On December 28, 2018, Governor Charlie Baker signed An Act Regulating and Insuring Short-Term Rentals, which, effective July 1, 2019, implements new rules related to short term real estate rentals.  These new policies will impose some of the strictest rules in the nation on such properties.

The new law will cover all real estate rentals made for a period of 31 days or less. These units are considered “short term rentals.” Exempt from the tax are units that are rented for less than 14 days in a calendar year, although these units will still be required to abide by the registration and insurance requirements of the law.

The regulations require landlords to register all units intended for short term rental on a yearly basis and pay an accompanying registration fee. All landlords of short term rentals will be required to carry liability insurance of $1 million on each unit. The state law sets a state tax on short term rentals equal to 5.7%, allows for an additional tax imposed by cities and towns of up to 6% (6.5% in Boston), an additional 2.75% tax on Cape Cod and the Islands (to fund the Cape Cod and Islands Water Protection Fund) and an optional community impact fee of up to 3% may be assessed by locality. The owner is required to collect and remit this tax.

As a result of the new law, landlords are facing a host of problems. For instance, many towns haven’t set their tax rate. This leaves both brokers and landlords at a loss as to where to set their prices, as they do not yet know their tax liability. In addition, while the law is effective as of July 1, 2019, there is still a question of how bookings taken after January 1 and filled before July 1, 2019 will be treated.

There is a sense on one side that these regulations will help to even the playing field for people looking for affordable, long-term housing. In addition, this could be a significant source of revenue for the state and many cities and towns where these short term rentals operate like hotels. On the other hand, many landlords who draw a major portion of their income from sites like Airbnb, are worried that such strict regulations will destroy what was a very lucrative industry.

If you have any questions related to this topic and how it may affect you and your business, our Business Law department may be able to help. To reach one of our Business Law attorneys please call our office at 617-951-3100.