Park City’s nightly rental/property management businesses looking at prevention
July 7, 2009
Utah Sen. Kevin Van Tassell, R-Vernal, confirmed last week that he’s been meeting with several interested parties about possibly changing laws governing nightly rental companies.
He said that before early June he hadn’t known or thought much about the issue besides following coverage in The Park Record. But for the last several weeks he’s been researching the current law and speaking with several experts.
"I’m looking at it, and ways to improve it and prevent this from happening in the future," he said. "I understand this happens every four or five years. That’s what I’ve been told."
Van Tassell said he isn’t convinced yet that government intervention is the answer. He said he doesn’t want to sponsor any action that would make doing business more difficult or complicate the process of renting a vacation home in the state.
"I don’t want to overreact, but there are definitely issues to address," he said.
As part of the exploration, he said he’ll be looking at laws in other states, but is holding off on any decisions until all the facts are in. He said it’s been people in the industry driving the conversations. They’ve said that people who have managed their businesses correctly are getting a bad reputation from those who haven’t.
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Park City’s most recent lodging troubles began when the now defunct Deer Valley Lodging announced to condo owners that it could not pay them in late March. David Holland Resort Lodging soon made the same announcement. The former’s parent company, Premier Resorts of Utah, announced bankruptcy in late May leaving creditors unpaid on a collective $12.6 million.
One person who met with Van Tassell was the Park City Chamber/Bureau’s executive director Bill Malone. He said a group was formed last month to discuss what happened this year.
He said the primary desire is to make sure people are protected. The latest incidents have affected suppliers, home owners and management companies, but luckily not consumers.
"We’re pretty fortunate we dodged a bullet from the consumer’s standpoint," he said.
Malone said everyone is looking at possible options that range from legislation to a voluntary code of conduct in the industry. He said he wants to make sure the pendulum doesn’t swing too far in the opposite direction. He also hopes that companies without problems aren’t punished by a change.
He said it’s possible the market will solve the problem itself. Companies are already incorporating into contracts promises to hold condo-owner payments in escrow or trust. That may soon become standard.
"It may be a new standard norm with owners of units and what they’re going to demand in a contract," he said.
Teri Whitney is on the board of the Park City Area Lodging Association and said she remembers when nightly rental companies were governed by the state’s Division of Real Estate. The same problems occurred then, but there was a lot of confusion on what was or was not code.
In the middle of the last decade, another company owner said she was going to be audited by the division and wanted to ask Whitney what her understanding of the law was to make sure she was complying. As they talked, it became clear to Whitney that they understood the rules differently.
Whitney then asked for meetings with the division so that all parties interpreted the rules the same way. After a long period of time and a large amount spent on legal fees, it became clear to everyone that the rules of real estate brokers were not a good fit for property managers.
For example, Whitney said, money paid by a real estate client must be attached to a property. But in nightly rentals, a deposit is paid in advance, but what unit a guest will stay in might change two or three times before they arrive especially if they request an upgrade.
As a result of those meetings, the nightly rental business was deregulated by the division.
"I’m not anxious to go back and through that again," she said. "It didn’t work then, what has changed?"
Further, she said 99 percent of companies keep advanced deposits in a separate account. If consumers are worried about losing their deposit if a company goes under, they should make sure they know what that company does with their deposit.
"How do you regulate against poor business practices?" she asked.