Short-Term Rental Pitfalls for the Real Estate Investor
Lately, I’ve had several investors ask me about the state of affairs for obtaining a permit for Short Term Rental in Nashville. As a guide, I’ve identified the top things you need to look for when purchasing a property you wish to rent on popular sites like Airbnb and VRBO.
Pitfall 1. You Don't Know the Metro Code.
While generally the code can be found in Title 17 of the Metro Code, the principal Ordinance is BL2017-608. You can see a copy of the ordinance along with it’s 9, yes 9, amendments by clicking here.
Pitfall 2. You Don't Know the Zoning.
By reading the code above, you quickly learn that there is a big difference in what is allowed in R, RS and RM properties. The main take away is that if you want to rent as a non-owner-occupied, you must find the RM zoned properties. If you don’t know the zoning, you can run a check through the Davidson County GIS and mapping. You click here to go to that website. Once inside the Parcel Viewer, click on the magnifying glass at the top and type in your address.
Pitfall 3. Beware the SP
“SP” zoning or Special Project zoning is a special carve-out in the zoning code. Properties with this designation have gone through a long process to obtain the SP zoning. If your SP document doesn’t support short-term rentals (it probably doesn’t), then you will not be able to get a permit. As of December 13, 2018 the BZA has held that if the SP doesn’t specifically state the use within the residential uses, STRP permitting will not be available.
Pitfall 4. Beware the HPR
Many of the homes in Nashville are in what is know as a Horizontal Property Regime or HPR. An HPR is a tool used by developers to essentially subdivide property without a formal subdivision of the lot. As of Nov 16, 2018, the current position of Metro Codes is that Amendment 9 of BL2017-608 does, in fact, prohibit owner-occupied permits if both (or all) properties in the HPR (A&B) are not owned by the same owner. This applies to R and RS zoned properties. I believe this position to be incorrect but until there is a ruling in the opposite direction, this is what they will follow. I anticipate Codes will also take this position at the renewal period for existing permits. Our firm has engaged in several lawsuits to challenge the constitutionality of Amendment 9. Litigation is ongoing. Codes is currently determining the number of HPR permits that have been issued. They have not determined if that means they will revoke permits or simply not renew them.
Pitfall 5. You Don't Know about the State law
In May of 2018, the State of Tennessee passed a bill that essentially froze in time the rules concerning people who already had permits. If you operated before new ordinances were enacted, then you may have a claim for use under the new law.
Most people only heard that the State law grandfathers and assume they are fine. This leads to the final pitfall…
Pitfall 6. You Assume - Don’t assume.
The rules are continually changing. Do not think you know the rules unless you are always staying up on the changes. The law changed over 9 times in 2018 alone. Don’t operate unless you have someone keeping up with the changes.
If you have a question contact one of our attorneys today.
Contact a nashville real estate attorney to obtain a short term rental permit
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