2/21/2019 11:07 AM | 0 Comments

 

Introducing this month's Guest Blogger:

 

On December 31, 2018, Massachusetts Governor Charlie Baker signed a new bill that will regulate short-term rentals, such as properties listed on AirBnB, HomeAway, or with local realtors. This new legislation has three components: new taxes, new registration protocols, and new insurance requirements.


Read on to learn what action you need to take now, and what changes you’ll need to make in the future.


What qualifies as a short-term rental property for this law?

Any occupied property with at least one room rented out for under 31 days at a time is defined as a short-term rental property under this bill. This includes apartments, houses, condos, and cottages.

Who does this apply to?


Anyone who rents out their home or property themselves or using a realtor or hosting platform, such as AirBnB or HomeAway.


What do you need to do as a rental owner?


If you are a rental owner (or “operator” as referred to in the law) you will need to:


  • Immediately: Obtain and maintain a minimum of $1 million liability insurance to cover each short-term rental. Confirm that your current insurer does not exclude coverage for short term rentals.

  • Immediately: Register your property with the MA Department of Revenue. (You can find more information on how to register here.)

  • For stays beginning July 1, 2019: Collect a 5.7% state lodging tax, along with any applicable city, town, or regional (Cape Cod) taxes.


If you are an operator with 14 rental days or less in a calendar year you may be eligible for a tax exemption, but you still must register and insure your property. The tax also will not apply to rentals that are less than $15 per night or to military officials renting out their home while on active deployment.

How much is the tax?

As with hotels and other lodging establishments, the new law will apply a 5.7% state excise tax on short-term rentals. Individual cities and towns may also impose a tax of up to 6% (6.5% for Boston). Additionally, towns and cities will be allowed to impose a “community impact fee” of up to 3% to help fund affordable housing and local building projects in the community. Cape Cod and the islands may also impose a tax up to 2.75% for the newly founded Cape Cod and Islands Water Protection Fund, which supports environmental conservation. Depending on the location, taxes could add up to 17.25% and will apply to the total amount paid by the renters, including cleaning services and any additional fees.

What should rental owners do right now?

Register your rental and get the minimum required insurance coverage for each property you rent. Make sure new renters are aware of the tax increase if they booked after January 1, 2019 for a stay after July 1, 2019. As details are finalized regarding the new law and when and to whom to submit taxes, stay up to date on all registration information on the Massachusetts Department of Revenue’s website. You may also find full details on the law here.

 

What kind of insurance do I need for my short-term rental property?

 

This new legislation requires operators to have $1 million in liability coverage on each property. While many short-term rental programs offer insurance to operators, such as

Airbnb’s Host Protection Insurance, relying solely on these coverages could leave you with significant liability exposures.


If you already have a policy on your short-term rental property that meets the requirements of the new law, make sure your insurance agent is aware that you are renting out the property. It is common for many carriers to have a clause in a homeowner insurance policy stating that concealment, misrepresentation, or failure to notify insurer of a change of actual occupancy can result in the denial of a claim, lengthy legal battles, and/or immediate cancellation of coverage and unavailability of replacement insurance.


If you are currently renting your property, or are considering renting it in the future, talk to a member of the customer service team at Eastern Insurance about your insurance options. They can be reached by phone at 1-800-333-7234 (Option 2), or by email at customerservice@easterninsurance.com.



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