It seems like a perfect scenario: You, as a homeowner, need a few extra hundred dollars and there are thousands of people on the internet who would like to pay you for the “experience” of staying at your house instead of a hotel. Or you have all that space in the basement and think that renting it out to a stranger is an easy way to cover half the mortgage this month.
Proceed with caution because you are about to enter into a landlord/tenant relationship, even with a gesture as simple as a handshake or clicking “Accept.”
A lease agreement is any contract where one person (the Landlord) gives another person (the Tenant) temporary possession and use of real property and in return, the Tenant agrees to return possession of the property to the Landlord in the future. In simpler terms, the Landlord rents a dwelling to the Tenant for a specific period of time — e.g., one day, one week, one month.
The general public is most familiar with a standard lease agreement whereby the Landlord rents an apartment to the Tenant. These lease agreements are usually several pages long and contain many conditions, including:
- Rent is X dollars per month
- Tenant pays utilities
- Tenant pays a security deposit and the Landlord gets to keep the security deposit if the Tenant breaches (violates) the lease
- The landlord agrees to maintain the apartment in a livable condition
- No pets, unless those pets are fish, but absolutely no sharks
With a standard lease agreement, if the Tenant breaches the lease, the Landlord can post a three-day notice that the Landlord intends to evict the Tenant. This notice can be posted on the door of the residence or delivered by a process server or sheriff. If the Tenant does not move out, the Landlord can start the eviction process in court and get a judgment to reclaim the property within a few weeks of posting the notice.
However, if a person lists her home or apartment with an online marketplace enabling others to rent for a short vacation, it is unlikely that person and the jet-setting frugal traveler will enter into a written lease agreement. While those first few days may seem like something out of a television commercial, with everyone sharing stories of their hometowns and local cuisine, the world traveler may end up being a squatter who just won’t leave. Just what every master of the domain wants – another person to eat all the food without buying groceries, leave dirty dishes, and clothes lying around without picking them up, and watching stupid movies that mess with the Netflix algorithm for the next few months.
That’s right. Without a lease agreement that sets the rules for eviction, the homeowner has to follow the rules set out by statute. In North Dakota, the homeowner would have to give the squatter a thirty-day notice instead of the three required by a lease. If the squatter hasn’t moved out after thirty days (and really, why would you leave free food and Netflix?), the homeowner has to prepare a summons and complaint, hire a process server to serve the summons and complaint on the squatter, file the summons, complaint, and proof of service with the court, secure a court date for an eviction hearing, and show up to the court to explain to the judge why the squatter is violating an unwritten lease agreement.
Here are more potential problems with short-term rentals:
- The practice may violate a local ordinance
- Your mortgage company may seek to foreclose for violating a material term of the mortgage lending agreement
- Your condo association may prohibit unvetted guests
- Your lease agreement may prohibit subleasing to another person
- You may attract the interest of the IRS
There are success stories right here in the Fargo/Moorhead area with people who love the experience. But for those of you who enjoy the privacy of your own home and want unwanted guests to leave when you ask, and not when ordered by the court, you should think very seriously about allowing strangers into your home on short-term rentals. That quick hundred bucks you were hoping to make to help cover an unexpected car repair just turned into a thousand-dollar court experience.
I am one of the real estate attorneys at SW&L. If you have questions about lease agreements, landlord/tenant issues, or your general property rights, call 701-297-2890 to reach our Real Estate Team or send us an email below.
The information contained in this article and on this website is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem.