Details on the New Massachusetts Short-Term Rental Law

UPDATE: Governor Charlie Baker sent the bill back to the House and Senate with recommended amendments. He is asking for a 14-day rental exemption for owners who rent their house out for less than 14 days a year; fixing an issue with the convention center tax; and to nix the online registry. The bill will now go back to the House and the Senate. We will continue to update you as we have more.

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The Massachusetts legislature passed legislation (pending Governor Baker’s signature) taxing and regulating the short-term rental market. The following information should help REALTORS® as they navigate the short-term rental market under these new laws and regulations.

Your Association of REALTORS worked for more than a decade successfully advocating for the defeat of these new taxes. It is only after the shift to the “sharing economy” and the impact of online portals that legislation was passed. Throughout the debate, the Cape Cod & Islands Association of REALTORS and the Massachusetts Association of REALTORS saw wins influencing and shaping the legislation. Included in this is removing the requirement that real estate brokerages that book vacation rentals would be required to obtain no less than $1 million in liability coverage for each stay they book. This insurance requirement ended up being a requirement of the owner, not the real estate brokerage.

The table below explains the legislation as approved by the Massachusetts House and Senate in more detail. Contact CCIAOR CEO Ryan Castle at rcastle@cciaor.com or (508) 957-4300 with any questions.

EFFECTIVE DATE For stays starting January 1, 2019 that are booked  November 1, 2018 or later.
REGISTRATION All properties must register with the state. State registry will be online with only the address of the property displayed. There is no statewide inspection requirement.
DURATION OF STAY For any stays of 31 days or less
*Tenancy at will exempted
TAX RATE State Tax: 5.7%

Local Tax: up to 6%

Community Impact Fee: up to 3%
*for owners who own multiple properties in same town

Cape & Islands Waster Water Tax: 2.75%
*is also applied to hotels and motels

Click here for a list of the existing local option rooms tax in each town in Massachusetts.

TAX COLLECTION By law, the property owner is required to collect and remit the tax. However, the law requires intermediaries (which includes REALTORS® who post the property for rent online) who enter into a written agreement with the owner or operator to collect rent or facilitate the collection or payment of rent on behalf of the operator to collect and remit the taxes. The Department of Revenue will issue regulations to clarify how often taxes should be remitted to the Department. This also means that a Realtor who does not collect or facilitate the collection of rent on behalf of the owner or operator does not need to collect and remit the tax.
INSURANCE Every operator that rents out their property must carry not less than $1 million of liability coverage for each stay unless the hosting platform provides equal or greater coverage. Coverage shall defend and indemnify the operator and any tenants or owners in the building for bodily injury and property damage arising from the short-term rental. A hosting platform shall provide notice to the operator of the insurance requirement, which we expect will be in the form a disclosure for real estate brokerages.
CITIES & TOWNS AUTHORITIES A city or town MAY:

–          Limit areas of the rentals; the number of establishments permitted; and the length of or time of year these establishments may be rented;

–          Require licensing or permitting of these establishments

–          May require inspections of the establishments

DEFINITIONS Hosting Platform: A service through a digital platform that allows the operator to do the following actions:

–          Advertise, list or offer the use of an accommodation for rent;

–          Collect payment of rent for an accommodation;

–          A person to arrange, book, reserve or rent an accommodation.

Operator: person operating a bed and breakfast establishment, hotel, lodging house, short-term rental or motel in the commonwealth including, but not limited to, the owner or proprietor of such premises, the lessee, sublessee, mortgagee in possession, licensee or any other person otherwise operating such bed and breakfast establishment, hotel, lodging house, short-term rental or motel.

Intermediary: a person or entity, other than an operator, that facilitates the sale, use or possession of an occupancy and charges a room charge to the general public; provided, however, that the term “facilitates” shall include a person or entity that brokers, coordinates or in any other way arranges for the purchase, sale, use or possession occupancies by the general public; provided further, that the term “intermediary” shall include a hosting platform and operator’s agent.

2018-08-01T23:31:17+00:00
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