Short-Term Rental Rules in Orlando
An Overview of Orlando Short-Term Rental Laws
It seems that everywhere you go, especially if you are a tourist, people are listing their homes on websites for visitors to rent them out for short periods of time. Of course, this is a business. Just like any business, these short-term rentals come with certain regulations. The person staying in the home is considered a tenant and the person renting out their home is considered a landlord.
Orlando, or more specifically, unincorporated Orange County is certainly one of the major players in the short-term rental game. Orange County passed certain laws in an effort to regulate these rentals. Under Orange County law, short-term rentals are defined as any home that is rented once for less than 30 consecutive days. Deliberate "blackout dates," meaning that you as the owner are not going to be renting out the home during certain times, don’t count and those dates still count toward a full rental. So be sure to plan accordingly.
Orlando also requires that the short-term rental owners obtain some type of local license. Depending on where you live in Orange County, the license is going to be different. In unincorporated Orange County, you will be looking at an unincorporated license on the licensing website.
If you rent your home out for 30 consecutive days (or more) you are exempt from short-term rental laws. However, you may still need to register your short-term rental home with the State of Florida. The State of Florida is looking for owners to voluntarily registered so the state can make sure that you are paying your state taxes. Florida is not issuing an actual license , but they are looking for your physical address.
Local and state taxes can definitely add up, but ultimately are not a big deal. It’s not hard to pay your local and state taxes, just like it isn’t hard to pay for your business license. The problem arises when someone refuses to pay their local and state taxes while conduct business, which is considered a short-term rental. If you are a tenant renting a home for less than 30 consecutive days, you are likely doing so because you are looking for somewhere to stay for a business trip or for a vacation to spend time with family. But what happens when someone tells you they have done everything they can to comply with local and state laws, when they haven’t?
Having to pass inspection and being issued a license is about more than just paying your business taxes. It is insurance that you are doing the right thing. It gives you peace of mind in knowing that you are complying with all local laws and avoiding liability. If there are faulty electrical outlets, or even mold or mildew, a landlord has the responsibility to fix the issue. Some short-term rental owners may ignore these issues: if you are there for the weekend, you might be out of the place before the electrical outlet sparks or the mildew begins to grow and spread. So, for your peace of mind, you should make sure you are operating a legal short-term rental.
Requirements for Short-Term Rental Licensing
Licensing Requirements for Short-Term Rentals in Orlando
Your first question as a new or potential short-term rental owner may be, "What does it take to get a license?" The City of Orlando is well-prepared to answer your question because per Section 57.404 of the City Code of Ordinances, a short-term rental must apply for and obtain a City Business Tax Receipt ("CBTR") as a prerequisite to operating. And while this may sound simple and straightforward, it still will require some due diligence on your part. However, if you’re serious about entering the short-term rental game, even a low-maintenance, years-old condo or a quiet single-family home, it’s time well-spent. The process of applying for a CBTR is not quick; the City estimates that it "will require up to 14 days [to complete] after applying." But you should also expect the actual permitting process to be somewhat longer, so don’t be surprised if it takes six weeks to get a CBTR. The CBTR application must be submitted through the City’s online system, and short-term rentals may be eligible for an expedited review that could reduce the time from four weeks to two. The CBTR (and the payment associated with the online application) comes with a $50 fee. The City is flexible with locations, allowing short-term rentals anywhere that other residential uses are permitted. The definitions of the areas where short-term rentals may be used are listed in the City’s "Short Term Residential Rental Ordinance" and cross-checked on the City’s "Official Zoning Map." The CBTR must be purchased regardless of use type, whether it be a short-term rental, a multifamily residential unit rented to a tenant for six months or longer, or a single-family unit rented to a tenant. The cost of a CBTR is based on how long it will be valid for, with the longest period lasting one year. The cost of the CBTR is based on the scale set forth by the City: A CBTR is $62.46; $156.16 for six months; $184.23 for nine months; and $229.02 for one year. Keep in mind that this is in addition to the $50 administration fee. The fees have different lifespans as they relate to the zoning of where your property is located. For example, for short-term rentals in R-1A and R-1AA, the fee for each CBTR is $62.46 and is valid until September 30 of that year. However, short-term rentals located in the R-1C and R-1T zoning districts shall pay 88% of the above-mentioned CBTR fees. There are a few circumstances in which short-term rentals are not required to have a CBTR. The exemptions are designed to apply for rentals where the period of stay will be fewer than 30 days. For example, someone renting out their room for a week while on vacation does not need a CBTR, and rentals under 30 days that are not done in full-time rentals are also exempted. A full-time rental occurs when the dwelling unit is officially listed for rent for 90 or more consecutive days, and the listing must be accessible to the general public. Short-term rentals that occurred before June 17, 2019, also are exempted from obtaining a CBTR if the property continues to be used for a short-term basis. For commercial activities, such as wedding venues and retreat centers, there’s also no requirement to have a CBTR. After you have obtained a CBTR, you are required to get a permit through the State of Florida. Under the SCRR, you may be eligible to apply for a Vacation Rental Dwelling License. The license will be issued electronically, but the cost for this is a $100 registration fee and the Department of Business and Professional Regulation will assess an additional 5% surcharge and processing fee. You also must have a transient rental property license issued through the Orange County Tax Collector’s Office. Tax Collector’s Office is required to establish an opt-in registry, and you must submit a completed application for approval. The application must include your proof of the occupancy under the City Ordinance, a copy of the signed agreement with your tenant and a certificate of compliance. You have to pay a $250 fee for initial registration for a new property and $75 per year thereafter.
Short-Term Rental Zoning Regulations
While this ordinance will be further analyzed below, for purposes of this discussion it is important to note the local restrictions imposed by Section 58.554(14) of the Orange County Code. This section of the Code restricts short-term rentals to areas of the county that are zoned for tourist accommodation.
Ordinance 2018-25 provides that short-term rentals are only permitted in areas zoned as "commercial general," "tourist commercial," "downtown activity center," and certain segments of the "Miami Boulevard Development Plan." Few will be surprised by the commercial zones that were included (as this is the area of the county that is primarily impacted by REOs).
However, several neighborhoods throughout the county are zoned as "suburban estate." The suburban estate zoning of these neighborhoods is a point of controversy as these restrictive neighborhoods are among those most affected by the rise in short-term rentals in Orlando; this is because many of these neighborhoods are located in close proximity to Orlando’s theme parks (notably Disney, which has been known to ban and breach contracts with short-term renters who do not identify the neighborhood where their rental property resides). Despite the controversy surrounding these neighborhoods, county lawmakers are unconvinced that a more restrictive zoning ordinance should have been adopted for short-term rentals.
HOA Restrictions that Affect Short-Term Rentals
Many properties in Orlando are part of a Homeowners Association (HOA), which is legally able to create further restrictions on short-term rentals. An HOA is a Florida corporation whose purpose is to maintain and promote the interests of the members (or homeowners), who each own individually owned portions of the real property known as the Association common area. HOAs can create additional rules and regulations on short-term rentals, but it does not require an HOA to do so. Pursuant to Florida Statutes 720.303, an HOA may adopt, maintain, and enforce reasonable restrictions and rules that relate to the health, happiness, comfort, and general welfare of the members, their guests, and invitees. Members of the ARC may identify rules that may affect their ability to use their property for short-term rental use.
Taxes and Other Dues
Under Florida Statutes ยง 125.0104, counties that levy a Tourist Development Tax for operating the convention center and promoting tourism may also use the revenues to acquire, construct, extend, enlarge, remodel, repair, maintain, administer, and operate sports facilities, auditoriums, and convention and visitor bureaus. Orange County does so by Ordinance 2003-13, which levies on each rental transaction in Orange County a six percent tax on the transaction. "Rent" is defined in the ordinance as all consideration received by a vendor with respect to any lease or rental of transient occupancy in a facility in Orange County.
Ordinance 99-05 levies an additional three percent tax for the construction of the new convention center and the acquisition of other public facilities. The tax applies to all rental transactions regardless of the length of stay. This ordinance does not follow any provision of Florida law mandating exemptions or exceptions to the new tax.
A fairly complete list of exempt entities is set forth in the tax collector’s website. These include religious , charitable, scientific, or literary institutions under 501(c) status; nonprofit educational institutions; political subdivisions of the State of Florida; and medical, assisted living, and nursing facilities licensed by the State.
There are several exemptions that are of note. The first is for rentals occupied for more than six months by individuals who have obtained an exemption certificate. A second likely relevant exemption applies to rentals by a Declarant to any other Declarant to furnish hotels, motels, lodgings, or other similar accommodations and privileges in a facility for six months or longer. The tax collector has also passed exemptions for 601-day rentals of single family homes as well as rentals made under government refunds and rebate agreements. Space does not permit a detailed discussion, nor should this blog offer tax advice.
Enforcement and Compliance
Compliance with any law is necessary to avoid issues. First, do you have a license? Second, is that license being renewed on an annual basis or as required by the laws in effect? Third, what are the penalties for violations?
Currently, it is unclear as to whether violations of these laws are to be criminal or administrative. If a violation of a law is a misdemeanor, then it is called a criminal violation. If it is a civil law or violation, it is likely an administrative violation.
If a penalty is civil or administrative, usually there is a fine attached to the penalty like any other. Fines can be in the thousands of dollars, but usually something less than a misdemeanor level. It’s important to note that fines of a few thousand dollars can end up being a burden to any rental owner northeast of Chicago where real estate is more expensive.
As a business owner with assets, you should maintain some sort of liability coverage in case of issues of this nature. Business income or business property coverage is needed for any business owner who relies on rents to pay their mortgage and/or carry on their business. I am not saying that you will be penalized, but if you were, it can result in a fine, and if you don’t have insurance to cover the fine, then this restriction and compliance cost could cause issues.
If the violations are criminal in nature, it could mean jail time or probation, as well as monetary penalties. It can be an expensive mistake either way, but it at least provides for a legal defense in the criminal context. With an administrative violation, the only real recourse is to appeal, and your costs may be limited to some appeals filing fee and/or court costs when the inevitable appeal is taken. If an administrative fine is imposed and the rental property owner and/or short-term purchaser was not licensed, and/or did not renew the license, then the costs are basically whatever you have to pay in fees to have the license issued, although it may be far more than you ever expected. There is no right of appeal from an administrative violation short-term rental property owners and/or short-term purchasers. The right of appeal in an administrative context is reserved for certain circumstances such as when someone claims that the application for licensing or renewal was misrepresented. It is almost certain that an appeal will occur if there are multiple penalties and fines levied in the short term rental context.
This being said, if the local government is looking at a property for compliance and finds that it is not compliant, it is possible that the government will move for a license suspension or revocation, especially if they believe it has been a repeat offense. In a past enforcement context, if you were in front of a judge on a criminal matter, they would often times let you remedy the situation and take into consideration the prosecution’s recommendation at a sentencing hearing. In some interpretations of the Orlando laws and rules, any enforcement by the local government is of criminal nature, which means it is possible that criminal penalties may be imposed or license suspension could occur.
Be careful if you are in a short term rental context and you are in non-compliance of the local laws, because you might force the issue of criminal prosecution or the imposition of the maximum fines, which may include not just a fine along with a license suspension.
In the alternative, I would expect ordinances and rules to evolve in Orlando, and each city and county involved. It is likely that some ordinances will be repealed and new ones passed to meet the government agencies’ enforcement objectives to curtail the type of short-term rentals discussed here.
Current Amendments and Updates to the Law
Last year, in an effort to regulate short-term rentals, the city of Orlando passed several laws impacting rental property owners. In 2014, the Florida Legislature enacted the Florida Vacation Rental Act (FVRA) preventing municipalities from regulating short-term and vacation rentals. Orlando was quick to challenge the FVRA in the First District Court of Appeal. Soon after, Pinellas, Martin, and Orange Counties joined the challenge.
On April 6, 2017, the First District Court of Appeal ruled that the FVRA does not apply to charter counties, and the City of Orlando was given its day in court. A few months later, the City of Orlando set up a Temporary Advisory Committee to develop recommendations to the City Council regarding short-term rentals and property standards for residential uses.
Orlando has several laws relating to short-term rentals. The City Enabling Legislation places a moratorium on permitting new short-term rentals unless they are in general hotel or multiple-family zoning districts. The Delay of Enforcement Ordinance allows properties currently registered with the City for a short-term rental to continue operating for 12 months while the rest of the City prepares to adopt new short-term rental rules in 2019.
The most significant changes happened earlier this year when the Temporary Committee released their recommendation, recommending against limiting the number of rentals permitted in each neighborhood. In addition, the Committee recommended that property owners of short-term rentals with fewer than five units will only need to register with the City and obtain an annual business tax receipt. However, property owners with more than five units will need to become licensed as a Community Residential Home with the Florida Department of Children and Families and will need to include more detailed information about the operation of the short-term rental with the registration application.
The 2019 Short-Term Rental Rules also require owners to have short-term rental insurance and maintain certain safety features such as fire alarms, emergency lights, etc. Owners are required to get a separate permit for each dwelling, keeping them updated annually. Finally, owners of short-term rentals are supposed to pay all applicable sales and tourist taxes.
Best Practices for Short-Term Rentals
For property owners interested in operating short-term rental properties in compliance with Orlando’s regulations or those outside of Orlando, you should consider incorporating the following best-practices into your rental operations:
1. Get to know your STR Code, the full-text version, and a code FAQ.
2. Create a LLC or other business entity even if no state registration is required (for ASC districts only) to shield yourself against liability claims. You should register with the Division of Corporations and the IRS.
3 . Purchase a business license, and then once you obtain your STR Licensing / Building Permit.
- Establish your own standard rental agreement with checklists and conditions of occupancy.
- Obtain liability insurance, renters insurance, and personal property insurance.
- Consider taking a rental cooperative approach with other property owners.
- Encourage guests to book stay-cations with you.
- Live there and rent out a room of your home.
- Take great pictures for your web listing.
- Have a website with a great review rating.