Homesharing and Insurance What Your Board Should Know

In the tri-state area, where even the most profligate among us may shed a tear or two at hotel room prices, the homesharing trend has grown by leaps and bounds, with more co-op and condo owners than ever renting out their units to short-stay vacationers—and pocketing more than a few extra bucks in the process.

Led by Airbnb, homesharing has had a steady ascent over the last eight years or so since the company’s founders stumbled on the idea of renting out residential units in popular vacation destination cities to travelers in town both for business and recreation. As lucrative as the business can be for homeowners, it is also fraught with huge risks, including breaking proprietary leases, breaking state and city law and facing significant uncertainty with regard to issues of insurance and liability.

A Risky Money-Maker

“Airbnb is very much in play these days,” says attorney Robert Silversmith, a partner with the Silversmith & Associates Law Firm, PLLC based in Manhattan.

The popularity of joining Airbnb as a renter continues to climb while local municipalities have struggled to keep up with regulations. In October 2014, the New York attorney general released a report saying that nearly three-quarters of all Airbnb rentals in New York City are illegal, according to The New York Times. The focus of the attorney general’s report, though, seemed to center on the idea of illegal hotels versus illegal rentals, perhaps an acknowledgment that some sort of acceptance of the occasional rental may one day come to fruition, something toward which Airbnb and its advocates are working.

New Jersey does not have any statewide regulations on short-term rentals, but various cities have taxes designed to target tourists, including Jersey City’s “hotel tax.” The 6 percent tax did not apply to homesharing sites like Airbnb until very recently, when the city passed a bill in April to bring in any stays that lasted 90 days or less. In application, the new tax will not directly involve homeshare hosts. Airbnb and others will include the tax in user transactions on their websites.

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