Published on: January 2, 2019
In the final days of the 2017/2018 Massachusetts legislation session, the House and Senate passed a compromise bill, that was subsequently signed by the Governor, to tax and regulate short-term rentals. The new law takes effect on July 1, 2019.
The change in the law expands the state’s hotel and motel tax to include the short-term rental of residential dwellings (which may include condominium units, single family homes, etc.). The tax applies to all rentals for a period of 31 days or less, regardless of whether the rental is for recreational, vacation, personal or business use. The law only applies to short-term rentals; annual leases and tenancy-at-will are not covered by this bill. Properties rented for 14 days or less per calendar year are exempt from the tax.
The tax rate will vary by locality, and is the total of the following: (1) base rate levied by the state of 5.7%; (2) a local tax which may be up to 6% in all cities/towns except Boston, which can charge up to 6.5%; (3) an additional 2.75% for all towns on Cape Cod & the Islands; and (4) a Community Impact Fee of up to 3% may be assessed locally on professionally managed properties (owner of two or more units in one town).
In addition to imposing a tax upon short-term rentals, the bill also requires that each rental unit be listed with the state short-term rental registry. A person shall not operate a short-term rental unless a certificate of registration has been issued. Furthermore, owners are required to maintain $1 million in liability insurance coverage for each short-term rental.
MEEB attorney Matthew W. Gaines, chair of the Massachusetts legislative action committee for Community Associations Institute, monitored the bill as it made its way through the legislative process, and offered comments when necessary to ensure no adverse impact to condominiums and community associations. The good news is that with respect to condominiums and community associations, the bill does not authorize or otherwise confer a right to rent a unit for short-term periods if such use is prohibited by the association’s governing documents. In addition, the governing board of an association may be able to use the registration requirement of the law in order to effectively monitor whether an owner is engaging in any short-term rentals.
The passage of this bill is an excellent reminder that for those associations that desire to prohibit short-term rentals, it may be necessary to amend the governing documents to include language to that effect. We encourage our clients to have their attorney review the association’s documents prior to the law taking effect on July 1, 2019.
If you have any questions regarding how these changes impact your association please do not hesitate to contact Matthew W. Gaines at firstname.lastname@example.org.