Short-term Rentals & Long-term Headaches

Having a side hustle is becoming more and more popular by the day, and many people sure could use some extra income. This is why companies like Airbnb and VRBO have become so profitable. If you can take a current asset like your house and use it to generate extra income with little or no additional investment, why not give it try? Of course, not everyone in this rental arena is leasing a single room at a time. Some have taken this on as a larger investment opportunity, purchasing properties for the sole purpose of using them as short-term rentals. Regardless of the avenue chosen, whether the property owner is a person or a type of entity, starting a short-term rental business might not be so easy depending on zoning laws.

Before deciding to enter the short-term rental market, the first step is determining whether the municipality has an ordinance specifically addressing short-term rentals. These are not uncommon in larger cities and areas known for tourism. Even a town like State College passed its first such ordinance last year and already is considering changes to those rules based on how the industry operates practically. This kind of ordinance typically addresses:

  • limits on length of stay
  • limits on the number of nights a property can be rented in a given year
  • limits on the number of rooms which can be rented, occupancy limits
  • parking requirements

A municipality also might have different rules depending on whether an entire property is rented or just a portion of an owner’s already-occupied home, as well as a requirement to register as a landlord or obtain a rental operating license.

Where such ordinances exist, there are not too many questions to ask. The problem is when there is a lack of this kind of clear guidance, which is the case in most municipalities. In those instances, interpreting the local code and determining how it applies to your specific situation can be difficult. A number of different factors can make or break your plan to use the property as a short-term rental based on zoning requirements and prohibitions. These can include:

  • whether the property will be inhabited by the owner while also being partially rented
  • the language of related ordinances regarding other kinds of rentals
  • whether the property is owned by a person or an entity
  • how the code defines terms like “family” or “single-family dwelling”
  • whether the municipality wants to limit traffic in the zoning district

Since zoning ordinances specifically addressing short-term rentals are still generally lacking in Pennsylvania, and particularly in more rural areas, the issue has been brought to the courts on a number of occasions. Unfortunately, those cases have been decided in various ways, which only muddies the waters. Barring these specific ordinances, it is too easy and too common to enter the short-term rental market only to be slapped with a zoning code violation as a result. That is why due diligence is necessary before renting that room or that cabin for the weekend. While variances can be requested, a denial can mean that a rather large investment will not produce the intended return.

If you are considering entering the short-term rental space, your local attorneys at Cornerstone Law can help you navigate this emerging market. Give us a call to schedule a consultation today.

 

If you’d like to read more about rental properties, check out our post on Legal Things to Know Before Investing in Rental Properties.

Legal Things to Know Before Investing in Rental Properties

With the rise of the DIY movement and the expansion of the mobile workforce in the U.S., investors are clambering to purchase rental properties. Whether they are rehabbing and flipping properties or buying them and turning them into rentals, more investors are interested in the potential returns of real estate investment. If you have attended a seminar, read a book or listened to a podcast on real estate investing, or if you are personally interested in investing, here are some legal issues to consider as you move forward in the rental market.

Sheriff’s Sales and Tax Sales are Much More Dangerous Than You Think

It seems almost too good to be true. All of these properties are available at your county’s tax or sheriff’s sale for tens of thousands of dollars less than what they are worth, according to the best estimate you can find. Why not start your investing there? Well, although sheriff’s sales can represent an incredible opportunity to purchase a property, that purchase can bring its own difficulties. For example, a sheriff’s sale does not extinguish junior liens if those lienholders were not properly notified of the sale. Although the senior lienholder (the one trying to sell the property) is technically responsible for notifying all junior lienholders, it is the new buyer who is left with a property encumbered by liens when proper notification is not given.

Also, there are several title problems that can arise long before the sheriff’s sale. Someone who claims to own a property and even has secured a mortgage for it might not have a clean title. Purchasing a property at a sheriff’s sale does not guarantee you a clean title. In fact, it guarantees you nothing at all except that you have title against the lienholder who sold it and, in most cases, against the debtor who previously owned the property. This is not to discourage you from attending a sheriff’s sale or a tax sale. These can be great investment opportunities, but you must do a careful search of any properties you are considering purchasing to make sure that there are no legal problems or a cloudy title lurking in their past.

Form an LLC for Each Property

You should form an LLC for each property you purchase. These often are named for the street address of the property, but that is not a hard and fast rule. Forming an LLC can be relatively inexpensive once you begin to work with a real estate lawyer or business lawyer you can trust, and you should do so for each individual property. The reason you want an LLC for each property is that it protects the property in the event you have problems in other parts of the business. For example, a slip and fall at property A will limit any claims against Property A to that LLC. These claims will not affect the LLCs holding the other properties. Forming LLCs also allows you to sell off individual properties or businesses at a future time more easily, and it can help you to avoid taxes in that case. Managing properties as part of the portfolio also can be easier when you have an LLC for each property. As the ownership of an LLC in Pennsylvania is not a matter of public record, there also is additional privacy protection in this approach.

Eviction and Ejectment

If a tenant stops paying rent, the landlord’s remedy is eviction. If an occupant never had a right to be there in the first place, the remedy is ejectment. That is the basic difference between eviction and ejectment under Pennsylvania law. Unfortunately, evictions are part of being in the rental business and can take several months. In fact, they can take up to a year depending on all the circumstances involved. Even property owners who are very selective find that they occasionally must evict a tenant who stops paying rent or who damages the property. In most counties in Pennsylvania, getting before a District Justice for an eviction hearing can be done quickly, and the time to bring a case is statutorily prescribed. Nonetheless, obtaining the eviction order can be rather difficult as judges might rely on nonlegal reasons for granting a tenant an extension while they clean out the unit or find new housing. These extensions are more common during the colder months.

Anyone considering being a landlord should speak with an attorney and learn more about Pennsylvania’s Landlord and Tenant Act. Understanding landlord-tenant actions can help you avoid some of the cost and time associated with completing an eviction. Furthermore, when you purchase a property at a tax sale or a sheriff’s sale as discussed above, you might have to remove an individual who has no right to be in the property in the first place. This can be the former owner or a regular squatter, in which case an ejectment is necessary. Unfortunately, this process can take as long or even longer than an eviction.

Conclusion

If you are thinking of renting real estate to others, it is important to know the landscape of this area of law. Contact a real estate attorney at Cornerstone Law today to discuss your options and get to know how to better predict potential problems in the rental business.

August 2022 Review

This month the attorneys at Cornerstone Law Firm have been busy with:

  • landlord/tenant actions all over the state
  • personal injury cases that are settling and going to court
  • insurance disputes
  • contractor fights
  • a trade secrets and corporate freeze-out trial

Attorney Stephanie Rauch-Mannino has spent much of her month working out final custody arrangements for families that are splitting up, challenging a post nuptial agreement for unfairness, litigating the proper amount of child support to be paid to a single mom and working on a final distribution of assets in several divorces.

Attorney Tony Distasio has been handling landlord/tenant work for Section 8 clients, where evictions are based on everything from unpaid rent to allegations of criminal misconduct and violence. Attorney Distasio has been everywhere from Pittsburgh to Philadelphia this month as part of hearings on these issues.

Attorney Carl Carrero has been writing briefs and motions and has been to court to handle a request for a delay of a sheriff sale. As sheriff sales pickup and foreclosures continue, Attorney Carrero and the Cornerstone Law Firm team are expecting to see more last-minute litigation over attempts to sell houses after foreclosure.

Attorney Joel Ready began the month handling a 2-week trial on a claim regarding trade secrets and a fight over corporate ownership of a large company. From there, he has handled several contract disputes. He has also been finalizing a few guilty plea agreements in the last 2 weeks to ensure the best possible deal for individuals facing criminal charges.

Finally, the whole staff at Cornerstone Law Firm has been working to ensure that clients’ wills are being drafted, contracts are getting signed, deeds are being drawn up and filed, and that clients are getting quick responses to their concerns. If you have a question about your legal issue, call Cornerstone Law Firm today so we can help you.

Attorney Crossett Wins Landlord Tenant Trial in Dauphin County

This month, Attorney Crossett successfully prosecuted a landlord tenant case in Dauphin County, Pennsylvania and finalized the eviction of a tenant who had refused to pay rent and threatened other tenants. Because every county has their own rules regarding how a trial for a landlord tenant matter is conducted, this trial was done in front of a jury.  

Landlord tenant cases have become more complicated here in Pennsylvania due to the outbreak of COVID-19 and Governor Wolf’s orders prohibiting evictions during the summer. This order did not apply to those evictions which had begun before the COVID-19 pandemic which includes cases such as this one. However, for cases which have arisen since that time, the road remains complicated.

“We pride ourselves on being able to help clients walk through the various state and federal regulations surrounding evictions during the pandemic,” said David Crossett, who represents a number of landlords of various sizes.

Contact Us

At Cornerstone Law Firm, we help clients dealing with landlord tenant issues every day. We have helped tenants who are being wrongfully evicted and landlords who needed to evict someone who is a danger to other tenants. If you have questions about your landlord tenant situation, call us today so that we can help you figure out the solution to your problems.

Cornerstone Law Firm in the Greater Reading Merchandiser

Cornerstone Law Firm is honored to serve the Berks County, Pennsylvania and beyond. We’re happy to solve your legal problems, even through the uncertainty and stress of the current coronavirus (COVID-19).

In this month’s Greater Reading Merchandiser, we’re sharing a little bit about ourselves and what we’re doing to make sure your legal needs are still met! Check out are ad:

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For more information about how we can serve you, contact us today!