Denver’s Short Term Rental Law Strikes Again

Just last month, another Denver resident, high-profile immigration attorney Aaron Elinoff, was arrested on the charge of “attempting to influence a public officer,” a criminal felony. This comes about a month after a couple from Stapleton were arrested on the same charge, which stems from a controversial rental law Denver passed in 2016.

Their crime? Renting out houses they didn’t live in.

These property owners are facing charges for making a false statement in a signed and notarized affidavit claiming that the homes they were going to rent out would also be their de facto primary residences. The affidavits are a requirement for obtaining the short-term rental license they needed to set up rentals in the Denver Metro. The offense is a Class 4 felony, with a potential sentence of two to six years in prison and/or fines of $2,000 up to $500,000. Since March, when the ordinance was updated, enforcement has increased.

According to the text of the ordinance, “Primary residence means a residence which is the usual place of return for housing as documented by at least two of the following: motor vehicle registration, driver’s license, Colorado state identification card, voter registration, tax documents, or a utility bill. A person can only have one primary residence.” Thus, the regulation demands that property owners tie themselves to the property they wish to rent, which in theory, prevents them from having more than one.

Controversial from the beginning, the ordinance is intended to curb an influx of wealthy people buying investment properties in Denver. The city’s real estate market has struggled with low supply and fast-rising prices for more than a decade, as short-term rentals have become ever more popular in the Mile-High City. The regulation effectively limits the number of short-term rentals that will be available at any given time, so it also has an impact on the availability of AirBnB-style vacation housing around the city. An added effect is that chain hotels benefit from decreased competition.

Owners of investment properties are upset about the regulation, which was enacted in 2016 and carried a one-year grace period for short-term rental license applications. Contrarians claim that the law is an unfair violation of property rights; in other words, if you own a property, you should be allowed to do what you want with it, and it’s none of the city’s business if you want to rent it out as long as you pay the applicable taxes. The ordinance also rather suspiciously benefits major hotel chains, which are suffering from an industry-wide downturn in sales, as platforms like AirBnB and VRBO have exploded in popularity.

Requirements for applying for a short-term rental license:

  1. Applicant must get a city lodger’s tax account number (similar to an EIN),
  2. Applicants need to provide proof of ownership of the property (a deed),
  3. The property must be the owner’s primary residence, and they must sign a notarized affidavit that affirms this.

Penalties include:

  1. For operating an unlicensed short-term rental, you can be fined $1000,
  2. Violating any rule, knowingly or not, will result in the revocation of a license,
  3. If you are found violating the primary residence stipulation, you are charged with attempting to influence a public officer; resulting in prison time and/or being fined up to half a million dollars, like the people mentioned earlier.

Having such severe penalties for breaking a short-term rental ordinance is already generating outrage and will likely result in many drawn-out legal battles with the city. Regardless of your feelings toward the law, if you own an investment property in Denver or you rent out your home on a short-term basis and have to comply with these regulations, you should be legally prepared in case the city comes knocking on your door.

Robinson and Henry’s real estate team is familiar and experienced with Denver rental laws. Our team is made up of lawyers whose case experience includes eviction and landlord/tenant disputes, defense against aggressive homeowners’ associations (HOAs), ownership disputes, commercial leases, licensing, and a whole lot more. We’re sometimes just as baffled as anyone at the way laws and regulations sometimes affect people in practice—at the end of the day, we’re on your side. If you are having trouble with Denver’s short-term rental laws and regulations, we can help you understand and get ahead of the problem, starting with a free consultation. Give us a call at (303) 688-0944 to get started.

You can read Denver’s short-term rental ordinance for yourself here:

https://library.municode.com/co/denver/codes/code_of_ordinances?nodeId=TITIIREMUCO_CH33LO_ARTIIISHRMRE

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