On July 6, 2022 Governor Doug Ducey signed into a law new powers for cities to regulate vacation rentals or short term rentals. These changes include rights for local governments to require permit or licensing, neighbor notification requirements, and liability insurance requirements of short term rentals.
Cities have often attempted to control and regulate short-term rentals or vacation rentals including even restricting them completely. A number of municipalities (including Yavapai County, Sedona, Jerome, and Bisbee) at one point even attempted to completely ban short term rentals. However, Senate Bill 1350 was passed in 2016 that stated a “city or town may not prohibit vacation rentals or short-term rentals.” While local governments cannot completely ban short term rentals in Arizona, with the passage of Senate Bill 1168 cities now have additional enforcement rights.
The first major enforcement right gives the local government the ability to require the owner of a vacation or short term rental to obtain liability insurance of at least $500,000 to cover the rental. A city may alternatively allow an online lodging marketplace that offers each rental to provide equal or greater coverage.
The second change allows for cities the option to require that owners (or an owner’s designee) to notify all single-family residential properties adjacent to, directly and diagonally across the street from the vacation or short term rental of the rental and their licensing information before allowing them to operate the vacation or short term rental. If the property is a multi-family property the notification is to all residents on the same building floor.
Local governments can also specify that contact information may be required for an emergency point of contact and for complaints. Additionally, if a local government requires sex offender back ground checks on vacation or short term rentals guests they must waive such requirement if an online lodging marketplace perform the sex offender background check of the booking guest.
The regulation and permitting of short term rentals by a city or local government also gets additional clarification regarding what can be required in an application for a license, when the government can deny a license, and penalties. However, an important provision also requires local governments that require a permit to initiate an administrative process to suspend a permit or license for up to twelve months with just one verified violation occurs including, but not limited to, an owner intentionally allowing the use of a vacation or short term rental for a special event that would otherwise require a permit or license like a retail, restaurant, banquet space, or similar use.
Matthew McCabe represents property owners and property managers in regards to short term rental properties. If you have questions about short term rentals, the enforceability of covenants, conditions, and restriction (CC&Rs) in your community, or other real estate matters please contact Thunderbird Law to schedule an office meeting or virtual consultation.