Are You an Outlaw Landlord?

Renting Out Your Home? You Could Be Sued By the City.

Homeowners across the country are using online listing services such as Vacation Rentals By Owner (VRBO) and Airbnb to rent out their homes. Locally, residents of Chaska are eyeing big paydays this fall when the Ryder Cup comes to Hazeltine National Golf Club, bringing an estimated 300,000 visitors, some of whom prefer a furnished home to a Marriott by the airport. More than 125,000 people are expected to travel to Minneapolis in February 2018 for the Super Bowl. With only about 9,000 hotel rooms in the area, owners are lining up to rent their downtown condos, apartments, and homes to visiting football fans.

Real Estate Icon

But some Twin Cities area suburbs are cracking down on this practice, saying short-term rentals violate city ordinances for residential-zoned properties. One couple in an east metro suburb was recently sued by the city to prevent them from renting parts of their home. The homeowners are nearing retirement age, and their grown children have moved out of their five-bedroom, nearly 4,000-square-foot home. Renting out the lower level walkout and a bedroom on the upper level generated up to $1,200 each week. The homeowners lived in the house during all rentals, so they were not absentee landlords. Their guests were mostly couples—a husband and wife visiting grandchildren in the area, a family of three in town for a weekend wedding, and a husband and wife waiting for their new home being built in a neighboring suburb. The homeowners insisted on clean, quiet guests, requirements that are spelled out in rental agreements.

Despite all the precautions taken by the homeowners, the city alleged that the rentals meant the homeowners were effectively running a hotel, which the city contends is prohibited in areas zoned for single-family dwellings. The city brought claims against the homeowners for violating the city’s residential zoning ordinances and sought a restraining order to prevent the homeowners from advertising online and renting to temporary guests.

Under the current version of the city’s ordinance, a “family” is generally limited to blood and legal relatives unless the individuals maintain a “common residence,” which means everyone has access to the home’s kitchen, dining area, laundry, bathroom, living rooms, and family rooms. In other words, renters cannot be prohibited from entering any rooms or other areas of the house unless those areas are accessible only through a bedroom. The ordinances further provide that any use not specifically permitted in a particular zoning area is prohibited. So, by definition, “single-family dwelling” excludes any use as a “multi-family dwelling,” “hotel,” or “short-term rental.” Similar restrictions exist in Apple Valley, Blaine, Stillwater, and Woodbury. Homeowners in these cities are unable to reap one of the benefits of owning property in these locations unless the cities’ ordinances are amended, a slow process that is by no means guaranteed, especially in the face of zoning boards and neighbors who view short-term rentals with skepticism.

Those who oppose short-term rentals say it will negatively impact the neighborhoods where single-family homes are occupied only by the persons whose names appear on the title. Residents often complain that they don’t want new strangers living across the street every week. If the rentals are permitted, however, not only would homeowners have another source of income, cities could generate sales tax revenue and could monitor and regulate the number, frequency, and behavior of guests staying in private homes. And homeowners may just spend that extra rental income at businesses near where they live or to make improvements to their homes to make them more attractive to potential guests.

Recognizing the growing trend, some cities already allow short-term rentals in some form or have begun to evaluate the practice and implement rules and regulations to ensure it is done with minimal disruption to neighbors. Chisago City, Forest Lake, and Maplewood, for example, allow owners of single-family dwellings to rent rooms as “accessory uses” of the property under their residential zoning ordinances, subject to certain conditions. St. Paul has formed a task force to evaluate whether regulations should be implemented to address the short-term rental business. Eagan is considering changes to its zoning ordinances that would allow its residents to rent their homes to non-family guests. Stillwater recently hired a consultant to study the issue. But unless exceptions already exist in your community, you could be violating city ordinances by renting your home and could soon face a lawsuit to prevent you from continuing to do so.

In any event, you might want to consult with an attorney before renting out your home or if you currently rent out your home but are unsure if you are staying within the law in your neighborhood.