Bill H.3454

HOUSE DOCKET, NO. 3761 FILED ON: 1/30/2017

HOUSE . . . . . . . . . . . . . . . No. 3454

By Mr. Michlewitz of Boston, a petition (subject to Joint Rule 12) of Aaron Michlewitz, Brian Murray and Julian Cyr for legislation to establish a short term residential rental excise. Financial Services.

The Commonwealth of Massachusetts

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In the One Hundred and Ninetieth General Court
(2017-2018)

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An Act regulating and insuring short-term rentals.

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:

SECTION 1.

Chapter 64 of the General Laws is hereby amended by adding after Chapter 64M the following Chapter

CHAPTER 64 N: SHORT TERM RESIDENTIAL RENTAL EXCISE

Section 1. DEFINITIONS

In this Chapter, the following words and phrases shall have the following meaning, unless the context requires otherwise:

“Business Entity,” a corporation, partnership, or other legal entity that is not a natural person that owns or leases one or more residential units.

“Commercial Host,” any person who is the owner of, or lessee of, a residential unit who is offering said residential units for tourist or transient use for more than 60 days a year or is offering a unit or units for rent that is not their primary residence.

“Conversion or Convert,” a change of use from Residential Use to Tourist or Transient Use, including, but not limited to, renting a Residential Unit as a Tourist or Transient Use.

“Department,” the Department of Revenue.

“Director,” the Director of the Department of Revenue.

“Hosting Platform,” a person or entity that provides a means through which an occupant may offer a Residential Unit for Tourist or Transient Use. This service is provided through any website, software, online-enabled application, mobile phone application or some other similar process to advertise the Residential Unit through a website provided by the Hosting Platform and provides a means for potential tourist or transient users to arrange Tourist or Transient Use and payment, whether the tourist or transient pays rent directly to the Principal Occupant or to the Hosting Platform.

“Interested Party,” a Resident of the Building in which the Tourist or Transient Use is alleged to occur, any homeowner association associated with the Residential Unit in which the Tourist or Transient Use is alleged to occur, the owner of the Residential Unit in which the Tourist or Transient Use is alleged to occur, the relevant city or town, or the commonwealth.

“Professionally Managed Host,” any person or business entity who is the owner of, or lessee of, a residential unit who is offering said residential unit for tourist or transient use. Said host shall be or employ a manager who is responsible for the upkeep and maintenance of the properties and shall be available to respond to any issues that might arise with the renter. The residential unit in question shall be offered for rent for a minimum of five consecutive nights to an individual renter or renters.

“Relevant City or Town,” the city or town where the Residence in question is located.

“Renter,” an individual who is engaging in a Short-Term Residential Rental for Tourist or Transient Use.

“Residential Host,” any person who is the owner of, or lessee of, a residential unit who is offering said residential unit for tourist or transient use no more than 60 days a year. Said unit shall be the occupant’s primary residence. The occupant shall not offer more than one residential unit for tourist or transient use per relevant city or town and no more than three residential units in the commonwealth.

“Residential Unit or Residence,” a room or rooms, including a condominium or a room or dwelling unit that forms part of a tenancy-in-common arrangement, in any building, or portion thereof, which is designed, built, rented, leased, let or hired out to be occupied for Residential Use, as defined by the relevant Housing Code.

“Residential Use,” any use for occupancy of a Residential Unit by an Occupant.

“Short-Term Residential Rental,” a Tourist or Transient Use where all of the following conditions are met:

(a)the Residential Unit is offered for Tourist or Transient Use by the Residential, Commercial, or Professionally Managed Host of the Residential Unit on a hosting platform;

(c)the Host or business entity has registered the Residential Unit and maintains good standing on the Department’s Short-Term Residential Rental Registry.

“Short-Term Residential Rental Registry or Registry,” a database of information maintained by the Department that includes information regarding Hosts who are offering Residential Units for Short-Term Residential Rental. The Registry shall be available for public review to the extent required by law, except that, to the extent permitted by law, the Department shall redact any individual names from the records available for public review.

“Tourist or Transient Use,” any use of a Residential Unit for Occupancy for less than a 30-day term of tenancy, or occupancy for less than 30 days of a Residential Unit leased or owned by a Business Entity, whether on a short-term or long-term basis, including any occupancy by employees or guests of a Business Entity for less than 30 days where payment for the Residential Unit is contracted for or paid by the Business Entity.

Section 2.

An excise is hereby imposed upon Renters of Short-Term Residential Rentals of a Residence for Tourist or Transient use in this commonwealth, as set forth in Section 10 of this Chapter at the rate of 4 per cent for the total amount of rent for each rental by a residential host, as defined in Chapter 64N; of 8 per cent for the total amount of rent for each rental by a commercial host, as defined in Chapter 64N; and of 5.7 per cent for the total amount of rent for each rental by a professionally managed host, as defined in Chapter 64N. No excise shall be imposed if the total amount of rent is less than fifteen dollars per day or its equivalent.

Section 3.

Any city or town which accepts the provisions of this section shall be authorized to impose a local excise tax upon Renters of Short-Term Residential Rentals of a Residence for Tourist of Transient Use, as set forth in Section 10 of this Chapter, of a residence within such city or town at a rate up to, but not exceeding, 5 per cent for the total amount of rent for each rental by a residential host; of 10 per cent for the total amount of rent for each rental by a commercial host; and of 6 per cent for the total amount of rent for each rental by a professionally managed host; provided, however, that the city of Boston is hereby authorized to impose such local excise upon professionally managed host Renters of Short-Term Residential Rentals of a Residence for Tourist of Transient Use, as set forth in Section 10 of this Chapter at the rate of up to, but not exceeding 6.5 per cent of the total amount of rent of each such occupancy. No excise shall be imposed if the total amount of rent is less than fifteen dollars per day or its equivalent. The renter shall pay the local excise tax imposed under the provisions of this section to the commissioner of the department of revenue at the same time and in the same manner as the excise tax due to the commonwealth. All sums received by the commissioner under this section as excise shall at least quarterly be distributed, credited and paid by the state treasurer upon certification to the commissioner to each city or town that has adopted the provisions of this section in proportion to the amount of such sums received from the Short-Term Residential Rentals in each such city or town.

Any city or town which accepts the provisions of this section shall promulgate rules and regulations requiring all Short-Term Residential rentals within the city or town to undergo an annual safety inspection before said unit shall be offered for Tourist or Transient Use. The city or town in question shall have 30 days after the host has registered the unit to inspect said unit. If the unit is not inspected within 30 days the host may offer the unit for Tourist or Transient use on a temporary basis. The cost of the inspections shall be charged to the hosts.

Any city or town which accepts the provisions of this section shall distribute half of the fund received from commercial hosts to programs addressing low and moderate-income housing.

This section shall only take effect in a city or town accepting the provisions of this section by a majority vote of the city council with approval of the mayor, in the case of a city with Plan A, B, or Plan F charter; by a majority vote of the city council, in the case of a city a Plan C, Plan D, or Plan E charter; by a majority vote of the annual town meeting or a special meeting called for the purpose, in the case of a municipality with a town meeting form of government; or by a majority vote of the town council, in the case of a municipality with a town council form of government. The provisions of this section shall take effect on the first day of the calendar quarter following thirty days after such acceptance, or on the first day of such later calendar quarter as the city or town may designate. The city or town, in accepting the provisions of this section, may not revoke or otherwise amend the applicable local tax rate more often than once in any twelve month period.

The commissioner of the department of revenue shall make available to any city or town requesting such information the total amount of tax collected under this section in the preceding fiscal year in the city or town requesting this information.

Section 4.

(a) It shall be a local option for the all cities and towns within the commonwealth to restrict Short-Term Residential Rentals of Residential Units in accordance with Section 10 of this Chapter to Permanent Residents of the Residential Unit.

To demonstrate that the applicant is a Permanent Resident, the applicant shall provide the Relevant City or Town with an Affidavit, signed under the pains and penalties of perjury, stating that the Residential Unit in question is the applicant’s Primary Residence as well as tax documents showing the Residential Unit as the applicant’s Primary Residence for home owners’ tax exemption purposes.

Section 4 of this Chapter shall take effect in a city or town upon its acceptance in the following manner: by a majority vote of the city council with approval of the mayor, in the case of a city with Plan A, B, or Plan F charter; by a majority vote of the city council, in the case of a city a Plan C, Plan D, or Plan E charter; by a majority vote of the annual town meeting or a special meeting called for the purpose, in the case of a municipality with a town meeting form of government; or by a majority vote of the town council, in the case of a municipality with a town council form of government.

Section 5

(a)It shall be a local option for all cities and towns within the commonwealth to restrict the number of days a host may rent out a Short-Term Residential Unit.

Section 5 of this Chapter shall take effect in a city or town upon its acceptance in the following manner: by a majority vote of the city council with approval of the mayor, in the case of a city with Plan A, B, or Plan F charter; by a majority vote of the city council, in the case of a city a Plan C, Plan D, or Plan E charter; by a majority vote of the annual town meeting or a special meeting called for the purpose, in the case of a municipality with a town meeting form of government; or by a majority vote of the town council, in the case of a municipality with a town council form of government.

Section 6

(a)It shall be a local option for all cities and town within the commonwealth to require Professionally Managed and Commercial Hosts to obtain a business license with the relevant local authority.

Section 6 of this Chapter shall take effect in a city or town upon its acceptance in the following manner: by a majority vote of the city council with approval of the mayor, in the case of a city with Plan A, B, or Plan F charter; by a majority vote of the city council, in the case of a city a Plan C, Plan D, or Plan E charter; by a majority vote of the annual town meeting or a special meeting called for the purpose, in the case of a municipality with a town meeting form of government; or by a majority vote of the town council, in the case of a municipality with a town council form of government.

Section 7.

Reimbursement for the excise hereby imposed shall be paid by the Renter of such Residence or Residences to the Hosts or Hosting Platform. Hosts and Hosting Platforms in this commonwealth shall add to the rent and shall collect from the Renter the full amount of the excise imposed by this chapter, or an amount equal as nearly as possible or practical to the average equivalent thereof; and such excise shall be a debt from the Renter to the Host or Hosting Platform, when so added to the rent, and shall be recoverable at law in the same manner as other debts.

Section 8.

The amount of the excise collected by the Host or Hosting Platform from the renter under the provisions of this Chapter shall be stated and charged separately from the rent and shown separately on any record thereof at the time the transfer of occupancy is made, or on any evidence of such transfer issued or used by the operator.

Section 9.

(a)Except as set forth in Section 10 of this Chapter, it shall be unlawful for:

1.any Hosts to offer a Residential Unit for rent for Tourist or Transient Use on a hosting platform;

2.any Hosts to offer a Residential Unit for rent to a Business Entity on a hosting platform that will allow the use of a Residential Unit for Tourist or Transient Use; or

3.any Business Entity to allow the use of a Residential Unit for Tourist or Transient Use offered on a hosting platform.

(b)The Host and Business Entity, if any, shall retain and make available to the Department and the Relevant City or Town records to demonstrate compliance with this Act, upon written request as provided herein. Any Hosts offering his or her Residence as a Short-Term Residential Rental shall retain and make available to the Department and the Relevant City or Town records to demonstrate compliance with this Chapter, including, but not limited to, records demonstrating Residence, and the number of days per calendar year the Residential Unit has been rented for Short-Term Residential Use, including specific dates and the duration of each stay.

(c)Upon filing of a written Complaint that a Host or Business Entity has engaged in an alleged unlawful Conversion or that a Hosting Platform is not complying with the requirements of this Act, the Relevant City or Town shall take reasonable steps necessary to determine the validity of the Complaint. The Relevant City or Town may independently determine whether a Host or Business Entity may be renting a Residential Unit for Tourist or Transient Use in violation of this Chapter or whether a Hosting Platform has failed to comply with the requirements of this Act.

To determine if there is a violation of this Act, the Relevant City or Town may initiate an investigation of the subject property or Hosting Platform’s allegedly unlawful activities. This investigation may include, but is not limited to, an inspection of the subject property by the Relevant City or Town and/or a request for any pertinent information from the Host, Business Entity, owner, or Hosting Platform, such as leases, business records, or other relevant documents. The Relevant City or Town shall have discretion to determine whether there is a potential violation of this Act. Notwithstanding any other provision of this Chapter, any alleged violation related to failure to comply with the requirements of the Business and Tax Regulations Code shall be enforced by the Treasurer/Tax Collector under the provisions of that Code.

(d)The Relevant City or Town or the State Attorney General’s Office may institute civil proceedings for injunctive and monetary relief, including civil penalties, against a Host, Business Entity, or Hosting Platform for violations of this Chapter at any time. Following the filing of a Complaint by the Relevant City or Town or the State Attorney General’s Office, any Interested Party may institute civil proceedings for injunctive relief against an owner, host , or Business Entity under this Chapter.

(e)If the Relevant City or Town or the State Attorney General’s Office is the prevailing party in any civil action under this Chapter, a Host or Business Entity in violation of this Chapter or a Hosting Platform in violation of this Chapter may be liable for civil penalties of not more than $1,000 per day for the period of the unlawful activity. Other Interested Parties may not seek monetary damages. If the Relevant City or Town, the Department, or any other Interested Party, is the prevailing party, the Interested Party shall be entitled to the costs of enforcing this Chapter, including reasonable attorneys’ fees, pursuant to an order of the Court. Any monetary award obtained by the Relevant City or Town or by the commonwealth in such a civil action shall be divided with half of the monetary award given to the Department and half of the monetary award given to the Relevant City or Town. Both the State and the Relevant City or Town shall use said monetary awards for enforcement of this Chapter and, through the use of these funds, shall reimburse other departments and agencies in the Relevant City or Town and in the commonwealth for all costs and fees incurred in the enforcement of this Chapter.

(f)Any Host or Business Entity who rents a Residential Unit for Tourist or Transient Use in violation of this Chapter shall be guilty of a misdemeanor. Any person convicted of a misdemeanor hereunder shall be punishable by a fine of not more than $1,000 or by imprisonment of not more than six months, or by both. Each Residential Unit rented for Tourist or Transient Use shall constitute a separate offense.

Section 10.

(a)Notwithstanding the restrictions set forth in this section, a Host may offer a residential unit as a Short-Term Residential Rental if:

i.The Host complies with any and all applicable provisions of State and Federal law, as well as the relevant municipal code, including but not limited to the requirements of the Business and Tax Regulations Code by, among any other applicable requirements, collecting and remitting all required transient occupancy taxes, and the occupancy requirements of the relevant housing code;

ii.The Host maintains liability insurance appropriate to cover the Short-Term Residential Rental Use in the aggregate of not less than $1,000,000 or conducts each Short-Term Residential Rental transaction through a Hosting Platform that provides equal or greater coverage. Such coverage shall defend and indemnify the host and, as named additional insured(s), any tenant(s) and owner(s) in the building for their bodily injury and property damage arising from the Short-Term Residential Use;

iii.The Residential Unit is registered on the Short-Term Residential Rental Registry;

iv.Residential Hosts shall maintain records that show said unit is their primary residence, and the number of days per calendar year the Residential Unit has been rented as a Short-Term Residential Rental, These records shall be provided to the Relevant City or Town.

v.For units subject to rent control provisions, the Host shall comply with the initial rent limitation for subtenants and shall charge the Renter no more rent than the rent the host is paying to any landlord per month; and

vi.The Host can demonstrate to the satisfaction of the Relevant City or Town that the Residential Unit and the property on which it is located is not subject to any outstanding building, electrical, plumbing, mechanical, fire, health, housing, police, or planning code enforcement, including any notices of violation, notices to cure, orders of abatement, cease and desist orders, or correction notices.

vii.A Host offering a Residential Unit for Short-Term Residential Rental shall post a clearly printed sign inside his or her Residential Unit on the inside of the front door that provides information regarding the location of all fire extinguishers, gas shut off valves, fire exits, and pull fire alarms in the unit and building.

viii.Offering a Residential Unit for Short-Term Residential Rental, including but not limited to advertising the Residential Unit’s availability, while not maintaining good standing on the Registry shall constitute an unlawful conversion in violation of this Chapter and shall subject the person or entity offering the unit in such a manner to the administrative penalties and enforcement procedures, including civil penalties, of this Chapter.

Section 11.

(a)All Hosting Platforms shall provide the following information in a notice to any user listing a Residential Unit located within the commonwealth through the Hosting Platform’s service. The notice shall be provided prior to the user listing a Residential Unit or renting a Residential Unit and shall include the following information: that this Act regulates Short-Term Rental of Residential Units, and the transient occupancy tax obligations related to the rental.

(b)A Hosting Platform shall comply with the requirements of the Business and Tax Regulations Code by, among other applicable requirements, collecting and remitting all required Transient Occupancy Taxes, and this provision shall not relieve a Hosting Platform of liability related to a host’s, resident’s, or Business Entity’s failure to comply with the requirements of the Business and Tax Regulations Code. A Hosting Platform shall maintain a record demonstrating that the taxes have been remitted to the Department of Revenue and shall make this record available to the Department of Revenue upon request.

(c)A Hosting Platform or Host shall not discriminate in who they rent the Short-Term Residential Rental to on the basis of race, sex, ethnicity, sexual orientation, age, religion, disability, or nationality.

(d)Any violation of a Hosting Platform’s responsibilities under this Chapter shall subject the Hosting Platform to the administrative penalties and enforcement provisions of this Act, including but not limited to payment of civil penalties of up to $1,000 per day for the period of the failure to comply, with the exception that any violation related to failure to comply with the requirements of the Business and Tax Regulations Code shall be enforced by the Department of Revenue under that code.

Section 12.

(a)The exception set forth in Section 10 of this Chapter provides an exception only to the requirements established in this Act. It does not confer a right to lease, sublease, or otherwise offer a residential unit for Short-Term Residential Use where such use is not otherwise allowed by law, a homeowners association agreement or requirements, a rental agreement, or any other restriction, covenant, requirement, or enforceable agreement.

(b)Notwithstanding any other provision of this Chapter, nothing in this Chapter shall relieve an individual, Business Entity, or Hosting Platform of the obligations imposed by any and all applicable provisions of state or municipal law, including but not limited to those obligations imposed by the Business and Tax Regulations Code. Further, nothing in this Chapter shall be construed to limit any remedies available under any and all applicable provisions of state and municipal law.

(c)Notwithstanding any provisions of this chapter, nothing in this chapter shall apply to ‘Bed and Breakfast homes’ or ‘Bed and Breakfast establishments’ as defined in Section 1 of Chapter 64G of the Massachusetts General Laws.

Section 13.

No excise shall be imposed, pursuant to this Chapter, upon the rental of a Short-Term Rental of a Residential Unit if the Renter is an employee of the United States military traveling on official United States military orders which encompass the date of said rental. Each Host and Hosting Platform shall maintain such records as the commissioner shall require to substantiate exemptions claimed under this section.

SECTION 2.

Said Chapter 175 is hereby amended by adding, after section 4D, the following section.

Section 4E. Insurers that write homeowners and renters insurance may exclude any and all coverage afforded under the policy issued to a homeowner or lessee for any claim resulting from a short-term residential rental under chapter 64N of the general laws.

Insurers that exclude the coverage described in this section shall not have a duty to defend or indemnify any claim expressly excluded by a policy. Nothing shall preclude an insurer from providing coverage for short-term residential rentals if the insurer chooses to do so by contract or endorsement.

Any Host who has homeowners insurance shall be required to provide notice to all insurers that the occupant intends to use the residential unit in question as a short-term residential rental.

SECTION 3.

There shall be a short-term residential rental insurance task force established to review the current laws, regulations and industry practices relating to the insurance coverage provided to lessors and lessees of short-term residential rentals under Chapter 64N of the general laws.

The task force shall be comprised of the following members or their designees: the commissioner of insurance who shall serve as chair; the speaker of the Massachusetts House of Representatives’ the president of the Massachusetts Senate; the house and senate chairs of the joint committee on financial services; and two persons to be appointed by the governor, 1 of whom shall represent the insurance industry and 1 of whom shall be from the short-term residential rental industry.

Not later than 30 days after the effective date of this act, the task force shall convene to study whether claims arising from short-term residential rentals are currently being covered by homeowners’ insurance and renters insurance, whether there is a risk that said claims could no longer be covered due to policy exceptions related to commercial use, whether hosting platforms have adequate insurance coverage in place to protect lessors and lessees in the event of a claim, and whether the coverage amounts required under chapter 64N of the general laws are adequate.

SECTION 4.

The Department shall establish the Short-Term Residential Rental Registry and all cities and towns within the Commonwealth shall establish a system for evaluating applicants no later than December 31, 2018.

Name:	District/Address:	Date Added:
Aaron Michlewitz	3rd Suffolk	1/30/2017
Brian Murray	10th Worcester
Julian Cyr	Cape and Islands