Gilbert is looking to get a handle on short-term rentals that sometime bring complaints of loud parties, fights and unnecessary noise.
Staff pitched four options that they’ve been working on since 2019 for Council to consider at its two-day retreat last week – mandatory registration and no local fines, no registration or do nothing, voluntary registration, and mandatory registration with local fines imposed.
A short-term rental is a property rented out for 29 days or less per period.
“Back in December of 2016, Council did pass at the time language in our land development code that required a registration for short-term rentals,” said Jordan Fasano, business compliance analyst.
“Unfortunately, it was just the language at the time that was implemented,” Fasano continued. “We didn’t implement any sort of process. We didn’t build a database for short-term rentals. We didn’t work through how to handle incidents or complaints. And that was because it was a kind of a gray cloud over everything at the time.
“We weren’t sure what legislation was coming. We knew some was coming. We just didn’t know exactly what it was, or how it was going to change or what it was going to allow.”
In 2019, a state law took effect that gave municipalities the ability to collect contract information from short-term rental property owners, to hold a property owner accountable for verified violations by the renter and require a transaction privilege tax license.
“So, if they’re renting it out, and they’re continually having issues there, we can now hold the owner accountable for those issues,” Fasano said, “not just the renters, who are changing every week.”
The state statute also established reporting requirements and a civil penalty structure – for the first verified violation, it’s a maximum $500 fine, $1,000 for the second violation and $1,500 or half of the income for the month, whichever is greater, for the third violation. The violations are tracked on a rolling 12-month calendar.
“Verified violation just means it was adjudicated,” Fasano said. “A renter was cited for an incident that worked all the way through the court process and was adjudicated and now we can hold the owner accountable for a $500 civil penalty.”
The town would need to adopt an ordinance in order to set the fines in its code.
If the fines are not equal to those set by statute, the state Department of Revenue will issue a fine to make up the difference and all fines issued by the department are not shared with Gilbert, according to Fasano.
“If we set it at $250 for the first one, the Department of Revenue is going to issue a $250 fine to make it match $500,” he said. “If we issue zero, they’re going to issue $500 and if we issue $500, they’re going to issue zero.”
Fasano said during staff’s research into the issue, they contacted 26 random homeowners associations in town to see what regulations they had in place to deal with short-term rentals.
He said 13 HOAs had some limitation on the rentals but were “a little nervous to enforce that, because it might get tied up in a lawsuit.”
He added the 12 other HOAs had nothing on the books due to reasons such as the difficulty in changing CC&Rs and or concern over infringing on property rights.
“So they reach out to us and say, ‘hey, what are you guys doing?’” Fasano said. “How can we come along together and handle this together?”
Fasano said three software vendors were contacted that specialized in short-term rental compliance.
Those vendors would be able to help the town find all the short-term rentals, get them registered and enable tracking of any incidents that occur on a site, he said.
He presented a map from one of the vendors that showed 350 short-term rentals in Gilbert for 2016, just over 600 units currently and 800 unites projected for 2023. The map, however, didn’t show owner information or gave address information.
Staff also looked at reported complaints for a two-year period, 2019-21 and found 70 incidents were recorded by police, with seven of them resulting in a charge, said Fasano, who added that 15 months in that time period was during the pandemic.
He said those seven incidents would be the sort the town would follow through the court process to adjudication to determine if an owner is liable for a fine.
“A caveat with this data, it doesn’t include anything that town manager’s office has heard and it doesn’t include anything that Council has heard,” Fasano said. “And I know you guys have heard something.”
Fasano said each of the four options would require outreach and an education campaign.
“It seems the feedback we’ve got is that our residents don’t have a place or don’t know how we handle short-term rentals,” he said. “It’s not on our website anywhere. So we’d like to add a page there, and they don’t know where to file complaints. They don’t know where to go to be heard.”
Fasano said staff also looked at what sort of practice was in place at eight comparable Valley municipalities – Peoria, Mesa and Glendale opted to do nothing regarding the issue.
Chandler, Paradise Valley and Tempe all had a registration process in place, hired an outside vendor and passed an ordinance, he said, adding that Scottsdale has one employee dedicated to overseeing short-term rentals in that city.
After Vice Mayor Yung Koprowski questioned the need to hire an outside vendor, Fasano said it would save staff time and that some short-term rentals are owned by limited liability companies, which would be labor-intensive to find an owner’s identity.
Additionally, he said, a vendor would build a data base, find the property owner and verify it.
He said the cost for a vendor ranged from $10,000 for a sweep of the town for short-term rentals to $40,000 a year for full service.
Koprowski said she was still unsure if the town could fix the problem and that any residential property in town could have as many parties it wanted as long as it’s during a certain part of the day.
Councilwoman Kathy Tilque said in talking with residents, the concern rises when a short-term rental becomes a neighborhood party house all year.
“It’s the No. 1 thing we hear from neighbors” she said. “It’s constant for many years. People are really concerned about this.”
Having a list of the property owners will help with enforcement, she said.
Councilman Scott Anderson and Tilque liked the option that called for mandatory registration with fines imposed at the local level.
If the town cited a short-term property owner, the owner will self-enforce and be more selective with who they rent to, Anderson said.
Tilque said she was pro-business but oftentimes the owners of the short-term rentals live outside the state.
“If they don’t feel the pinch, they won’t change their behavior,” she said.
Tilque asked when a property owner is contacted if a renter is arrested for breaking a law.
“If a renter is cited, we have seven days to call the owner,” Fasano said. “Once it’s adjudicated then we have 30 days to call the owner. It’s verified and we can now fine.”
Mayor Brigette Peterson said by the time a case is adjudicated, a property may have changed hands and for a property owner who’s earning $2,500 a week from renting out a home, a $500 fine is nothing.
She noted the large upfront cost for the town and said she needed more time to digest the information before giving direction to staff on the next steps.
Koprowski suggested paying a one-time cost for a database and requesting voluntary registration.
At the end it was decided the Council will take time to think about possible action for dealing with short-term rentals.