke detectors, remotes and electronic key entry systems that are battery operated. All are essential to the flawless functioning of your home.

5. Update Your Welcome Information

This includes your house book, local magazines, and the travel brochures you provide. Make sure they are current, seasonally relevant and in good shape (no one likes coffee stained or crinkled materials!). Many guests rely on such things, so be generous with your stash and thoughtful of the activities for your location.

This post was written by Kris Getzie

Kris Getzie Hospitality Consultant