Vacation Rental Short Term Lease Agreement

When to Use a Short Term Lease Agreement

With the rise of Airbnb, VRBO, Vacasa, and Home Away, short-term vacation rentals have grown rapidly and are a popular alternative to hotels and traditional bed-and-breakfasts. However, having total strangers in your home comes with many risks, and it’s important to document the terms of the stay and the expectations of each party.

A Vacation Rental Contract allows owners and their guests to put into writing the detailed agreements between them, and any consequences if those agreements are broken. It also allows an owner to set the rules of the guest’s stay and allows the guest to know what to expect when he or she arrives.

Here are a few examples of what an owner or guest may include:

Guests may or may not:

• Smoke
• Bring a pet dog or pig
• Use the hot tub
• Park in the driveway
• Check in too early
• Play loud music at three in the morning
• Throw a rager
• Invite their whole football team to stay

Owner will provide:

• A bed, or two, or three
• Linens, blankets and pillows
• Kitchen utensils to make a pancake breakfast or dinner
• Television with cable or Netflix and Hulu
• Wireless internet
• Parking spots
• Basic toiletries

Consequences of Not Using a Short Term Lease Agreement

What happens if I don’t have a Vacation Rental Agreement?

Vacation rental horror stories are all over the Internet. A Short Term Rental Agreement can help you avoid becoming another aggrieved owner or guest. The agreement allows you to anticipate issues and resolve them before they become full-blown problems. And it can protect both owners and guests from unexpected behaviors or circumstances.

Here is a chart of some of the suffering a Short Term Rental Agreement could prevent:

OWNER	GUEST
Lost rent money	Lost money paid for rent
Guest won’t leave	Kicked out of property early
Damaged property	Large bill for repairs or replacement
Too many guests	Lack of amenities
Expensive lawyer fees	Expensive lawyer fees
Risk of illegal activities	Fear of owner
Fear of injury to guests	Personal safety and wellbeing

Some cities limit homeowners’ abilities to rent out their property short term. For example, Santa Monica, California prohibits home rentals of thirty days or less unless the owner also resides on the premises during the stay. Be sure to check your local laws before considering a vacation rental.

What are the tax consequences if I don’t have a Vacation Rental Agreement?

Having a clear record of how many days you have rented out your property is very important for tax purposes. The Internal Revenue Service (IRS) provides a 14-day vacation rental tax exemption (also called the “Masters exemption” because of its wide use during the annual Masters Tournament in Augusta, Georgia.) If you rent your property out for 14 days or less, you can pocket the income without reporting it on your tax return.

 

However, if you rent your property out for more than 14 days, you will need to pay taxes on that rental income by reporting it on your tax return. The IRS also has strict guidelines on dividing expenses between rental use, which can be used as a deduction, and personal use, which can’t. Check with a tax lawyer or certified public accountant for more detailed information on how your income taxes might be affected.

 

A written Short Term Lease Contract with details about the rental period can serve as important proof to the IRS for your tax return, especially if you are taking advantage of the 14-day rule. And if you are deducting rental expenses such as mortgage interest and property tax, a Short Term Lease Contract can help you detail the exact number of rental days and corresponding deductions.

For more information take a look at some vacation rental tax tips.

Most Common Situations to Use a Short Term Lease Agreement

Who needs a Vacation Rental / Short Term Lease Agreement?

Any person looking to rent out their home for the weekend or the summer or any person looking to rent a home for the weekend or the summer should consider a Vacation Lease Agreement.

Here are some possible owners and guests:

Still considering renting out your home to a vacation guest? Read this article on how to survive being a short-term host.

What to Include in a Short Term Lease Agreement

Here are the most essential elements to include:

•      Who are the parties, including all guests staying at the property
•      What will be included with the rental – beds, towels, board games
•      Where is this amazing rental located
•      When do the guests check in and check out
•      Why might guests get kicked out of the property
•      How much is the deposit, total rental cost, and security deposit

A Vacation Rental Agreement may also include some of these additional provisions:

Property Details

Maximum Occupancy
The maximum amount of people allowed to stay on the property

Visitors
Maximum number of visitors allowed

Keys & Access Codes
How to get the keys and access codes and what do they open

Rules & Restrictions
What the guests can and cannot do.

Cleaning
Is there a cleaning fee and what is included?

Parking
Will there be parking?

Other Fees
Are there any other fees or taxes involved?

Mechanical Failures
What happens if the power goes out or the internet stops working?

Acts of God
What happens if there is a hurricane and the guest can’t come?

Legal Speak

Limitation on Liability
The owner is not liable for any injuries or loss of property.

Indemnification
Guests will indemnify owner if any lawsuits arise from their stay.

Governing Law
Which state’s law will govern

Disputes
How will disputes be resolved?

Waiver
Any waiver must be made in writing.

Severability
If one part of the agreement is invalid, the rest of it is still enforceable.

Entire Agreement
This agreement takes priority over any other agreement between the parties.