Short-Term Rentals in Arizona

David Allen

Partner, Jaburg | Wilk Attorneys at Law

The growing popularity of homeowners renting out all or a part of their homes as “short-term rentals,” as an alternative to conventional hotels, cannot be denied. Several companies, including Airbnb and VRBO, exist to offer these types of “sharing economy” services to both the homeowner, who wishes to rent out their property, and to the short-term tenant, who wishes to take advantage of such accommodations, which are usually cheaper than a traditional hotel.

There are a wide range of laws that have been enacted in recent years by various municipalities throughout the country, as they attempt to strike a balance between the rights of property owners to use their properties as they deem fit, including renting it out for short-term use if they so choose, and the rights   of neighboring residents to not suffer from the increased noise, traffic, and garbage that of oftentimes results from having their neighborhood occupied by transient, as opposed to permanent residents. The right of an Arizona municipality to limit short-term rentals was resolved in 2016 (becoming effective in 2017), when the Arizona State Legislature enacted A.R.S. §9-500.39. This statute eliminated the ability of local cities and towns to regulate these types of rentals based solely on their classification or use. Consequently, short-rentals are now specifically allowed by Arizona state law.

That doesn’t mean, however, that a homeowner has a blanket right to turn their Arizona home into a short-term rental. Even in the brief amount of time since the statute was enacted, changes have already been made by the Arizona legislature. In response to neighbor complaints, A.R.S. §9-500.39 was amended to allow a municipality to “regulate vacation rentals or short-term rentals” for certain specified purposes, including “adopting and enforcing residential use and zoning ordinances, including ordinances related to noise, protection of welfare, property maintenance and other nuisance issues.” As a result, Arizona law now puts limitations on the use of a property as a “party house” for special events, by specifying that “a short-term rental may not be used to nonresidential uses, including for a special event that would otherwise require a permit or license pursuant to a city or town ordinance or a state law, or a retail, restaurant, banquet space or similar use.”

While A.R.S. §9-500.39 limits the ability of an Arizona municipality to restrict or regulate short-term rentals, it does not preclude a homeowners’ association from imposing much more severe limitations, or even eliminating them altogether. The ability of a homeowner who owns property within the jurisdiction of a homeowners’ association to utilize their property for a short-term rental is governed by the Codes, Covenants and Restrictions (“CC&R’s”), for their particular association. In that most CC&R’s were drafted at a time before the advent of the current short-term rental phenomenon, they are devoid of specific language precluding the use of homes for short-term rentals. As a result, there have been several cases in other jurisdictions, although as of yet none in Arizona, that have ruled on whether the commonplace prohibition in most homeowners’ association’s CC&R’s against using a residential property “for commercial purposes,” or for “non-residential use,” precludes short-term rentals, with most courts find such language, standing alone, to be insufficient.