Laying Down the Law – THREE STRIKES, YOU’RE OUT: SHORT-TERM RENTAL VIOLATIONS ARE GOING TO COUNT
September 30, 2022
Arizona’s legislature is making sure the party doesn’t go on too late and doesn’t get too loud. Governor Ducey has signed into law Senate Bill 1168, codified at A.R.S. § 9-500.39, as amended, which grants Arizona cities the right to implement certain restrictions on short-term rental properties, including a progressive “three-strike” regulatory scheme with increasing penalties for repeat violators. It is important to note, however, that Senate Bill 1168 is not a regulatory statute unto itself—it is instead a grant of power to Arizona cities to implement certain restrictions if the cities deem the regulations beneficial for their communities. Each city may or may not choose to enact regulations consistent with the bill to regulate their community.
Short-term rental operators will notice many similarities consistent with existing short-term rental regulations. Senate Bill 1168 allows cities to require operation permits and licenses from local agencies, as well as requiring property registration complete with the property owner’s contact information, proof of compliance with transaction privilege tax licensure, and emergency contact information.
New, however, is the power vested in Arizona cities to suspend short-term rental permits and licenses for repeated violations of city ordinances pertaining to short-term rentals. Implementing cities can suspend permits and licenses for a single violation in certain circumstances. Specifically, the bill authorizes increasing fines for serious, repeat offenses that affect public health and safety, including but not limited to raucous parties and fostering an environment where crimes may proliferate. Authorities will be able to impose the greater of $500 or one night’s rent, as advertised in the property’s listing, for the first verified violation. The violation fees increase to the greater of $1,000 or two nights’ rent for a second verified violation, and the greater of $3,500 or three nights’ advertised rent for the third verified violation.
A property receiving three verified violations within a twelve-month period will have its operation permit suspended for a period of twelve months. Importantly, however, a license only incurs a verified violation upon full adjudication on the merits of the violation. Therefore, the alleged violator can defend its rights and force the city to obtain a judgment of liability before a verified violation for purposes of the statute accrues. The twelve-month time period from which to calculate verified violations begins to run from the date of the first verified violation.
Beyond the three-strike policy, the regulation avails cities of the right to implement occupancy restrictions by instituting occupancy limits of up to two adults per bedroom. (It is unclear, at this point, whether any restriction on residential occupancy will withstand judicial scrutiny.) Additionally, hosts must carry a general liability insurance policy with limits of at least $500,000, or have the host platform provide such insurance to guests. Furthermore, before offering a vacation rental or short-term rental, the property owner or manager must notify all single-family residential properties adjacent to on either side, as well as directly and diagonally across the street from the property of the intended use as a short-term rental.
Ultimately, while Senate Bill 1168 may have mutually beneficial effects, short-term rental operators should remain abreast of Arizona’s continued efforts to regulate short-term rentals, as certain cities may institute the new regulatory structure, while others may not. If you or anyone you know has questions regarding short term rentals, call or email our office today to schedule a consultation with Mr. Wilkie or Mr. Charles.
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”). In 2017, Mr. Charles obtained one of the Top Ten Civil Verdicts for his client in a real estate dispute. 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 regularly 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.
Blake Wilkie is an Associate Attorney with Provident Law®. His practice focuses primarily on real estate, real estate litigation, and preventive counsel. Blake is also a licensed Arizona real estate agent, allowing him the unique perspective of serving clients from both a legal and business point of view. He has represented commercial landlords, homeowners, and tenants in numerous transactions and cases, as well as advised on and prepared business formation documents and performed lending agreement legal analysis. From pre-litigation matters through final resolution, he is trained to identify a wide variety of legal issues that arise on a day-to-day basis, how to respond to them, and how to prevent them before they arise in the future. After graduating from the W.P. Carey School of Business at Arizona State University, Blake obtained his J.D. from the Sandra Day O’Connor College of Law at Arizona State University, where he was a Managing Editor of the Arizona State Law Journal.