By Ryan M. McCabe

Lately, short-term rentals have been a hot-button issue not just in New Orleans, but worldwide. Recently, the government of Singapore ruled that short-term rentals of less than six months were illegal. Several other cities have outright bans (for instance, rentals of under a month are illegal in New York City), while other major cities—such as Paris, Amsterdam, and Barcelona—have heavily restricted and regulated the practice.

Can Short-Term Rentals Be Operated in New Orleans?

Until recently, the New Orleans Municipal Code prohibited short-term rentals of under sixty days in the French Quarter or under thirty days in the rest of the City. The New Orleans Comprehensive Zoning Ordinance also prohibited short-term rentals. However, neither provision was actively enforced by the City. Instead, property owners who were aggrieved by issues with their neighbors’ short-term rentals have been forced to resort to the judicial system.

On October 20, 2016, the New Orleans City Council approved what our local newspaper has described as “landmark short-term rental regulations.” The new rules, which take effect on April 1, 2017, significantly ease the prior restrictions on short-term rentals. The most notable feature of the new rules is that short-term rentals in the French Quarter continue to be prohibited.

A whole home may be rented to out-of-town guests for up to 90 days a year, regardless of whether it is a single-family home, half of a double, an apartment, or a condominium (more on condominium rentals below). The new regulations call this class of rental a “temporary short-term rental.”

Other than occupancy limits, individuals can rent out their spare bedrooms or the other side of their double as often as they would like. This class of rental is referred to as an “accessory short term rental.”

What Other Requirements Are There?

The new regulations impose certain licensing and registration requirements on individuals who wish to operate short-term rentals. They also impose standards for operation of short-term rentals such as:

  • The license granted by the Department of Safety and Permits must be displayed on the front façade of the property and must be visible from the street.
  • Short-term rentals cannot be outdoors—i.e., your neighbor is not allowed to rent his backyard to campers.
  • Short-term rentals cannot be in an “accessory structure” such as a garage or shed.
  • Short-term rentals cannot interfere with the residential character of the neighborhood. They cannot create excessive noise or other effects that would unreasonably interfere with the neighbors’ enjoyment of their property.
  • Regardless of how large the house is, accessory short-term rentals may have a maximum of six guests at once, while temporary short-term rentals may have a maximum of ten guests.

Can Short-Term Rentals Still Be Banned In Condominiums?

Although the rules have been greatly relaxed, there still will be situations where operating short-term rentals will be prohibited—even if the owner complies with the City’s requirements. The key example is with condominiums.

A condominium’s bylaws, which govern the administration and operation of the condominium, have the force of law over the condominium unit owners. The Louisiana Condominium Act specifically permits a condominium regime to regulate the use of condominiums via its bylaws. Thus, while the new regulations permit a condominium to be used for short-term rentals, that use may be prohibited by the bylaws. On the flip side, the bylaws in at least one of the new condominium developments in town expressly allow unit owners to operate short-term rentals. This provision has made that particular development popular with investors.

As short-term rentals via websites such as AirBnB, VRBO, and HomeAway have exploded in popularity, our condominium clients have had to decide how to deal with the issue. Many homeowners’ associations have amended their bylaws to include a short-term rental prohibition. From the homeowners’ association’s perspective, it is desirable for such an amendment to include provisions authorizing an award of damages and attorney’s fees for any violations, as well as dispensing with a bond if an injunction must be filed.

How Does A Homeowners’ Association Enforce a Short-Term Rental Prohibition?

As they say, however, rules were meant to be broken. When a condominium unit owner violates a short-term rental prohibition in the bylaws, the Association has a number of tools at its disposal:

  • The Association’s board may contact the Short Term Rental Administration, which is a division of the Department of Safety and Permits. However, as the new regulations have not yet gone into effect, at this time it is unclear what, if any, assistance the City will provide.
  • The Association may be able to notice an administrative hearing and fine the offending unit owner. In some circumstances, the Association may be able to record a lien against the unit for the amount of the fine and/or terminate “common services” such as water if the fine goes unpaid.
  • The Association can file an injunction action, seeking a court order prohibiting the unit owner from violating the bylaws. The injunction action may also seek attorneys’ fees and/or damages if permitted by the bylaws. We have already been in court twice this week representing homeowners’ association in this type of action.
  • If the unit owner ignores the injunction, the court may find him or her in contempt and assess additional fines or even imprison the unit owner.

 

Filed under: Commercial and Business Litigation, Industry News, Real Estate Litigation, Residential Real Estate
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