Laying Down the Law Short-Term Rentals: Party Houses or Family-Friendly Vacation Accommodation?

Written by Columnist:

Christopher J. Charles, Esq.

Written by Columnist:

Anne Munsil Courchaine, Esq.

Other than politics, one of the most contested topics in 2020 was short-term rentals. The advent and popularity of websites like AirBnb and VRBO, as well as a myriad of smaller, luxury property websites (especially in Scottsdale, Paradise Valley, and Phoenix) have sharply divided public opinion. In just one example, recent candidates for the Scottsdale City Council and Mayor were specifically asked their perspective on short-term rentals.

To those who own and operate them, short-term rentals are a lucrative way to provide a much-needed service to the community, especially in an era where many people are leery of traditional hotels and resorts. To opponents, many of whom live next door or near to a short-term rental, they are a perceived threat to neighborhood safety, quiet, and property values. News stories showing “party houses” flouting the conventional wisdom of social distancing and small gatherings in the COVID-19 era, as well as a recent shooting at a short-term rental, have generated negative publicity for the short-term rental industry.

But are short-term rentals legal?

The State of Arizona specifically recognizes property owners’ right to utilize their properties as rentals, including as short-term residential rentals. See

A.R.S. § 33-1806.01 and S.B.1350, amending A.R.S. § 9-500.39, signed by Governor Ducey on May 6, 2016, preventing cities from taking away the right to make short-term residential leases. In fact, on May 22, 2019, Governor Ducey signed additional legislation which affirms property owners’ rights to use their properties as short-term residential rentals and enacts certain restrictions to limit “party houses.” See HB 2672. However,  A.R.S. §33-1902 requires owners  of residential rental property, including short-term rentals, to register their property with the County Assessor and provide contact information and statutory agent information if the owner lives out of state. Vacation Rentals and short-term rentals also must pay a Transaction Privilege Tax and Transient Tax and have to secure a tax license from the Arizona Department of Revenue.

Despite state law, several cities have enacted ordinances aimed squarely at short-term rentals.

For example, the City of Phoenix has enacted multiple ordinances restricting common aspects of short-term rentals. Ordinance G-6674 authorizes citations and fines to be issued to any person who is “responsible for the party, gathering or event” that police determine is a threat to the “public peace, safety, or general welfare.”1 Essentially, a responsible person can be required to pay the costs for police to respond to an event that violates this ordinance. A “party, gathering, or event” is defined as an assembly of five or more people, and the responsible person can be the owner of the property, any person in actual or lawful control or possession, and any person who organized the event. Also, per the recent law passed by the Phoenix City Council in January 2020, short- term rental operators are prohibited from hosting special events, nonresidential uses, and liquor sales at short-term rentals.2

The Town of Paradise Valley, which is home to numerous short-term rentals, has an ordinance that bans “unruly gatherings,” and allows for a criminal citation

against the owner of the property, even if they aren’t there during the gathering in question. An “unruly gathering” is defined as: a gathering of five (5) or more persons on any private property, including property used to conduct business, in a manner which causes a disturbance of the quiet enjoyment of private or public property by any person or persons and also includes one of the following: excessive noise, impeding traffic, obstruction of public streets by crowds or vehicles, use or possession of illegal drugs, drinking in public areas, the service of alcohol to minors or consumption of alcohol by minors, fighting, disturbing the peace, and/or littering.3

While the City of Sedona has not formally taken action against short-term rentals, it has implemented a “24/7 hotline that people can use to report incidents related to short-term rentals.”4 Also, Sedona appears to be collecting “quantitative and qualitative data” on short-term rentals for future action, although the city appears to be waiting on the State of Arizona to pass future legislation on the issue.

Laws and ordinances governing short-term rentals in Arizona are evolving quickly; if you are a property owner interested in responsibly using your property as a short-term rental, or a neighbor fed up with the party house next door, the Attorneys at Provident Law® are here to help. We are experienced in dealing with all aspects of short-term rentals, from how to write a solid and thoughtful short-term rental agreement to dealing with problematic neighbors or guests.

1. Ordinance G-6674, City of Phoenix, October 21, 2020 phoenix.gov/police/resources-information/loud-party-ordinance
2. Ordinance G-6653, City of Phoenix, January 8, 2020 phoenix.gov/pddsite/Documents/ORD6653-G%20_Signed%20Short%20Term%20Vacation%20Rental%20Ordinance.pdf
3. Ordinance 10-13, Town of Paradise Valley , September 11, 2020, paradisevalleyaz.gov/DocumentCenter/View/95/Chapter-10—Offenses?bidId=
4. “Neighbors’ Rights,” gov, available at www.sedonaaz.gov/your-government/departments/community-development/short-term-rentals/neighbors-rights (last visited November 2, 2020)

Anne Courchaine is an Associate Attorney with Provident Law®, where she practices real estate, commercial litigation, and family law. She can be reached at a.courchaine@providentlawyers. com or 480-388-3343.

Christopher J. Charles is the founder and Managing Partner of Provident Law®. He is a State Bar Certified Real Estate Specialist and a former “Broker Hotline Attorney” for the Arizona Association of REALTORS® (the “AAR”). Mr. Charles holds the AV® Preeminent Rating by the Martindale-Hubbell Peer Review Ratings system which connotes the highest possible rating in both legal ability and ethical standards. He serves as an Arbitrator and Mediator for the AAR regarding real estate disputes; and he served on the State Bar of Arizona’s Civil Jury Instructions Committee where he helped draft the Agency Instructions and the Residential Landlord/Tenant Eviction Jury Instructions. Christopher teaches continuing education classes at the Arizona School of Real Estate and Business and he can be reached at Chris@ProvidentLawyers.com or at 480-388-3343.