In recent years, the rise of Airbnb and vacation rentals has provided a much needed boost in short-term guest accommodation given the limited number of hotel rooms presently available in Bermuda. Now individuals can directly support the island's tourism industry by transforming their homes, apartments or spare bedrooms into sources of income for visitors to stay in. However, amidst the allure of extra income and cultural exchange, hosts often find themselves navigating a web of regulations and liabilities. As the popularity of short-term rentals continues to increase, the Bermuda Government is adjusting the regulation of this growing sector, while hosts may be exposed to legal and financial risks.
Cynthia Millett, Counsel in Conyers Bermuda Property practice, shares her knowledge on the subject.
What regulations, fees and liabilities do people need to be aware of when they are creating their own vacation rental and/or Airbnb property?
In Bermuda, the legislation pertaining to Airbnb and vacation rentals is primarily governed by the Vacation Rental Act 2018 (the "Act"). This act outlines the regulations that property owners must follow when renting out their properties for vacation purposes.
Under the Act, property owners are required to obtain a vacation rental certificate before they can legally operate a vacation rental. If your residential property has an annual rental value of US $22,800.00 or lower you must obtain your licence from Consumer Affairs. You must receive a licence from the Bermuda Tourism Authority (BTA) if your annual rental value exceeds US $22,800.00. The BTA has the authority to grant or deny these certificates based on certain criteria, including property standards, health and safety requirements, and local planning regulations.
In terms of fees, property owners are required to pay an annual licensing fee to the BTA for each vacation rental property they operate. The fee structure varies based on the number of bedrooms in the property and is designed to contribute to the administrative and enforcement costs associated with regulating vacation rentals.
Additionally, property owners are subject to a 4.5% vacation rental tax on the rental rate charged to guests. This tax is collected for every rental transaction and is to be paid to the Bermuda Government directly by the agent or Airbnb and not the host.
Lastly, the maximum number of individuals a host can allow in one property at one time is 10.
Operating an Airbnb or vacation rental in Bermuda carries certain liabilities and responsibilities that hosts should be aware of:
- Guest Safety: Hosts are responsible for ensuring the safety and security of their guests. This includes providing emergency contact information, clear instructions on property usage, and necessary safety equipment including smoke detectors and fire extinguishers.
- Privacy and Data Protection: Hosts must comply with privacy laws when handling guests' personal information, ensuring their information is protected and only used for necessary purposes.
- Property Damage: Hosts should take appropriate measures to safeguard their property and valuable possessions. Security deposits or insurance can help mitigate potential losses resulting from damage caused by guests.
How would you advise people who find it difficult to comprehend all the legal terms and language involved with the regulations?
Potential hosts can obtain assistance from the BTA or seek legal counsel.
What is the difference between vacation rentals and Airbnb properties? Is it important that people know the difference?
- Local versus Foreign: With vacation rentals in Bermuda, the agents are local, only advertising Bermuda properties, specialise in Bermuda, typically charge 15% commission per rental and tend to deal with whole houses. Airbnb, on the other hand, is an online platform that is international and allows individuals to rent out their properties, whether it be a whole house, a room, or a shared space.
- Booking process: When booking a vacation rental in Bermuda, you usually deal directly with the property owner or a property management company. The booking process may involve filling out rental agreements, communicating and making payments directly to the owner or their Agent. With Airbnb, the booking process is done entirely online through the platform. You can communicate with the host, make payments, and manage reservations through Airbnb's website or app.
- Availability: Vacation rentals in Bermuda may be limited in terms of availability, especially during peak travel seasons. Airbnb, on the other hand, typically offers a wide range of options (e.g. renting a room versus the entire house) and availability, as hosts can easily add or remove their listings based on their preferences.
- Amenities and services: Vacation rentals in Bermuda may vary in terms of amenities and services offered. Some vacation rentals may offer additional services like daily housekeeping, concierge services, or access to on-site facilities like pools or fitness centres. Airbnb listings also vary significantly in terms of amenities, as it depends on what the individual host offers. Some Airbnb listings may be a spare room in someone's home with minimal amenities, while others may be more luxurious and well-equipped.
Why is it important that people pay attention to all the regulations, fees and liabilities? What happens if they try to cut corners?
- Reputation and trust: Cutting corners and not abiding by regulations can damage a host's reputation and trustworthiness. Negative experiences arising from non-compliance may be shared by guests online, affecting the host's ability to attract future bookings. Adhering to the rules demonstrates professionalism and responsible hosting, leading to positive reviews and recommendations. Regulations are put in place to ensure the safety and security of guests and to maintain a certain standard of quality for Bermuda. By following regulations, hosts can ensure that their properties meet these standards and offer a good experience to guests.
- Legal implications: Failure to comply with regulations can lead to legal consequences. The government or regulatory authorities may issue fines, penalties, or even injunctions to individuals or companies operating outside the rules. This can result in financial and legal troubles for the host. Operating a vacation rental without a licence carries a fine of up to US$10,000.00.
- Guest safety and satisfaction: Regulations often include certain safety measures and requirements that need to be met by hosts. All hosts are required to have safes and smoke detectors and are inspected by the BTA every two years. By adhering to these regulations, hosts can create safer environments for their guests and minimise potential accidents or issues. This will enhance the overall guest experience and satisfaction.
What mistakes do people make when creating vacation rentals and/or Airbnb properties?
One major mistake is not keeping up to date with the regulations as it is worth noting that the legislative framework surrounding Airbnb and vacation rentals in Bermuda is continuously evolving. It is advisable for property owners to stay updated with any changes in regulations or requirements through official government sources or consult with legal professionals.
What are the consequences of some mistakes?
Again, negative experiences arising from non-compliance may be shared by guests online, affecting the host's ability to attract future bookings. This hurts a host's reputation and as a consequence they lose business or potentially their licence depending on how grievous the mistake. Adhering to the rules demonstrates professionalism and responsible hosting, leading to positive reviews and recommendations.
What further information on vacation rentals and/or Airbnb properties should people be aware of?
A host's insurance company should be notified that a property is being used for vacation rentals, as this may affect premiums. A host can purchase guest house insurance as additional liability insurance, however a typical homeowners or condo insurance policy may not cover occupiers' liability and contents when running a vacation rental. As an example, one host with three 2 bedroom unit listings currently pays US $580 per month for guest house insurance with a local insurer.
There may also be third party consents required in order to let your property as a vacation rental. If the property is mortgaged, any form of vacation rental may need the lender's consent. Similarly, if you own a condo you may require your condo board's consent to operate a vacation rental and some condominiums' rules and regulations may prohibit short term rentals.
Additionally, look at your expenditure versus income if you want to become a host. If you have a mortgage or need a specific amount of rental income monthly, hosting is not ideal as vacation rentals are seasonal. Hosts need to take into consideration the annual licence fee, utilities, supplies, cleaning etc., and need ensure they have enough on account to cover and to carry them through the slow months of September – March.
It is best to understand the legal framework and to consider the regulations, fees and liabilities involved before hosting a vacation rental on Airbnb in Bermuda. Neglecting to comply with regulations can result in fines or the revocation of your license. If you would like to know more on how to avoid potential legal repercussions, speak with our Bermuda real estate team.
This article was originally published on www.rgmags.com.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.