May Cities Regulate Short-Term Rentals in Arizona?

By July 26, 2020 Real Estate
May Cities Regulate Short-Term Rentals in Arizona?

A 2016 law created a regime in Arizona that barred cities from regulating short-term rental properties. This bill was passed based on the convincing idea that doing so would keep cities from barring residents from making a bit of extra money by letting out a room or occasionally renting their properties on one of the increasingly popular home-sharing sites, such as AirBnB, while they were out of town.

But when the rubber hit the road, the situation didn’t turn out to be quite so wholesome. Some of the large companies that have cropped up within the industry swept into locales where tourism is popular—which is, let’s face it, most of Arizona, though some places do have more pull than others. They bought up houses—which some experts claim has crowded out families and pushed real estate prices higher; they also bought land and built, for example, eight-bedroom houses with eight restrooms. They bought apartment buildings, took the units off the market and used them for short-term rentals, in some cases displacing more permanent residents altogether. And then, according to many, they treated the properties they purchased as, basically, unregulated hotels. The number of short-term rentals skyrocketed. Homeowners and typical renters began to complain about the effects this was having on their neighborhoods—unsafe driving, carelessness about noise levels, party atmospherics … the list was long.

So long, in fact, that lawmakers have felt the need to respond with a change in the law.

In late May of 2020, Governor Ducey signed House Bill 2672. While the bill does not permit cities to prohibit vacation rentals or short-term rentals, it alters the regime such that regulation of these properties goes back under municipal control for particular issues. Investor-owned rentals still may not be prohibited, and limits on the number of permissible guests did not make it into the bill. But the rentals may be restricted to overnight stays, and events that would otherwise require the gaining of a permit may not use a short-term rental in order to skirt this requirement. Moreover, vacation-rental property owners must provide to towns and cities the contact information of someone who can be timely in handling complaints. And owners of short-term rentals may no longer operate without a sales tax license. There are also fines instituted for violations of this bill, ranging from $250 to $1500 per violation—and in some cases even more.

So, yes, cities may regulate short-term rentals in Arizona—to an extent.

If you’re looking to buy or sell a property in Phoenix or anywhere else in the state of Arizona, whether for purposes of short-term rental or a more traditional use, you’ll need an experienced attorney with strong scruples by your side to aid in ensuring both sides commit to enforceable signatures on the closing documents. At Provident Law, our real estate attorneys represent parties on either side of real estate and financing transactions, including landlords, tenants, buyers, sellers, lenders, borrowers, trustees, guarantors, shareholders, partners, and others. We structure, negotiate and document a variety of real estate and financing transactions, including leases, purchase and sale agreements, loans and development agreements for a variety of commercial and residential projects. Contact us if you’d like us to give you a hand.

Christopher J. Charles is the founder and Managing Partner of Provident Law ®. He is a State Bar Certified Real Estate Specialist and a former “Broker Hotline Attorney” for the Arizona Association of REALTORS ® (the “AAR”). Mr. Charles holds the AV ® Preeminent Rating by the Martindale-Hubbell Peer Review Ratings system which connotes the highest possible rating in both legal ability and ethical standards. He serves as an Arbitrator and Mediator for the AAR regarding real estate disputes; and he served on the State Bar of Arizona’s Civil Jury Instructions Committee where he helped draft the Agency Instructions and the Residential Landlord/Tenant Eviction Jury Instructions.

Christopher is a licensed Real Estate Instructor and he teaches continuing education classes at the Arizona School of Real Estate and Business. He can be reached at Chris@ProvidentLawyers.comor at 480-388-3343.