Cities across the country are now coming to terms with the impacts of nightly rentals as primary residents demand action. Before now nightly rentals have been the wild west of regulation, but the tide is starting to change quickly. Denver is leading the way as the district attorney filed felony charges against two realtors & a prominent attorney in Denver County for allegedly running illegal nightly rentals. Why is this monumental? What does this mean for other cities? How will this impact real estate?
Two realtors are accused of illegally operating nightly rentals in Denver County. In Denver, an affidavit is required stating that a house is your primary residence. It is illegal to rent a property nightly that is not your primary residence. The District Attorney has accused the couple of owning three houses, one primary residence that is not rented, and two other properties that are used for nightly rentals. Affidavits were signed that the nightly rentals were their primary residences, which is impossible to have 3 primary residences with only two people. This could result in jail time of 2-6 years. The spokesperson for the Denver District Attorney’s office, Carolyn Tyler, says these charges stemming from short term rentals are “a new area we are pursuing.”
The District attorney has filed class 4 felony charges against each of them for “attempting to influence a public servant. This is the first case I’ve seen where the District attorney has filed criminal charges for nightly rentals
What does the future hold for nightly rentals in Denver ant throughout the country?
The Denver District Attorney has stated that the public can “expect some additional cases in the future”. She was not lying. The Denver district attorney just announced another felony case against a local attorney for also operating an illegal nightly rental.
It is interesting how the district attorney is pursuing these cases. For anyone suspected of operating illegal nightly rentals the district attorney sends them a letter with an affidavit they must sign and notarize stating the home is their primary residence. They are then charged with “influencing a public servant” by making false statements when it is discovered that it is not their primary residence.
The District attorney in Denver is making it clear that they are not backing down and will go to court to enforce the nightly rental ordinance with severe consequences for violations. It will also serve as a warning to others that there could be large consequences for not following the law.
Denver like NY and others will influence the discussion around nightly rentals throughout the country. Denver county is a leader in the prosecution of running afoul of nightly rental laws; other cities will look to cases in Denver as templates for their own enforcement efforts. This is already occurring in cities like Atlanta where local suburbs are banning nightly rentals and/or imposing strict rules. For example Dunwoody a suburb of Atlanta, has banned all nightly rentals less than 30 days (source AJC).
How will real estate be impacted?
The recent case is the most aggressive enforcement I have heard of in Colorado. I see this as the beginning for Denver and other cities will use these cases as a roadmap for their enforcement efforts. Currently in most cities, the worst thing that happens if someone is caught illegally renting a property is a minor fine. This recent case greatly changes the repercussions for not following the law.
The mere publicity of this case should greatly help future enforcement of nightly rental ordinances. I don’t see much impact on real estate prices, but as enforcement is stepped up it could put some property owners under duress that were banking on the increased revenue from nightly rentals.
The felony case in Denver against two realtors is a warning sign for greater enforcement of ordinances governing nightly rentals. Although I doubt either of the two defendants will go to jail, the mere threat of jail time for illegally renting a property will greatly enhance enforcement efforts. Denver will just be the start of this trend as other municipalities adopt similar practices to try and gain control of the burgeoning industry. How many property owners this impacts is the million dollar question; I suspect there are a considerable number of illegal nightly rentals that could face enforcement action in the future. Regardless of if you are personally impacted, this case will be interesting to watch as a precedent for future cases/enforcement throughout the country
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.