THE FUTURE OF SHORT-TERM RENTAL IN JERSEY CITY
A rise in the popularity of Airbnb and other short-term on-line marketing rental sites has allowed homeowners and renters to rent properties on a short-term basis and to reap significant financial rewards. That financial reward has allowed cities who passed laws to accommodate short-term rentals to realize increased tax revenue. While for most this has been a win-win situation, there has also been a downside to this growing trend. The rise in short-term rentals has had both a negative and a positive impact, depending on which side of the issue you favor. In general, the practice of short-term rental has increased the cost of rent and decreased the availability of residences to rent in urban cities on a long-term basis. Those engaged in the short-term rental business have realized a revenue source that has proven very lucrative. Landlords, on the other hand, have had to deal with the consequences of short-term rentals.
In 2015, Jersey City passed its first ordinance regulating short-term rentals in the city. Since its passage, homeowners and operators have realized millions in income. It is reported that Airbnb has estimated that Jersey City generated over $4,000,000.00 in tax revenues from the six (6%) percent tax imposed on short-term rentals. (Rosario, Joshua, Short-term renters submit over 20,000 signatures in effort to repeal new regulations in Jersey City, NJ.com, July 18, 2019). Owners and operators who engaged in short-term rentals have invested significantly to improve the appeal of their properties. In June 2019, the Jersey City Council, however, passed a new Resolution that puts in place new restrictions on short-term rentals. These new restrictions have been met with fierce opposition from the community as homeowners and operators stand to lose significant income.
Ordinance 19-077, passed on June 25, 2019, put in place new rules that further restricts short-term rentals in the city. Arguably, the most significant change in the new ordinance is the limit on the number of days that a property can be rented. The new law sets the limit at sixty (60) days per year where the owner or operator is not living or present in the residence.
The new ordinance also makes it illegal to offer the short-term rental of a dwelling with more than four (4) units where the owner or operator is not present. In addition, a tenant cannot offer a unit for short-term rental, only an owner or operator may do so. The new ordinance does allow for some exceptions. Any property that was under contract for a short-term rental at the passage of the new law, is allowed an exception up to January 1, 2021. If a tenant was operating a property for short-term rental at the passage of the new law, they may do so up to January 1, 2021. In both cases, the Jersey City Division of Housing Preservation can request documentation in affording this exception.
Under no circumstance may a property be used or advertised for short-term rental without the required permit. An initial permit will cost an applicant $250.00 and must be renewed annually at a cost of $200.00. The new ordinance makes an owner, transient occupant(s), the property rental agent, the responsible party or their agents liable if violated. Should anyone be found in violation of the ordinance, fines can be imposed up to $2,000.00 per violation, but not less than $100.00 per violation per day. A separate fine can be imposed for each day a party violates the rules.
In response to the new law, owners and operators in Jersey City turned in a petition with over 20,000 signatures requesting that the Council repeal Ordinance 19-077. The Council subsequently voted on August 14, 2019 to reject the request to overturn Ordinance 19-077. If the Council takes no further action within twenty (20) days of that vote, the voters of Jersey City will have a choice of repealing the ordinance through a ballot on November 5, 2019.
It is hard to say how this matter will be decided when voted on in November. What is clear is that there will be winners and losers on both sides of this issue. Landlords with more than four (4) units must comply with the law and will have protections against tenants renting their respective units. Homeowners and operators who do not reside in the rental unit are now limited to a total of sixty (60) nights per year for short-term rentals.
At Griffin Alexander, P.C., our attorneys have decades of combined experience representing community association and landlords in various legal matters. We are committed to the provision of client-oriented service. We have vast knowledge in effectively handling matters related to short-term rentals, and how landlord and associations can protect against potential liability.
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The information in this Client Alert is provided solely for information purposes. It should not be construed as legal advice on any specific matter and is not intended to create an attorney-client relationship. The information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based upon particular circumstances. Each legal matter is unique, and prior results do not guarantee a similar outcome.
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