Why Your Vacation Rental Needs a Lease & Reservation Policy
A lease is a given when it comes to renting residential or commercial property. Tenants expect to receive a lengthy document that spells out rules and includes addenda and disclosures, and they know they had better read the fine print.
Vacationers should expect to sign a rental agreement, too, whether they are renting a cozy cabin for a weekend or beachfront home for an entire summer. Just as even a brief getaway fulfills a vacationer's quest for a change of pace, a lease satisfies the owner's need for asset protection. In fact, short-term tenants are unlikely to view a vacation rental as their “home.” They may stay for a few days and never return, so it's important to provide them with a lease that has straightforward guidelines on caring for your property.
Also, vacationers typically look at multiple rentals before paying a deposit, so they've come across multiple sets of rules before settling on your unit. Your agreement will undoubtedly be a little different from all the others, so tenants will need to be clear on your expectations for your property. That's best handled with a lease.
More homeowners are handling their own reservations and leasing agreements, especially with the increased use of sites like Airbnb.com. The San Francisco-based, privately held company started in 2008 and now boasts more than 2 million listings in 191 countries. HomeAway, Inc., parent company of Vacation Rental By Owner – VRBO – and VacationRentals.com, has been matching property owners with vacationers for a few years longer than Airbnb.
The companies have turned the Short Term Rental – STR – business on its ear, allowing owners to lease out vacation property without a real estate agency or property management company.
But that also means that property owners are on their own when it comes to creating the STR contract.
We've all heard a vacation rental horror story or two. Airbnb's host guarantee can cover some property damages, but without a vacation lease and a reservation confirmation form, property owners expose themselves to great risk including theft and no-show tenants.
Will vacationers want to bother with a lease agreement?
Typical residential leases can run from nine to 20 pages and longer because they cover a lot of issues. Vacationers would probably be discouraged by a document that long, and few landlords would find it necessary to use such a comprehensive agreement. After all, tenants staying for a few days or a week won't have the same duties as long-term tenants, so details on a lease renewal and getting utilities under the tenant's name, among other areas, are irrelevant with STRs.
In spite of the relative brevity of a vacation lease, basics like rent, a deposit and how damages will be handled are essentials and must be included. Vacation leases also commonly address maximum occupancy and where visitor cars must be parked during the stay, as well as terms that may be governed by the local municipal code.
Landlords leasing an STR should also consider adding terms to address hazards that tenants tend to be a bit less vigilant about when on vacation, suchas burning candles, leaving windows open in inclement weather and using fireworks. Pools and spas can be risky but they're big drivers in the vacation market, so private home rentals that offer them must be sure to follow the federal Pool & Spa Safety Act as well as state and local safety laws. A pool/hot tub addendum is the perfect form to accompany vacation leases for a home with those amenities.
Vacation property owners will find themselves fine-tuning leases over time to deal with new issues that arise – either through tenants' neglect or neighbors' complaints. The idea is to learn from each renter and anticipate problems before they occur, just as when you're leasing to year-round tenants.
What about reservations and cancellations?
Vacation property owners know that keeping the rental filled, especially during busy tourist seasons, takes finesse. Along the U.S. Atlantic coast for instance, vacationers vie for the week around the Fourth of July holiday. In Montreal, Grand Prix du Canada weekend in June draws the biggest holiday crowds. It should be a snap to fill rentals at those times, but landlords must contend with tourists who send out 10-15 booking requests in order to assure they'll snag one good rental. Vacationers may never call to cancel and, unlike a hotel, a private homeowner may be unable to secure a replacement lodger.
Losses mount when tenants cancel, especially “in season” when owners typically can charge higher rents. That's where the reservation policy comes into play.
The policy spells out the rent amount, a deposit amount and whether the deposit is refundable or non-refundable, and due dates for all payments. It isn't a lease agreement – just a promise that a deposit will hold a property for a specified period until full payment is made and an agreement is signed.
Some landlords will fully refund a deposit if they are able to lease the rental to another tenant. Requiring a deposit well in advance of the scheduled stay and insisting on lengthy notice in the event of cancellation benefits both parties, because if the landlord is able to secure a replacement tenant, there is a greater likelihood the deposit will be returned.
Forms to include when you lease a vacation property
Investing in a vacation property can be a marvelous investment, but it calls for careful management. Getting away from it all entails flip flops and light reading for the vacationer, but the fun shouldn't begin until the lease is signed; landlords need peace of mind, too.
Make sure you use all the necessary agreements, below, to manage your vacation property. Then, carve out some time in that seaside cottage or urban townhome for your own getaway so you can reflect on your success with tenants and soak up the rewards of a well-managed rental.