What is a Short-Term Rental Agreement?
Why Do You Need a Rental Agreement?
Before exploring the components of a short-term rental agreement, let’s first clarify why hosts need one in the first place. In essence, a short-term rental agreement is a written, legally-binding document that recognizes a relationship between two parties — in this case being a host and a guest. It’s not a legal requirement, but many hosts elect to use one as added protection.
Homesharing platforms like Airbnb, HomeAway, and VRBO have grown so rapidly over the past decade that many hosts don’t think twice about letting a complete stranger into their home. Insurance programs like Airbnb’s Host Guarantee — a $1 million property protection insurance — certainly cover significant liability, but they don’t go as far as many hosts want.
A short-term rental agreement is an opportunity for hosts to explicitly outline everything from the house rules to the terms of payment and the cancellation policy. Utilizing a rental agreement simply adds another layer of security for hosts and property managers. If a situation jeopardizes a host’s property or belongings, the signed rental agreement serves to benefit the host in court. Even if things don’t get escalated to legal levels, having guests sign a formal document is likely to help deter them from doing anything unwanted.
What’s Included in a Short-Term Rental Agreement?
A vacation rental agreement should be thorough. Despite the hesitation many hosts feel when imploring guests to sign a lengthy contract, legal thoroughness should always take priority. Here is everything hosts should always include in their rental agreement:
- Name of guest(s) and length of stay
First and foremost, leave blanks in the template to clearly define who the guests are and how long they will be residing in the property. Be sure to clearly highlight check-in and check-out dates (and times) so there is no logistical confusion for either party.
- Terms of payment
Before Airbnb and other homesharing platforms implemented the Instant Book policy, terms of payment for vacation rentals were a bit messy. Traditionally, guests would have to pay 25% upfront, and the remainder would be due 60-90 days before check-in. Nowadays, many travelers complete bookings well within that 60-day time frame. If the guests are assumed to book and pay in full through an OTA (online travel agency), this is the host’s opportunity to state if they require a security deposit, as well as the refund policy.
- House rules
Most hosts include a section for house rules in the post-booking follow-up email, but it’s likely guests skim over this information. A rental agreement is a chance to clearly state the policies regarding pets, smoking, parties, trash and recycling, and which amenities are on and off limits.
- Cancellation policy
Hosts should also use the rental agreement to outline the cancellation policy. If a guest cancels their stay days before the check-in date, this could result in huge sums of lost revenue. Rental agreements should include a section that states how many days in advance a guest can cancel, and what the repercussions are if they cancel after that time period.
- Occupancy limits
Rental arbitrage — industry jargon for renting an apartment and simultaneously earning a profit by renting it out to other guests — is a well-documented phenomenon. Many Airbnb hosts do this to leasing companies, but Airbnb guests have been known to add another layer. Short-term rental agreements can be used to set occupancy limits and state which people are allowed to stay on the premises. If a particular booking was only made for one person but four people show up to stay, this gives hosts a legal leg to stand on.
- HOA rules
If a property is part of an HOA (homeowner association), be sure to include that in the rental agreement. HOAs aren’t always fond of short-term, high-turnover vacation rentals, so hosts should do everything in their power to keep guests in line. This applies principally to the common areas of a building.
Whether an accommodation has a permitted parking area or strictly outlaws any parking whatsoever, this should be noted in the agreement. Be sure to include all parking specifications including location and time of use.
- Mechanical failures
What happens if the power goes out or if the roof leaks? What if the internet stops working? A rental agreement doesn’t have to be all threats and ultimatums. It can actually be a functional resource for guests if there are issues.
The Consequences of Not Using an Agreement
It goes without saying that vacation rental property management comes with its fair share of assumed risk. For every positive quarterly return, there’s a horror story reminding owners how fragile the business can be. For owners, not utilizing a rental agreement could result in lost money, damaged property, legal issues after poor guest conduct, and a host of other consequences.
When it comes to rental agreements, consequences can go both ways. For guests, not signing an agreement can result in lost payments, early eviction, expensive lawyer fees, bills for repairs or replacements, and a number of other legal issues that can throw a wrench in vacation plans.
How to Use a Rental Agreement
It’s important for guests to sign the rental agreement before they enter the property. Ideally, hosts send over the agreement in an email attachment after the booking. This way they can e-sign the document or print it, sign it, scan it, and email it back.
Airbnb also has its own online portal where hosts can upload documents to be signed.
Below are some examples of short-term rental agreements for hosts to use a template. To be clear — hosts who elect to implement a short-term rental agreement are still required to adhere to Airbnb’s (and other OTA’s) code of conduct regarding nondiscrimination, inclusion, and respect.