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| WHAT LEGAL RESTRICTIONS APPLY TO VACATION HOME SHARING ARRANGEMENTS? |
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© March 16, 2007 by D. Andrew Sirkin.
Any reproduction or use of this document or any part of its content
requires the written consent of the author. Mr. Sirkin is chief attorney for Paris Pied-à-Terre Fractional Ownership. Contact Mr. Sirkin at
dasirkin@earthlink.net, or visit www.andysirkin.com
Several types of legal restrictions can apply to fractional vacation home sharing arrangements. These can be grouped in four general categories: (i) state real estate laws and regulations, (ii) local real estate laws and regulations, (iii) private deed restrictions, and (iv) federal and state securities laws.
The state real estate laws and regulations applicable to vacation home sharing vary from state to state. Most states determine whether regulatory approval is required based on either the number of owners in the co-ownership group or the amount of usage allotted to each co-owner per year. For example, California requires regulatory approval if there will be more than 10 co-ownership shares. Florida requires approval if there will be more seven co-ownership shares. Hawaii takes the alternative approach, requiring approval if any owner will be allotted less than sixty days of usage per year. When state regulatory approval is required, the cost and delay associated with obtaining the approval can be significant, and in some cases approval may be denied based on the location of the property or other
restrictions.
Local regulation of vacation home sharing arrangements is rare but increasing, particularly in resort communities. These rules are often triggered based on number of co-owners or usage allotment, but can also be based upon zoning or building codes. When the regulations apply, they can be in the form of approval requirements, but more often are in the form of outright prohibition.
Private deed restrictions found the governing documents of home owners’ associations may also restrict or prohibit vacation home sharing arrangements. These restrictions are not permitted in all states.
Federal and state securities law may also apply to vacation home sharing arrangements. In general, these regulations will apply where rental income is pooled among the owners, management responsibilities are delegated completely, or the purpose of the co-ownership is primarily investment. Application of these laws will often result in expensive registration and compliance requirements.
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