If DM adopts rent restrictions, there will be changes. Here’s a list of needed changes in the Dings Committee Data Book prepared for the DMMA Board of Directors:
• A robust rental registration process.
• Internet site regulation.
• Laddered charges will be assessed to fund the additional security and enforce the restrictions.
• Add more short-term rentals from approved web sites to compensate for losses from non-approved web sites.
Let’s look at each of these four topics in detail. Expect some version of the following to happen in the months after rent restrictions are adopted.
Robust Rental Registration Process Renters would be required to register upon entry, either at the security gate or at the DMMA office. Questions will include:
• Where will you be staying at Desert Mountain?
• Are you renting or swapping homes?
• How long do you plan to be at Desert Mountain?
• Please show a picture ID.
• What are the names of people in your party?
Answers to these questions are fed into DMMA’s 911 system. But the information will be used for another purpose. DM’s membership and real estate marketing staff needs this information to identify prospects for sales presentations. Registration will be the first step in DM’s marketing program.
The present Gate Pass system for guests would have to be replaced. Owners will no longer have authority to admit guests at the front gate. All guests will have to answer questions about their reason for being at Desert Mountain. The only practical way to tell a paying guest (renter) from a social guest is to ask.
On average, 3,200 cars and trucks come through our DM gates every day. DM gates are open for Luxury Home Tours every Thursday and Saturday from 2 to 5 PM during the high season. Are all these visitors going to receive the same robust screening?
During holidays and special events, many DM owners invite family and friends to visit. Can visitors like that rent a neighbor’s home for a few days or a week? No. The March 12 proposal prohibits short term rentals to friends and associates unless the guests are:
• DM owners or Club members, or
• Renters for more than 30 days, or
• Booking through a broker approved by either the DM Club or DMMA.
Clearly, enforcing rent restrictions would affect every DM owner, even those who have no plan to rent. More staff will be required for both management of short-term rentals and enforcement. The cost to property owners, club members and owners hasn’t been estimated. But it’s clear there will be substantial additional costs. Home owners and club members will pay most of these higher costs. Owners who rent are likely to face additional fees and a decrease in rental income.
Internet Regulation The March proposal won’t take DM rentals off the web and won’t reduce the number of short-term rentals. That’s not the purpose. What the March proposal will do is restore the traditional commission structure on DM rentals. Only real estate agents approved by the DM Club or DMMA’s suggested concierge service will be allowed to list DM short-term rentals.
Squeezing DM owners out of direct rentals is much easier than trying to police guests and tenants. All DMMA needs is HostCompliance.com.
HostCompliance is one of several short-term tenant monitoring services used by cities and counties to find homes offered for rent. HostCompliance scans properties listed on sites such as Airbnb, VRBO, or FlipKey and provides regular reports to subscribers. The cost isn’t cheap. The setup fee per home is about $4. For Desert Mountain, the cost for 1,800 homes would be $7,000 plus $3,000 annually on a 2- to 4-year contract.
DMMA can’t regulate the internet. But our HOA can get concise and timely reports on owners offering homes for rent on web sites not approved by DMMA. From that report, the next step is obvious.
Laddered Charges will be Assessed What happens when a Desert Mountain home shows up on a rental site other than those sponsored by DMMA or the DM Club? DMMA management plans to summon the owner to a hearing and assess “laddered” fines, increasing to $1,000 or more. Presumably, a fine not paid promptly would show up on your next DMMA statement. Under Arizona law, fines like that don’t automatically become a lien against your home. A court hearing is required to convert an HOA fine into a judgment that can become a lien on your house. The judge hearing the case could rule that a $1,000 fine is too much for an owner simply listing his or her home on AirBnB.
The goal of management is to match the cost of enforcing rent restrictions with fines imposed for advertising properties on non-approved sites. DMMA must be planning for plenty of violations. That’s likely, judging by what’s offered at other communities in Scottsdale. Troon North, Estancia and Silverleaf all have short-term rent restrictions. But you’ll nearly always find short-term rentals available at any of these three communities on VRBO and AirBnB.
More Short-Term Rentals to Compensate for Lost AirBnB & VRBO Business. DMMA recognizes that squeezing owners off public rental sites would reduce the pool of prospects exposed to DM marketing efforts. To make up for any losses, DMMA management has floated several ideas for filling the rental space available at DM. One of these ideas is a “fly and buy” realtor program that would bring more qualified short-term renters to DM for a weekend. It’s considered good sales strategy by brokers in our community to let good prospects rent at DM for the weekend.
Another idea is for DMMA or the DM Club to bring owners and prospective tenants together using either an electronic service or a licensed real estate broker. This rental pool will be controlled by our HOA, realtors and the DM Club. Owners may or may not be required to list exclusively with the pool. No fee for this service has been set. But it’s safe to assume the owners or tenants or both would have to cover costs of the program, including both broker fees and administrative costs.
Would owners be allowed to qualify prospective tenants before those tenants start unpacking? Probably not. Brokers working with DMMA and the DM Club often consider themselves better qualified to judge a tenant than the rental property owner. Owners can be short-sighted. They’re more concerned about protecting their own home than promoting investment in Desert Mountain. Real estate professionals don’t make that mistake.
Desert Mountain is a real estate and recreational community. In the mind of many DM real estate professionals, rentals should be part of the DM home sales and membership marketing program. Rentals managed by owners through AirBnB, VRBO and FlipKey offer little or no benefit either to the real estate community or to DM management. Some feel threatened by Airbnb or VRBO. Owners may not agree Some owners feel empowered to have these public sites as an option and don’t want to relinquish this property right.
Another Change if Rent Restrictions are Approved
The seller of every residential property in Arizona has to complete a Seller’s Property Disclosure Statement (“SPDS”). Question 40 on this form asks:
If the proposed addition to Desert Mountain Use Restrictions is adopted, every seller of Desert Mountain property will be required to disclose short-term rent restrictions in CC&Rs Exhibit E, Section 1.2.2. Failure of a seller to make a required disclosure may be considered fraud. By law, a real estate agent can not help answer questions on the SPDS form. Actual answers are up to the home seller.
Some buyers may not care about short-term rent restrictions. For others, it could be a deal-breaker. Over the last two weeks, two realtors working with prospective Desert Mountain buyers reported first-hand knowledge of 10 or more potential buyers who ‘walked’ when the proposed rent restrictions were disclosed. These same two brokers indicated a number of deals are “hanging” until the vote is tallied. If DM approves rent restrictions, they expect to lose those sales as well.
Desert Mountain Homeowners Coalition 