LEGAL MATTERS: 5 Things To Do Before Renting Out Your Summer House

Wednesday, July 31, 2013

John T. Longo, GoLocalWorcester Legal Contributor

Better safe than sorry...make sure you cover your bases before renting out your vacation home this summer.

Thinking of renting out your vacation house this summer? Here are five people to talk to before you do.

An Insurance Agent

She/he will probably point to the small print in your standard homeowner’s policy and tell you the policy does not cover rental properties. When does the beach house you rent out a few times a year morph into a commercial rental property not covered by your homeowner’s policy? The day you file an insurance claim. Remember, insurance companies make money collecting premiums–not paying claims. If you want to be sure they will pay, tell your agent about your plans, preferably in writing or e-mail, and get plenty of insurance. The minimum you should have is $1 million. That is not as expensive as you might think but if you cannot afford it, do not rent out your house.

A Realtor

You must screen your tenants. A Google search is helpful but you really need a copy of their credit report. Credit bureaus will send those to realtors but not to you. That leads some owners to turn the entire rental process over to a realtor and just trust them to do the screening. Don’t. Whenever you are dealing with someone who works on a commission remember President Reagan’s advice: trust but verify. That means having your agent give you a copy of potential tenants’ credit reports and applications so you can decide who you want to rent to.

An Accountant

The IRS makes a big deal about whether you rent your house out for more, or less, than 14 days; your accountant can explain why. She/he can also make sure you keep the right records to minimize your taxable income and can tell you when it might make sense to form a limited liability corporation to own the property. The accountant can also make sure you keep the good records necessary to minimize your taxes when you, or your kids, sell the house–hopefully for more than you paid for it.

Your neighbors

They cannot stop you from renting out your house but they may try. If they are against the idea, anticipate they will report you to local officials and really dot all your i’s and cross all your t’s when it comes to complying with tax, building and rental codes. Then tell your lawyer there may be trouble.

A Lawyer

Will you have to comply with the Rhode Island Residential Landlord Tenant Act? If you collect sales and lodging taxes like a hotel, no. Otherwise, maybe. In Massachusetts, rentals of less than 3 months are exempt from some landlord tenant laws but not all of them. For example, in Massachusetts you still have to give your summer tenants information about lead paint. Talk to a lawyer where your vacation house is for specific advice.

I do not mean to discourage you from renting out your vacation house; I just want you to be protected for when things go wrong.

John Longo is a consumer rights attorney practicing law in Rhode Island and Massachusetts. He represents consumers who have disputes with businesses, employees cheated out of their wages or overtime, car buyers stuck with Lemons, and people in need of bankruptcy protection. He is a member of the National Association of Consumer Advocates, the National Association of Consumer Bankruptcy Attorneys, and the Rhode Island Association for Justice.