VROA COMPLIMENTARY NEWSLETTER - November 24, 2003
SUBJECT: All about Guest Terms & Conditions.
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*** To receive this newsletter from the VROA every week and to support the Vacation Rental Industry please visit www.VROA.org and consider joining. Its just $59 per year and you'll get 10 times your moneys worth.
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Writing and enforcing firm but fair "Terms & Conditions" enhances Guest enjoyment and allows for the operation of your rental home that is safe and secure. If you haven't already put it on your list today to spell out your rules, include them with Guest confirmations and post them on your website.
After last week's topic of making your Guest agreement enforceable I received a lot of comments and questions. So this week its time to provide the reasoning for some of the provisions in the sample Terms & Conditions form I referred to and that is available free online to members. Because this is a lot of text I am organizing this week's news letter as follows:
- First I'll print the paragraphs so you can see the actual language:
- Then I'll follow each with an explanation of why it important.
My goal in all this is not to make us all lawyers (I certainly am not one) but to impress upon owners how important establishing their legal terms of service is. If you are lucky, like most owners you'll never have a major legal episode. But you will probably have little issues and the way to avoid what could be a heavy cost is to be prepared and well documented.
Because the discussion of Terms & Conditions is so lengthy I have chosen to paste it below the signature line. Please take a look at it there.
INPUT:
As always I seek your input. Please share you tips, techniques compliments and complaints on this or any other subject by writing me at Director@VROA.org.
HOME OF THE WEEK:
Buying a vacation home stars as a dream for most of us. Take a look at Rob & Kate's place on Alligator Point 45 miles south of Tallahassee Florida. It's Kate's Dream. I think I could see myself sitting on their deck for a week or two. See www.AlligatorPoint.org.
*** If you want your place considered for Home of the Week please drop me an email.
FEEDBACK:
I love your newsletter!! I had received a bed and breakfast newsletter and hoped there might be one aimed at VR owners. We have been at this for 2 years now and really LOVE it. Definitely be money well spent!
- Mary & Duane, Black Missouri
Mary & Duane, That's why many of us buy a rental house - its fun to have guests. I sometimes talk too much about legal and worry about undesirable details but the huge percentage of guests are wonderful.
- Wm. May
SAMPLES ON LINE:
You can download samples of Contracts, Booking Confirmation and a Terms and Conditions form on the website www.VROA.org. Before using any sample forms always have your attorney review them. We can not guarantee they are appropriate for you or your area.
Please see the website section for other ideas:
- Forms & Contracts FREE downloads
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VROA OWNER NEWSLETTER
Published weekly for all Members
Copyright - Vacation Rental Owners Association
Read this and all prior newsletters at www.VROA.org
Director & Editor - Wm. May Director@VROA.org
Membership - Penny Taylor Membership@VROA.org
PO Box 21305
Seattle, WA 98111-3305
Voice: 206-343-7777
Fax: 206-628-0839
Email: Info@VROA.org
Web: www.VROA.org (for Members)
Web: www.VROA.com (for Guests - coming soon)
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TERMS & CONDITIONS DISCUSSION
(a sample from Sunspot Vacation Rentals)
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These are the Terms & Conditions upon which Sunspots Vacation Rentals provides the use of private vacation homes and they constitute an Agreement with Guests who make a booking with Sunspots.
SUNSPOTS: Sunspots, a division of TaylorMay Services LLC ("Sunspots") offers homes owned by one of its affiliated parties, or by third party property owners making homes available under contract to Sunspots.
GUEST: The person booking a Unit from Sunspots ("Guest" or "Guests") warrants they are of legal age and reside in the United States and that by phone, fax, email, on-line form or in person, they booked a vacation Unit as specified by the Booking Confirmation form ("Confirmation"). Guest confirms they were advised of the terms of the Booking at the time of purchase and, on behalf of themselves and their Invitees, agree to abide by these Terms & Conditions and such other instructions, directions and rules as Sunspots specifies. These terms govern Guest's current and future bookings unless otherwise later altered by Sunspots.
UNITS: Sunspots grants Guest the right to use the named Unit(s) including access to the Unit's improvements, furniture and fixtures interior and exterior. Guest may not begin occupancy prior to the Start Date/Time and must vacate the Unit no later than the End Date/Time. Earlier or Later occupancy will incur additional charges as noted herein as Holdover.
---> These first few paragraphs spell out who and what is covered by the documents. This means you, your guest and the vacation home. We call them Units but you can simply call it the "home" or even use its name such as "The Totem House."
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CONFIGURATION: The Confirmation is the approximate configuration of the Unit. All beds come with linens, blankets and bedspreads. Sleepers may mean a sleeper sofa or a coach futon. Some beds may be bunks. The exact configuration may vary before the first date of occupancy. There will be sufficient sleeping accommodations for the number of Invitees but necessarily for the maximum occupants.
---> Failure to include this section could require you to provide credits to guests if you remove a piece of furniture or rearrange beds.
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GUARANTEED RESERVATION: The Booking is on a Guaranteed Reservation basis. Barring emergencies or other problems beyond Sunspots control, Sunspots agrees to provide the Unit to Guest on the dates indicated. In return, Guest agrees the booking is not cancelable unless, at Guest's later request, Sunspots is able to sell Guest's dates to a third party at equal or better rates; in which case Guest's payments will be refunded less a cancellation fee.
--->Last week I explained why required "Guaranteed" reservations is fair to both you and the Guest. In short, if you are going to tie-up a $100 to $1,000,000 asset for a guests it is unwise to allow them to back out of the arrangement later. Depending on how competitive your resort area is this may not be feasible for you. Some owners allow for last minute payments and short notice cancellations. But remember you don't really have to.
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TRAVEL INSURANCE: Because the Booking is not cancelable by Guest, Sunspots recommends that Guest purchase Travel Insurance to cover the cost of this Booking and any other costs, such as airfare, related to its occupancy. Refunds are not available due to travel delays, weather or access problems.
--->Reminding guests to buy travel insurance reinforces that you are selling a non-cancelable booking. Plus its good sense too. Large property management firms create a profit opportunity by actually selling the insurance and earning a premium. You can do it too.
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For VROA members - Free Vacation Rental Listing or 6 months - No Strings Attached. Including up to 3 photos on fast and efficient site. www.VRworldwide.com
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INVITEES: Unless otherwise agreed in writing, Sunspots only books homes for the use of the Guest and their immediate or extended family members ("Invitees"). Guest agrees to inform Invitees of these Terms & Conditions and Sunspots Rules and is responsible for their conformance to them. No one may occupy the Unit at any time, even as drop in guests, who are not registered invitees.
---> If you don't limit who can visit the home you are essentially inviting the world to squat in your house. Your confirmation form must specify the number of adults, children and total.
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USE FEE: Guest will pay a "Use Fee" for the dates indicated. Should occupancy, at any time, exceed the Maximum Occupants noted, Guest will pay an additional $50 per person per day (or part). For exceeding the maximum vehicles allowed at the Unit Guest will pay an additional $50 per vehicle per day (or part). Guest agrees, upon demand from Sunspots, to provide a list of all people who were in the Unit during Guest's occupancy including persons' names, addresses and phone numbers.
--->Are occupants renting your home or simply being given the option of using it. In many jurisdictions there is a difference. Calling their stay a "Use" begins to clarify that they are Guests and not Tenants.
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CLEANING: There is no daily maid services but Sunspots will have Unit cleaned prior to Guest's arrival. Guest may request cleaning services in accordance with the Services Paragraph of these Terms & Conditions. Guest will keep the Unit clean and in good order during occupancy and to leave it in the same condition it was found at the Start Date/Time. Sunspots will have the Unit cleaned after Guest vacates for which Guest agrees to pay the Cleaning Fee(s). Should the term of occupancy be for more than ten days, Sunspots may have the Unit cleaned each week or portion thereof at Guest's cost and at the same cleaning price noted in the Confirmation. Sunspots will charge Guest for excess cleaning defined as greater than would be required for usual and normal for vacation use by not more than the number of Invitees.
---> Sure you are going to provide out-cleaning, but for how many occupants? And, always ask to do interim clean for longer stays. The more days they stay the more dirt you'll find.
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SECURITY DEPOSIT: As security for damages or other charges, Guest will pay Sunspots, at the time of booking, a Security Deposit that Sunspots may deposit into its general bank accounts and not into a segregated account. The Deposit will not bear interest and Sunspots will return the Deposit, less any overages, to Guest within 45 ' can be repaired.
---> Be clear that they are responsible for damages and always charge for costs return for that Guests incur. Some owners have switched to a Damage Waiver system where the Guests pays a smaller non-refundable fee and is exempt for non-intentional damage up to a set amount such as $1,000. We'll be discussing this in an upcoming newsletter.
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HOLD OVER: In the event that Guest, contrary to the terms of the Guest Confirmation, enters the Unit before the Start Date/Time or remains in Unit past the End Date/Time, Guest will pay Sunspots for each day or partial day in an amount equal the amount Sunspots pays to other Guests resulting from Guest's Hold Over, or double the daily rate, whichever is greater.
---> Guests who do not leave when scheduled can make your life a nightmare. There must be strong penalties for the grief they will cause you.
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PAYMENT: Guest will make payment of charges called for in the Confirmation. If paid by credit card, Sunspots is authorized to charge Guest's card for the Deposit immediately and for the other charges on the other dates indicated on the Confirmation and for any overages when they occur. If paid by check, Guest will make payment on or before the dates indicated and, if unpaid by the deadline, Sunspots may charge such payments to Guest's credit card. If Guest fails to pay by the deadlines, or Guest's check is returned unpaid by Guest's bank, or Guest's credit card is declined by its issuer, Sunspots may cancel the Booking, and sell Guest's dates to any third party without notice to Guest in accordance with the LATE PAYMENTS AND CANCELLATIONS paragraph. Guest will be charged $50 fee for returned checks or dishonored credit card charges. Sunspots may charge Guest a late fee equal to Twenty Dollars ($20) per day for past due payments.
---> Most of us take reservations over the phone and then wait for some or all of the money plus the paperwork. It puts you in a precarious situation. Explain your payment policies at the time of sale and then put them in writing so they are enforceable.
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CREDIT CARDS: Guest warrants that Credit Card ("Card") information is correct, that the card has sufficient available credit for all charges and any overages and that the Card will not be cancelled or charges dishonored or disputed with Guest's credit card issuer. Should the Guest's Card expire or be terminated while Guest has charges due, Guest will provide Sunspots with the name, number and expiration date of a replacement card that can then be used as payment for Guest's charges.
--->Credit cards have expiration dates. So what happens if your guest books many months in advance and then their card expires? You must have a mechanism for getting paid..
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SUNDRIES: Sunspots supplies minimum sundries for the unit such as paper towels, toilet paper and coffee filters sufficient for a single days use by the stated number of invitees. Guest will provide additional sundries and supplies greater than those noted above. Guest and Invitees are reminded to bring sunscreen, toiletries, food, laundry detergent and other personal items.
---> Do you allow Guests all the Sundries they can steal? Most owner's find it best not to tempt people. Providing a day's worth is courteous and its not unreasonable for them to buy as much toilet paper as their little hearts desire.
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SERVICES. Unit may be distant from Sunspots office, staff and service personnel or vendors. Should Guest request services or assistance, Sunspots will make reasonable effort to respond to issues during usual business hours and within the limitations of time, distance and expense as it sees fit. Guest accepts that Sunspots may be unable to address during Guests occupancy. Sunspots inability to address requests during occupancy will not be reason for reduction of the Use or other Fees. In the event Guest requests service for issues caused by the Guest, Sunspots will charge the Guest for Staff and Vendor time and materials required to provide the service. Guest will not be charged for services or problems not caused by Guest.
--->Probably you seldom hear from Guests during their stay. But some visitors are constant whiners - usually requesting goods or services that you did not agree to provide. If they have a problem then you are bound to do your best to help them. But if they demand all kinds of services that are not your problem then the answer is to
simply charge for them - rather than refuse them. No hotel in the world gives away anything. Neither should you
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OVERAGES: In addition to the charges indicated in the Booking Confirmation, Guest agrees to pay for charges, if any, incurred or caused by Guest during their stay ("Overages"). Such charges may include, but are not limited to, Guest's unpaid Resort charges or penalties, occupancy exceeding that stated in the Confirmation, service requests, occupancy hold over, damages, excess cleaning services, replacement of keys or re-keying or resetting of locks or lock boxes, occupancy and/or sales taxes, long distance, fees for smoking, excess noise, or having pets in the Unit, missing items, or other violations of Sunspots, Resort, or Homeowner Association rules, late charges, finance charges, etc. Handling charges are added to all such costs. If overages exceed the Deposit, Sunspots may immediately charge Guest's credit card or, at Sunspots option, make verbal or written demand to Guest for payment of overages. In the event Sunspots is unable to accurately ascertain overages at the time they are discovered Sunspots is authorized to charge an approximate amount and later make adjustments to reflect the actual charges.
---> You'll have a hard time charging guests for damages, services and so forth unless you put them on notice that these things costs money. And be sure to add handling charges because everything they cause you to bill for takes your time and effort.
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GUEST OBLIGATIONS: Guest agrees to abide by these Terms & Conditions and to follow the Unit Rules and Instructions, as attached here, as posted at the Unit, as specified in a "Unit Services" book sometimes located in the Unit or as later instructed verbally or in writing. In particular, Guest will:
- Utilize the Unit only for family vacation use and for no other purpose without the prior written approval of Sunspots. Will not conduct parties or any gathering that inc
eases occupancy to greater than the Maximum Occupants. To properly use and operate the electrical, gas, heating, air condition, plumbing and other fixtures, appliances, furnishings and amenities. Guest will vigorously enforce Sunspots' NO SMOKING RULE, NO PETS and NO NOISE rules.
- Not do or permit anything to be done in or about the premises which will, in any way, obstruct or interfere with the rights of Sunspots, Owner, Resort Management, Law Enforcement, neighbors or other home owners or guests or injure or annoy them or use or allow the premises to be used for any improper, immoral, unlawful or objectionable purpose, nor will Guest cause or maintain or permit any nuisance in on or about the premises. Guest will not operate any equipment in the Unit unless provided by Sunspots.
- Not destroy, deface, impair or remove any part of the Unit, its appurtenances, facilities, equipment, furniture, furnishings, appliances or fixtures. Not make copies of keys or reveal key codes to any other person. Not sublet the Unit under any circumstances.
- Return all furniture, kitchen and dining utensils, appliances, books, phones, recreational equipment etc. to their original positions. Leave all TV remote controls, garage controls and other non-fixed equipment in their original locations.
--->You would think these warnings would be commonly understood by Guests. And in most locations a court would require Guests to pay for damages even if your contract was not specific. But this paragraph serves as just another notice to Guests of what their obligations are. Most people just want to know the rules so they can abide by them.
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CHECKIN & CHECKOUT: Upon arrival at the Unit, Guest will complete and follow Sunspots' "Guest Checklist" and will alert Sunspots by phone (or voicemail) at (888) 628-8989 of any irregularities or problems noted in the Unit. Upon departure Guest will return the Guest Checklist (along with keys, if any) to Sunspots by mail or fax within 7 days. The Toll Free fax is (888) 628-0839.
---> If your resort has a front desk or you personally checkin checkout the guest then you don't need a checklist. But this method works great for distant offices. Some of our homes are 3,500 miles away.
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ISSUES: During occupancy Guest agrees to immediately notify Sunspots by phone (or voice mail) of any issues or problems with the Unit, or damage to the Unit or its contents or of any conflicts between Guest, Resort, legal authorities or others. Failure to report issues may subject Guest to charges for repair or replacement.
---> Guests are your eyes and ears at your home. They need to let you know what breaks even if its not their responsibility to pay for.
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DAMAGES: Unit(s) contains artwork, furniture and fixtures, machinery and equipment and other amenities. Guest will pay for any damages Guest causes including repairs, replacements, eviction, services calls, fines, assessments, cleaning, maintenance, customer service, accounting and other staff time at Sunspots usual rates, costs plus taxes and handling and the loss of subsequent income during the repair period. Guest also agrees to pay additional fees for violations of the Terms & Conditions, such as allowing pets in Unit ($500 charge), or smoking in the Unit, violation of Noise Rules ($500 charge), according to Sunspots rate schedule a copy of which is available to Guest upon request.
---> This paragraph further defines that Guest must pay for what they break. Plus it puts teeth in prohibitions against major concerns such as pets, smoking, noise, etc. If you don't define these penalties you probably can't charge them.
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INSPECTION: Because the Unit is for vacation lodging use and not for long-term rental, Sunspots may enter Guest's space, with or without notice at any time, for the purposes of inspection, maintenance, cleaning, rental or sale showings or for whatever other purpose it deems necessary. When entering, Sunspots staff will knock to announce themselves and allow Guest sufficient time to respond.
---> Ever had a Guest call about a dripping pipe only to leave th home so you couldn't get in? In most jurisdictions short-term tenants are not covered by landlord-tenant statutes thai make it difficult to enter your own home. But make sure you clarify that you will be coming and going from the unit even if the guest is out.
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AMENITIES: Use Fees are only for the occupancy of the Unit and use of its basic features. For the pleasure of Guests and without additional compensation, amenities are sometimes provided such as hot tubs, pools, artwork, televisions, stereos, phones, faxes, internet access, sporting goods, toys, games, house and pool/beach towels, patio furniture, furniture, dishes/flatware/pans, etc. Amenities sometimes malfunction, become worn, are out for repair, are replaced or are removed by Owner or prior Guests. Sunspots will endeavor to have these amenities on hand and functioning but can not guarantee availability at all times. Changes in decor or unavailability of amenities, or inconveniences such as power outages, adverse road and/or weather conditions, acts of God, area construction, allergic reactions, will not be reason for reduction of the Use Fee nor the payment of damages to Guest.
---> The more amenities you have in the home for Guest enjoyment the more likely that something will break. Give yourself room to upgrade, change or alter what you offer. Guest don't deserve a credit when you improve the home or have to make repairs.
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LOST & FOUND: There is no Safe in the Unit so Guest agrees to make their own provision for storage of valuables or to not bring valuables. Sunspots accepts no responsibility for loss of valuables or articles left at the Unit during Guest's stay. Sunspots may hold articles left in the Unit for a period of 30 days. Guest may call Sunspots to identify and claim lost items. Identified articles can be shipped at Guest's cost. Articles unclaimed for 30 days will be discarded, donated to charity or sold as Sunspots sees fit. Sunspots will retain proceeds from the sale as a fee for handling.
---> Some jurisdictions require owners to provide safes of guest valuables. Learn your local laws and include a paragraph that defines what you will and will not do.
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UNIT EXPENSES: Guest is not liable for charges for heat, electricity, water, sewage, garbage or other public utilities, normal and usual maintenance, taxes or other operating costs unless Guest's usage of utilities is greater than would be normal and usual for the number of Invitees. Guest will follow Sunspots rules and instructions for the use of utilities and equipment such as heating/air conditioning and are responsible for repair costs that may come about due to Guests misuse. In the event that Unit Expenses, during Guest's occupancy, are greater than would be normal and usual, Sunspots may impose a surcharge to Guest in an amount sufficient to recover excess costs incurred during Guest's occupancy, plus handling.
---> We've never had it happen but what would you do if the guest has a birthday party and leaves behind stacks of cardboard. In many locations it costs money to haul away and dispose of excess garbage. Protect yourself from unusual costs.
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LATE PAYMENT & CANCELLATION: Should Guest fail to pay as agreed, or requests a cancellation, Sunspots may sell Guest's dates to any third party. If Sunspots is able to re-sell Guest's dates to a third party at net rates at least equal to those charged to Guest, Sunspots will refund Guest's Use Fee less a Re-Booking fee equal to Fifteen Percent (15%) of the Use Fee or $100 whichever is greater. If only some of the dates are sold then refunds will only be made for those dates sold. No refund will be allowed if Sunspots is unable to re-sell Guest's dates to a third party. In the event the Unit becomes unavailable for use for whatever reason (such as fire, water or other damage, owner remodeling, change of zoning or taxation rules, Owner's sale of the Unit, Owner's failure to purchase Unit, termination of Sunspots' management agreement, or any other problem beyond Sunspots' control) Sunspots may cancel the Booking and return Guest's payments, or may transfer Guest's booking to a comparable or better unit of Sunspots choosing.
---> Be clear about payment terms and penalties. We didn't use to charge a re-booking fee until we realized that re-selling the dates really means double the work for us.
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TERMINATION: Sunspots reserves the right to immediately terminate the Booking and occupancy of Guest and Invitees with or without notice in the event that Sunspots believes the Guest or Invitees have done or intend to do any act that violates these Terms & Conditions, Sunspots rules, verbal or written instructions given to Guest or notices posted at the Unit, or that is in violation of any applicable Federal, State or Local statute, or which is not in the good interest of the Owner, Sunspots or other Sunspots guests, or which will be objectionable to neighbors, the home owners group, or resort management. If terminated Sunspots may enter the Unit without notice and require Guest and Invitees to immediately vacate the Unit. Should Guest fail to vacate, law enforcement officials may be called to remove Guest & Invitees. Guest will not be entitled to refund for any payments if this Agreement is terminated. The Guest may not terminate the Booking without the expressed written consent of Sunspots.
---> Did you know that, under the law, the word "cancel" and "terminate" do not mean the same thing? Its obvious to me now, but when I was first in business (A different industry) I made a tragic mistake of saying a customer could cancel his 12 month agreement at any time. He did so at the 11th month and wanted his money back for the 10 months of service we had provided. Luckily the judge saw through the ruse. Be careful to explain who "terminate" and when and why.
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INSURANCE: Sunspots or Owner will maintain reasonable and usual Property and Casualty Insurance on the premises but are not obligated to carry insurance for theft. Guest hereby agrees and relieves Sunspots and Owner and waives its entire right of recovery against Sunspots and Owner for loss, damage, injury, disability or death arising out of or incident to the perils described in standard fire insurance policies approved for the use in state where the Unit is located, whether due to the negligence of Owner, Sunspots and its agents, employees or otherwise. Guest agrees to maintain personal or homeowner insurance that would cover Sunspots and Owner in the event of damage, destruction or liability caused by Guest's actions whether intentional or not. In no case will Sunspots or Owner be responsible for loss of use, or other damages to Guest resulting from Guest's use of the Unit or damages or events beyond the control of the Sunspots and Owner.
---> What is something big goes wrong? Who pays and will their insurance cover it? Get your insurance agent's instructions and have your attorney be explicit in setting out the insurance requirements.
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ENTIRE AGREEMENT: The Confirmation and these Terms & Conditions constitute the final and complete understanding between the parties hereto and no other representations or promises, verbal or otherwise, have been made. The Terms & Conditions supersede all previous agreements between the parties. Sunspots may make modifications to the Terms & Conditions at any time by notice to Guest or by posting to www.Sunspots.org. Failure to enforce any of the Terms & Conditions, Confirmation, Sunspot Rules or subsequent agreement between the parties, will not be construed as a waiver of other provisions. If any portion of the Terms & Conditions, Confirmation Sunspot Rules or subsequent agreements are determined to be invalid, illegal or unenforced all other conditions will nevertheless remain in full force and effect.
---> If you allow them Guests will make all kinds of claims of verbal assurances you never made. Limit the agreement to what is in writing. And, make sure you can alter the terms if need be.
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LITIGATION: These Terms & Conditions will be governed in accordance with the laws of the state where the Unit is located. Any claim will be settled by action in the Court have jurisdiction where the Unit is located. In the case of litigation, or past due billings, Guest will be pay for Sunspots' and Owner's staff time charges for collection letters, faxes, emails, phone calls, meetings and court time, Late Charges, Damages, reasonable attorneys' fees, pre and post judgment Interest at twelve percent (12%) per annum, attendant Court and other Costs and Expenses.
---> With luck you'll go decades and never have a legal problem. In most jurisdictions the loser in a court action pays the legal costs of the prevailing party. But write it down here so the Judge won't get to decide about that later.
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Revised 11/09/03
---> This seems like a no-brainer, but be sure to date your terms and conditions because you'll probably be altering it from time to time and need to know which "contract": you are bond by for a given guest.
Monday, November 24, 2003
Monday, November 10, 2003
VROA COMPLIMENTARY NEWSLETTER - November 10, 2003
SUBJECT: Making Guest Agreements Enforceable
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*** To receive this newsletter from the VROA every week and to support the Vacation Rental Industry please visit www.VROA.org and consider joining. Its just $59 per year and you'll get 10 times your moneys worth.
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If you have a problem with a guest, is your guest agreement enforceable in court? If they don't pay. or cause damage. or are disturb neighbors can you take immediate and effective action? If you are a long time rental owner, property managers or have owned or managed a business this week's column may seem pretty basic.
But even experts need to sit down every now and then to review their Guest Agreement with a fresh perspective. Because situations changes and the way in which Guests select and buy vacation rental time continues to evolve rapidly. What worked last year might cause you trouble next year. Reviewing your contract could save you thousands of dollars.
FRESH PERSPECTIVE:
To start with you might want to log onto www.VROA.org and download any of the free sample Guest Agreements. You will notice there are really three distinct methods of contracting with guests. You might want to review some of the samples while considering whether your current method is sufficient and whether another method would suit you better.
The first is the VERBAL METHOD - and that is to simply to not use an agreement. Believe it or not there are a large number of owners and even some property managers who choose this system. They just take the reservation (probably over the phone) and hope the guest shows up. If they do thy they hope there are no problems. And if everything goes smoothly, before, during and after the occupancy, then the Agreement really wasn't necessary. I hope you are not seriously considering this method. Should any problem arise your recourse to law enforcement officers or in the courts will be based on verbal agreements and innuendo. You may have lost your rights as a landlord and may be left with egg on your face. I won't go on any further about Verbal contracts because its a terrible way to rent your home.
The second method is the CONTRACT method - where you have your attorney prepare a written agreement in a somewhat traditional lease agreement format. This is a great way to make sure you have the Guest's written approval of rental home use. It would include the dates of occupancy, rules of conduct, charges for damages and other costs, and how disputes would be handled. The only practical way to use a contract is to have it prepared as a form with fields that you fill out depending on the circumstances. This agreement is then forwarded to the guest for signature, then returned to you to confirm the booking.
The third methods is the TERMS & CONDITIONS Method - and this is what most traditional (Non vacation rental) lodging establishments use. When you check into a Hilton, Hyatt or Mariott you will sign a small card and a credit card receipt. The card says you are renting a room and agreeing to comply with their Terms & Conditions. They should, of course, have those Terms available for you to review and many hotels have them posted in the lobby or even in your room. What's more, "Transient Accommodations", often defined as any lodging less than 30 days in length, are governed by specific state or even local laws. And those statues are sometimes posted on the back of the door in each unit. You've probably noticed these postings but have never read them. By signing the card the guest is agreeing to abide by the establishment's rules whatever they may be.
COMPARING METHODS:
Until recently, we used the Contract Method for our homes. It has some advantages. The Guest is put on very clear notice as to the positives and negatives of the rental. In the unlikely event you find yourself in court the Guest will find it difficult to defend himself for behavior or situations that violate conditions specifically addressed in the paperwork. Of course that doesn't prohibit the guest from claiming a full refund on rent for the silliest of reasons but it does help. I've heard the strangest of stories. Like the one in Palm Springs who thought the highly developed "English Garden" of the home was just too overgrown. No document will help you avoid these weirdos, but a good one will cut down on the chances that you'll have to deal with them.
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On the other hand, the Contract Method gums up the works sometimes. Although you have accepted a Guest's reservation by phone, they have not really really agreed to pay for it until the Contract is prepared, mailed and returned. That can take 5 to 15 days in most cases. Yet during that delay you have taken the dates off the market, may have turned away other guests and have less chance of forcing the original guest to pay if they don't return the contract. Also, some Guests are very adverse to signing any paperwork. If you have a career in business you may be usd to signing contracts and other documents. Many people are not. They can go their entire lives signing only a home purchase agreement, a checking account start up and little else. Contracts scare them - even if they are dying to stay in a Hawaii bungalow, an Outer Banks beach home or a French Villa.
Recently we have switched our rental units to the Terms and Conditions Method of operations to accomplish several objectives (A downloadable sample is on th website). I suspect our reasons make sense for a great many other owners. The first is simplicity. Even with the Contract Method we thought it wise to post our Terms and Conditions on our website and in every home. We anticipated including them in the new "Guest Manual" we are preparing to be left in each home. That meant writing and periodically upgrading three or more documents.
Instead, now we have switched to using a pre-printed "Terms & Conditions" document that is simply attached to each booking, published to the websites, posted as a notice in the home and included in the Guest Manual. We have been able to condense it to a readable 2 page form.
GUARANTEED RESERVATIONS:
It has been our policy to only accept what in the lodging business is referred to as a "Guaranteed Reservation." This well known industry standard is used for guests who may be arriving late at night and want to make sure their hotel room will not have been sold to someone else. So they choose to "Guarantee" the reservation which means they are charged for the night even if they fail to show up entirely.
We use that policy basis for the entire reservation. Once made its non-cancelable. Doing otherwise allows guests to hold your home out of the market while they take the 5 to 15 days to really make up their minds. In some ways vacation rentals are like nightly lodging. But in other ways we are more like a traditional long term rental. We are giving guests full access to what may be a $100,000 to $1,000,000 (or more) asset and to take that asset off the market while the buyer tries to make up their mind and shop for alternatives is simply not wise. In major cities you can test drive a $250,000 Rolls Royce but if you want to put one on hold for two weeks they will politely decline.
Vacation home owners should do like wise. So our reservations are Guaranteed and Non-Cancelable. We will accept a "Request for Cancellation" and if, and only if, the dates are resold we refund the Guests payment less a rebooking fee of 15% or rent or $100 whichever is greater. My reasoning? Because you can't take possession of any other highly valuable commodity in the world and then return it without a reason simply because you've made other plans. Plus having to sell the same dates twice is too much work and unreasonable for the Guest to ask of us. We can only earn the rental once but we need to get compensated for doing double the work.
BOOKING CONFIRMATION:
When accepting reservations on the Terms and Conditions Method we use a short "Booking Confirmation" form that is prepared and sent to them. Ours is an Excel form and may be more detailed than many owners will prefer. (A downloadable sample is on the website). It is very careful to state that the Guest has ALREADY made a GUARANTEED reservation which this document is just confirming. We do ask them to sign and return the Confirmation as an acknowledgement of receipt. And, according to our Terms and Conditions, we can cancel the booking if they fail to do so.
To the Confirmation we attach a copy of the Terms and Conditions (This is disclosed in the Confirmation) along with our "Guest Rules." These forms are easier to read than a traditional contract. The guest need only return the Confirmation by mail or fax. The Rules and Terms are very fair to both parties. We never experienced many questions when we utilized the Contract methow but the number of questions has dropped and that saves time.
I've also observed that customers are less likely to argue about what they see as unbending conditions of their purchase. We do not alter the Terms and Conditions under any circumstances and there is nothing wrong with getting that message across in this way. If you feel our policy is too strong consider this example:
THE NORDSTROM STORY
Most folks are familiar with the Nordstrom Department store chain which was started here in Seattle. Everyone knows if they buy something at Nordstrom and are dissatisfied they can return it for a cheerful refund. They are renowned for their fabulous customer service. The employees are Nordstrom bend over backward for their clients. However - - if you want to see how firm Nordstrom is on their "Terms and Conditions" try this. Pick out some clothes, go the counter and present your Nordstrom Charge card. Then turn over the sales slip before signing and cross out the legal language on the reverse side. They may love you at Nordstrom's but you won't get the clothes. There are things they will do for you and things they will not. Vacation Rental Owners should be at least that careful in their legal dealings.
ON YOUR WEBSITE:
Lastly, let me emphasize that is very important for your Terms & Conditions to be posted on your website. Ours our linked on our footer information that appears on every page of the website. They can quickly find the Guest Rules as well as the Terms and Conditions. With so many of our leads coming from the Internet this is the perfect way to make sure Guest can not say they were unaware of our policies. And by the way, the good guests never mind and actually appreciate knowing what to expect.
SAMPLES ON LINE:
You can download samples of Contracts, Booking Confirmation and a Terms and Conditions form on the website www.VROA.org. Before using any sample forms always have your attorney review them. We can not guarantee they are appropriate for you or your area.
Please see the website section for other ideas:
- Unwelcome Guest List
- Forms & Contracts FREE downloads
INPUT:
As always I seek your input. Please share you tips, techniques compliments and complaints on this or any other subject by writing me at Director@VROA.org.
HOME OF THE WEEK:
With winter setting in you might want to pull a chair up to the fire at the David White's Rock Creek Cabins next door to the Great Smoky Mountains National Park in North Carolina. Great location and they're pet friendly. See www.RockCreekCabins.com
*** If you want your place considered for Home of the Week please drop me an email.
FEEDBACK:
Just wanted to say how eye-opening your "test" was to me. It's obvious there's a lot of room for improvement amongst owners and property managers. I know for myself, I'm a nut about replying asap to email or phone inquiries. But even though I'm in the communications business, I would never think to pick up the phone and call people if they had emailed me first. I'd just return their email with like kind. You're right though--there's nothing like establishing a "personal" relationship with an inquiry. Thanks for the reminder. As a new member of just under a month, I've really enjoyed your site and its information. I think my vroa membership will definitely be money well spent!
- Amy, Petersburg Michigan
Thanks Amy. Kind words keep us going. One of the great benefits of working for VROA is getting to talk to nice folks like Amy from all over the world.
- Wm. May
===========================================
VROA OWNER NEWSLETTER
Published weekly for all Members
Copyright - Vacation Rental Owners Association
Read this and all prior newsletters at www.VROA.org
Director & Editor - Wm. May Director@VROA.org
Membership - Penny Taylor Membership@VROA.org
PO Box 21305
Seattle, WA 98111-3305
Voice: 206-343-7777
Fax: 206-628-0839
Email: Info@VROA.org
Web: www.VROA.org (for Members)
Web: www.VROA.com (for Guests - coming soon)
===========================================
SUBJECT: Making Guest Agreements Enforceable
-----------------------------------------------------------------------------------
*** To receive this newsletter from the VROA every week and to support the Vacation Rental Industry please visit www.VROA.org and consider joining. Its just $59 per year and you'll get 10 times your moneys worth.
-----------------------------------------------------------------------------------
If you have a problem with a guest, is your guest agreement enforceable in court? If they don't pay. or cause damage. or are disturb neighbors can you take immediate and effective action? If you are a long time rental owner, property managers or have owned or managed a business this week's column may seem pretty basic.
But even experts need to sit down every now and then to review their Guest Agreement with a fresh perspective. Because situations changes and the way in which Guests select and buy vacation rental time continues to evolve rapidly. What worked last year might cause you trouble next year. Reviewing your contract could save you thousands of dollars.
FRESH PERSPECTIVE:
To start with you might want to log onto www.VROA.org and download any of the free sample Guest Agreements. You will notice there are really three distinct methods of contracting with guests. You might want to review some of the samples while considering whether your current method is sufficient and whether another method would suit you better.
The first is the VERBAL METHOD - and that is to simply to not use an agreement. Believe it or not there are a large number of owners and even some property managers who choose this system. They just take the reservation (probably over the phone) and hope the guest shows up. If they do thy they hope there are no problems. And if everything goes smoothly, before, during and after the occupancy, then the Agreement really wasn't necessary. I hope you are not seriously considering this method. Should any problem arise your recourse to law enforcement officers or in the courts will be based on verbal agreements and innuendo. You may have lost your rights as a landlord and may be left with egg on your face. I won't go on any further about Verbal contracts because its a terrible way to rent your home.
The second method is the CONTRACT method - where you have your attorney prepare a written agreement in a somewhat traditional lease agreement format. This is a great way to make sure you have the Guest's written approval of rental home use. It would include the dates of occupancy, rules of conduct, charges for damages and other costs, and how disputes would be handled. The only practical way to use a contract is to have it prepared as a form with fields that you fill out depending on the circumstances. This agreement is then forwarded to the guest for signature, then returned to you to confirm the booking.
The third methods is the TERMS & CONDITIONS Method - and this is what most traditional (Non vacation rental) lodging establishments use. When you check into a Hilton, Hyatt or Mariott you will sign a small card and a credit card receipt. The card says you are renting a room and agreeing to comply with their Terms & Conditions. They should, of course, have those Terms available for you to review and many hotels have them posted in the lobby or even in your room. What's more, "Transient Accommodations", often defined as any lodging less than 30 days in length, are governed by specific state or even local laws. And those statues are sometimes posted on the back of the door in each unit. You've probably noticed these postings but have never read them. By signing the card the guest is agreeing to abide by the establishment's rules whatever they may be.
COMPARING METHODS:
Until recently, we used the Contract Method for our homes. It has some advantages. The Guest is put on very clear notice as to the positives and negatives of the rental. In the unlikely event you find yourself in court the Guest will find it difficult to defend himself for behavior or situations that violate conditions specifically addressed in the paperwork. Of course that doesn't prohibit the guest from claiming a full refund on rent for the silliest of reasons but it does help. I've heard the strangest of stories. Like the one in Palm Springs who thought the highly developed "English Garden" of the home was just too overgrown. No document will help you avoid these weirdos, but a good one will cut down on the chances that you'll have to deal with them.
============================================
This week's Sponsor: RESERVE PROPERTY
Hotels use the Global Distribution System (GDS) to get on giant travel websites like Orbitz, Travelocity & Hotwire! Plus on the reservations terminals of 50,000 travel agents.? Now you can use GDS too. Go to www.VROA.org and click on "Click here to get more bookings" in the right hand border.
===========================================
On the other hand, the Contract Method gums up the works sometimes. Although you have accepted a Guest's reservation by phone, they have not really really agreed to pay for it until the Contract is prepared, mailed and returned. That can take 5 to 15 days in most cases. Yet during that delay you have taken the dates off the market, may have turned away other guests and have less chance of forcing the original guest to pay if they don't return the contract. Also, some Guests are very adverse to signing any paperwork. If you have a career in business you may be usd to signing contracts and other documents. Many people are not. They can go their entire lives signing only a home purchase agreement, a checking account start up and little else. Contracts scare them - even if they are dying to stay in a Hawaii bungalow, an Outer Banks beach home or a French Villa.
Recently we have switched our rental units to the Terms and Conditions Method of operations to accomplish several objectives (A downloadable sample is on th website). I suspect our reasons make sense for a great many other owners. The first is simplicity. Even with the Contract Method we thought it wise to post our Terms and Conditions on our website and in every home. We anticipated including them in the new "Guest Manual" we are preparing to be left in each home. That meant writing and periodically upgrading three or more documents.
Instead, now we have switched to using a pre-printed "Terms & Conditions" document that is simply attached to each booking, published to the websites, posted as a notice in the home and included in the Guest Manual. We have been able to condense it to a readable 2 page form.
GUARANTEED RESERVATIONS:
It has been our policy to only accept what in the lodging business is referred to as a "Guaranteed Reservation." This well known industry standard is used for guests who may be arriving late at night and want to make sure their hotel room will not have been sold to someone else. So they choose to "Guarantee" the reservation which means they are charged for the night even if they fail to show up entirely.
We use that policy basis for the entire reservation. Once made its non-cancelable. Doing otherwise allows guests to hold your home out of the market while they take the 5 to 15 days to really make up their minds. In some ways vacation rentals are like nightly lodging. But in other ways we are more like a traditional long term rental. We are giving guests full access to what may be a $100,000 to $1,000,000 (or more) asset and to take that asset off the market while the buyer tries to make up their mind and shop for alternatives is simply not wise. In major cities you can test drive a $250,000 Rolls Royce but if you want to put one on hold for two weeks they will politely decline.
Vacation home owners should do like wise. So our reservations are Guaranteed and Non-Cancelable. We will accept a "Request for Cancellation" and if, and only if, the dates are resold we refund the Guests payment less a rebooking fee of 15% or rent or $100 whichever is greater. My reasoning? Because you can't take possession of any other highly valuable commodity in the world and then return it without a reason simply because you've made other plans. Plus having to sell the same dates twice is too much work and unreasonable for the Guest to ask of us. We can only earn the rental once but we need to get compensated for doing double the work.
BOOKING CONFIRMATION:
When accepting reservations on the Terms and Conditions Method we use a short "Booking Confirmation" form that is prepared and sent to them. Ours is an Excel form and may be more detailed than many owners will prefer. (A downloadable sample is on the website). It is very careful to state that the Guest has ALREADY made a GUARANTEED reservation which this document is just confirming. We do ask them to sign and return the Confirmation as an acknowledgement of receipt. And, according to our Terms and Conditions, we can cancel the booking if they fail to do so.
To the Confirmation we attach a copy of the Terms and Conditions (This is disclosed in the Confirmation) along with our "Guest Rules." These forms are easier to read than a traditional contract. The guest need only return the Confirmation by mail or fax. The Rules and Terms are very fair to both parties. We never experienced many questions when we utilized the Contract methow but the number of questions has dropped and that saves time.
I've also observed that customers are less likely to argue about what they see as unbending conditions of their purchase. We do not alter the Terms and Conditions under any circumstances and there is nothing wrong with getting that message across in this way. If you feel our policy is too strong consider this example:
THE NORDSTROM STORY
Most folks are familiar with the Nordstrom Department store chain which was started here in Seattle. Everyone knows if they buy something at Nordstrom and are dissatisfied they can return it for a cheerful refund. They are renowned for their fabulous customer service. The employees are Nordstrom bend over backward for their clients. However - - if you want to see how firm Nordstrom is on their "Terms and Conditions" try this. Pick out some clothes, go the counter and present your Nordstrom Charge card. Then turn over the sales slip before signing and cross out the legal language on the reverse side. They may love you at Nordstrom's but you won't get the clothes. There are things they will do for you and things they will not. Vacation Rental Owners should be at least that careful in their legal dealings.
ON YOUR WEBSITE:
Lastly, let me emphasize that is very important for your Terms & Conditions to be posted on your website. Ours our linked on our footer information that appears on every page of the website. They can quickly find the Guest Rules as well as the Terms and Conditions. With so many of our leads coming from the Internet this is the perfect way to make sure Guest can not say they were unaware of our policies. And by the way, the good guests never mind and actually appreciate knowing what to expect.
SAMPLES ON LINE:
You can download samples of Contracts, Booking Confirmation and a Terms and Conditions form on the website www.VROA.org. Before using any sample forms always have your attorney review them. We can not guarantee they are appropriate for you or your area.
Please see the website section for other ideas:
- Unwelcome Guest List
- Forms & Contracts FREE downloads
INPUT:
As always I seek your input. Please share you tips, techniques compliments and complaints on this or any other subject by writing me at Director@VROA.org.
HOME OF THE WEEK:
With winter setting in you might want to pull a chair up to the fire at the David White's Rock Creek Cabins next door to the Great Smoky Mountains National Park in North Carolina. Great location and they're pet friendly. See www.RockCreekCabins.com
*** If you want your place considered for Home of the Week please drop me an email.
FEEDBACK:
Just wanted to say how eye-opening your "test" was to me. It's obvious there's a lot of room for improvement amongst owners and property managers. I know for myself, I'm a nut about replying asap to email or phone inquiries. But even though I'm in the communications business, I would never think to pick up the phone and call people if they had emailed me first. I'd just return their email with like kind. You're right though--there's nothing like establishing a "personal" relationship with an inquiry. Thanks for the reminder. As a new member of just under a month, I've really enjoyed your site and its information. I think my vroa membership will definitely be money well spent!
- Amy, Petersburg Michigan
Thanks Amy. Kind words keep us going. One of the great benefits of working for VROA is getting to talk to nice folks like Amy from all over the world.
- Wm. May
===========================================
VROA OWNER NEWSLETTER
Published weekly for all Members
Copyright - Vacation Rental Owners Association
Read this and all prior newsletters at www.VROA.org
Director & Editor - Wm. May Director@VROA.org
Membership - Penny Taylor Membership@VROA.org
PO Box 21305
Seattle, WA 98111-3305
Voice: 206-343-7777
Fax: 206-628-0839
Email: Info@VROA.org
Web: www.VROA.org (for Members)
Web: www.VROA.com (for Guests - coming soon)
===========================================
Monday, November 03, 2003
VROA COMPLIMENTARY NEWSLETTER - November 03, 2003
SUBJECT: Are You Paying Enough Tax?
-----------------------------------------------------------------------------------
*** To receive this newsletter from the Vacation Rental Owners Association every week and to see all of our helpful owner and affiliate services please join us by visiting www.VROA.org. Please support your industry.
-----------------------------------------------------------------------------------
If you think the law is supposed to be based on logic and reason you may be sadly mistaken. In many jurisdictions the rules, regulations and laws affecting your right to rent out your abode are illogical, unreasonable and sometimes downright stupid. And if you don't know the ropes you could get hung. Over time we'll be digesting the various kinds of laws that affect vacation rentals. Let's start with sales tax.
SALES TAXES:
Last summer a prospective guest told us he had chosen to rent from one of our competitors because they didn't charge sales tax on the rent. This is in a resort area where summer weeks go for $3,000 and up and many owners do their own renting. The tax is Eight percent. That particular owner has rented their home out for about ten years and for only about 10 weeks per year. If you do the math you can see that they have failed to pay taxes approaching $24,000.
Certain regulations governing vacation rentals are ambiguous and unclear in many countries, states, counties and cities. But there is one thing government bureaucrats are very sure about - - they want your money and they want it now. The interest and penalties on the owner's failure to file returns or pay taxes could cost him upwards of $50,000.
IGNORANCE OR STUPIDITY:
Maybe this owner is just ignorant of the taxing authority. Or maybe he is trying to beat the system. But in either cases he is digging a hole that may be difficult to escape. His home is worth a good half million dollars. That means the liability is a ful 10% of the value of his home and probably 20% or more of his equity.
Maybe he is thinking he'll sell one day, not tell anyone, and just sneak away into the night. That's a bad idea too. His obligation to pay the debt will stay with him until paid. And no statue of limitations will protect him when the government proves he knew he should pay, or more importantly, that he should have known. Both make him culpable for paying the debt.
And if he doesn't get caught? During the closing process, the buyer or buyer's agent or the escrow agent should be smart enough to ask whether the rental taxes have been paid. If not, closing could get delayed for a good long time or, worse yet, the deal killed. The buyer too could be held liable for the sales taxes incurred by a prior owner. When you buy a home be sure to get an affidavit from the state indicating taxes have been paid.
============================================
This week's Sponsor: RESERVE PROPERTY
Hotels use the Global Distribution System (GDS) to get on giant travel websites like Orbitz, Travelocity & Hotwire! Plus on the reservations terminals of 50,000 travel agents.? Now you can use GDS too. Go to www.VROA.org and click on "Click here to get more bookings" in the right hand border.
===========================================
TAX BLINDNESS:
Not collecting and remitting sales tax to your taxing authorities is just plain stupid.
First, because you can't beat the government's system. My father used to have a saying (which he illustrated by point one arm left and the other one right) "The government goes their way," (he then pointed his right arm to the left side and said) "And I go their way." This kind of ambivalence may not be assertive if you want to speak up at public hearings or voice your dissent over, let's say, the war in Iraq. But when it comes to dollars, pesos, lyre, euros or yen there is simply no sense in fighting the current tax rate. Pay it and pay it on time. Anything else is financial suicide.
There is another reason why paying the tax is really not a big problem. Citizens the world over are desensitized to paying taxes. They are so used to being fleeced for 20% on phone services and large sums on vehicle purchases and huge taxes on real estate that they no longer believe that they have any ability to cut or eliminate taxes. In fact, people believe that taxes will rise relentlessly. I used to joke that once that taxes won't stop rising until government takes 100% of your income. But a friend reminded me that after taking all the income they can still come after your assets. Let's hope they don't.
With guests already expecting to pay taxes on everything else they certainly expect to pay them on vacation rentals as well. The story I told of the guest who went elsewhere due to the tax is our first such encounter. Smart owners pay the tax and pass it on to the guests. Collusion about rates and policies is illegal according to the US government. But there is nothing illegal about requiring every owner and property manager to collect and charge the tax. And that's another reason why guests pay it - to stay in a given resort area the tax is mandatory and there is no way to escape it - so why try. They don't.
HOW TO CHARGE TAX:
When you buy a car, or clothes or jewelry and ask the price - the sales person never mentions the tax until they ring up the purchase. They presume any intelligent person knows there will be a tax on almost everything. But in vacation rentals we have to be more prudent. The same goes for deposits, cleaning fees, resort fees and the entire cost of renting.
Here is how we do it. Early in most inquiries the caller wants to know "What's the rate." It tempting to just blurt out the answer, but you may be doing a disservice to the guest. And if you don't remind them of tax they can later accuse you of misleading them. Instead, we answer the question this way,
"Well, there are several costs in renting. There is a refundable damage deposit, a one-time cleaning fee, a resort fee (if applicable) the rent and, OF COURSE, taxes. The rate varies by home you choose, the season and how long you stay. When do you want to come?"
Later in the conversation when the guest has chosen the unit, the dates and other details we then repeat the order in detail itemizing each item specifically including the tax. Sometimes the total is simply more than the guest can afford but this process minimize the tax objection (we can't waive it anyway) and actually makes most visitors comfortable that they know the whole price before making their purchase. And it even makes the calls go quicker. Try it.
WHAT ARE YOUR RATES:
Sales taxes come in many forms. In Washington State, where we live, the rates vary by county and city. We start with the basic amount to the state. Then we add county or city taxes and in Seattle (King County) we pay a regional transit tax. In certain tourist oriented areas visitors are slammed with an accommodation tax that fuels the local coffers. In Hawaii we pay General Excise Tax (GET) and a Transient Accommodation Tax (TAT) that add up to 11.419%. I have never asked but the TAT alone has to be a huge money maker for the state of Hawaii. They get a disproportionate number of guests to citizens in Hawaii but the state still cries budgeting woes while taxing its citizens at one of the highest rates in the nation.
KEEP A LOW PROFILE:
If have not been paying sales taxes you are in trouble. And even if you are new to renting I recommend keeping a low profile when determining what your tax rates might be. Virtually all governments have websites that spell out what is and what is not taxable. Believe it or not, we just discovered that the cleaning fees (janitorial services in the eyes of the state of Washington) are not sales taxable. We're trying to get a definitive answer in Hawaii. Yes, we've made good assumptions in the past but now its time to get it documented. We didn't expect to save some tax but that could a pleasant surprise in your case too.
So you need to be explicit and clear in finding your tax rates. The best way is to get your Accountant to answer the question. Or, in the alternate, call your taxing authorities and asking specifically what rate each item on your invoice or lease is taxed at.
No matter who you rely on for your answer be sure to get it in writing. Your accountant can write you a letter of opinion or you can write the authorities. Again, don't simply ask if rentals are taxed - ask about each type of charge specifically. And make sure you keep the answering letter in a safe place. Should you have a tax dispute later no phone call memory or email will protect you. All that counts is what you get in writing.
Please see the website section for other ideas:
- Forms & Contracts (Download free Guest Booking Confirmation)
INPUT:
As always I seek your input. Please share you tips, techniques compliments and complaints on this or any other subject by writing me at Director@VROA.org.
HOME OF THE WEEK:
Emily & Alfred Glossbrenner have written a great "how-to" book about owning and operating their vacation rental. Check out their Bucks County Cottage http://www.vrbo.com/7951. Read excerpts from their book at www.FireCrystal.com. It has lots of good info.
*** If you want your place added to the list of weekly contenders just drop me an email.
FEEDBACK:
Greetings from Las Vegas~
I must say that I believe the membership fee investment that i've made in VROA is one of the best values I've received - the information you provide is excellent! I do have a suggestion for your suggestion box - it has to do with the rating system for properties. Everyone knows the difference between a 3, 4 & 5 star hotel - why not use the same rating system so as not to confuse prospective renters? I would be much more interested in participating in the rating system if you did. Thank you for taking the time to read this and keep up the good work!
- Cynthia, Las Vegas NV
Thanks Cynthia, please reread the inspection & ratings info on the webpage. Each inspected property receives the Blue Ribbon Award AND between 1 and 5 stars.
- Wm. May
===========================================
VROA OWNER NEWSLETTER
Published weekly for all Members
Copyright - Vacation Rental Owners Association
Read this and all prior newsletters at www.VROA.org
Director & Editor - Wm. May Director@VROA.org
Membership - Penny Taylor Membership@VROA.org
PO Box 21305
Seattle, WA 98111-3305
Voice: 206-343-7777
Fax: 206-628-0839
Email: Info@VROA.org
Web: www.VROA.org (for Members)
Web: www.VROA.com (for Guests - coming soon)
===========================================
SUBJECT: Are You Paying Enough Tax?
-----------------------------------------------------------------------------------
*** To receive this newsletter from the Vacation Rental Owners Association every week and to see all of our helpful owner and affiliate services please join us by visiting www.VROA.org. Please support your industry.
-----------------------------------------------------------------------------------
If you think the law is supposed to be based on logic and reason you may be sadly mistaken. In many jurisdictions the rules, regulations and laws affecting your right to rent out your abode are illogical, unreasonable and sometimes downright stupid. And if you don't know the ropes you could get hung. Over time we'll be digesting the various kinds of laws that affect vacation rentals. Let's start with sales tax.
SALES TAXES:
Last summer a prospective guest told us he had chosen to rent from one of our competitors because they didn't charge sales tax on the rent. This is in a resort area where summer weeks go for $3,000 and up and many owners do their own renting. The tax is Eight percent. That particular owner has rented their home out for about ten years and for only about 10 weeks per year. If you do the math you can see that they have failed to pay taxes approaching $24,000.
Certain regulations governing vacation rentals are ambiguous and unclear in many countries, states, counties and cities. But there is one thing government bureaucrats are very sure about - - they want your money and they want it now. The interest and penalties on the owner's failure to file returns or pay taxes could cost him upwards of $50,000.
IGNORANCE OR STUPIDITY:
Maybe this owner is just ignorant of the taxing authority. Or maybe he is trying to beat the system. But in either cases he is digging a hole that may be difficult to escape. His home is worth a good half million dollars. That means the liability is a ful 10% of the value of his home and probably 20% or more of his equity.
Maybe he is thinking he'll sell one day, not tell anyone, and just sneak away into the night. That's a bad idea too. His obligation to pay the debt will stay with him until paid. And no statue of limitations will protect him when the government proves he knew he should pay, or more importantly, that he should have known. Both make him culpable for paying the debt.
And if he doesn't get caught? During the closing process, the buyer or buyer's agent or the escrow agent should be smart enough to ask whether the rental taxes have been paid. If not, closing could get delayed for a good long time or, worse yet, the deal killed. The buyer too could be held liable for the sales taxes incurred by a prior owner. When you buy a home be sure to get an affidavit from the state indicating taxes have been paid.
============================================
This week's Sponsor: RESERVE PROPERTY
Hotels use the Global Distribution System (GDS) to get on giant travel websites like Orbitz, Travelocity & Hotwire! Plus on the reservations terminals of 50,000 travel agents.? Now you can use GDS too. Go to www.VROA.org and click on "Click here to get more bookings" in the right hand border.
===========================================
TAX BLINDNESS:
Not collecting and remitting sales tax to your taxing authorities is just plain stupid.
First, because you can't beat the government's system. My father used to have a saying (which he illustrated by point one arm left and the other one right) "The government goes their way," (he then pointed his right arm to the left side and said) "And I go their way." This kind of ambivalence may not be assertive if you want to speak up at public hearings or voice your dissent over, let's say, the war in Iraq. But when it comes to dollars, pesos, lyre, euros or yen there is simply no sense in fighting the current tax rate. Pay it and pay it on time. Anything else is financial suicide.
There is another reason why paying the tax is really not a big problem. Citizens the world over are desensitized to paying taxes. They are so used to being fleeced for 20% on phone services and large sums on vehicle purchases and huge taxes on real estate that they no longer believe that they have any ability to cut or eliminate taxes. In fact, people believe that taxes will rise relentlessly. I used to joke that once that taxes won't stop rising until government takes 100% of your income. But a friend reminded me that after taking all the income they can still come after your assets. Let's hope they don't.
With guests already expecting to pay taxes on everything else they certainly expect to pay them on vacation rentals as well. The story I told of the guest who went elsewhere due to the tax is our first such encounter. Smart owners pay the tax and pass it on to the guests. Collusion about rates and policies is illegal according to the US government. But there is nothing illegal about requiring every owner and property manager to collect and charge the tax. And that's another reason why guests pay it - to stay in a given resort area the tax is mandatory and there is no way to escape it - so why try. They don't.
HOW TO CHARGE TAX:
When you buy a car, or clothes or jewelry and ask the price - the sales person never mentions the tax until they ring up the purchase. They presume any intelligent person knows there will be a tax on almost everything. But in vacation rentals we have to be more prudent. The same goes for deposits, cleaning fees, resort fees and the entire cost of renting.
Here is how we do it. Early in most inquiries the caller wants to know "What's the rate." It tempting to just blurt out the answer, but you may be doing a disservice to the guest. And if you don't remind them of tax they can later accuse you of misleading them. Instead, we answer the question this way,
"Well, there are several costs in renting. There is a refundable damage deposit, a one-time cleaning fee, a resort fee (if applicable) the rent and, OF COURSE, taxes. The rate varies by home you choose, the season and how long you stay. When do you want to come?"
Later in the conversation when the guest has chosen the unit, the dates and other details we then repeat the order in detail itemizing each item specifically including the tax. Sometimes the total is simply more than the guest can afford but this process minimize the tax objection (we can't waive it anyway) and actually makes most visitors comfortable that they know the whole price before making their purchase. And it even makes the calls go quicker. Try it.
WHAT ARE YOUR RATES:
Sales taxes come in many forms. In Washington State, where we live, the rates vary by county and city. We start with the basic amount to the state. Then we add county or city taxes and in Seattle (King County) we pay a regional transit tax. In certain tourist oriented areas visitors are slammed with an accommodation tax that fuels the local coffers. In Hawaii we pay General Excise Tax (GET) and a Transient Accommodation Tax (TAT) that add up to 11.419%. I have never asked but the TAT alone has to be a huge money maker for the state of Hawaii. They get a disproportionate number of guests to citizens in Hawaii but the state still cries budgeting woes while taxing its citizens at one of the highest rates in the nation.
KEEP A LOW PROFILE:
If have not been paying sales taxes you are in trouble. And even if you are new to renting I recommend keeping a low profile when determining what your tax rates might be. Virtually all governments have websites that spell out what is and what is not taxable. Believe it or not, we just discovered that the cleaning fees (janitorial services in the eyes of the state of Washington) are not sales taxable. We're trying to get a definitive answer in Hawaii. Yes, we've made good assumptions in the past but now its time to get it documented. We didn't expect to save some tax but that could a pleasant surprise in your case too.
So you need to be explicit and clear in finding your tax rates. The best way is to get your Accountant to answer the question. Or, in the alternate, call your taxing authorities and asking specifically what rate each item on your invoice or lease is taxed at.
No matter who you rely on for your answer be sure to get it in writing. Your accountant can write you a letter of opinion or you can write the authorities. Again, don't simply ask if rentals are taxed - ask about each type of charge specifically. And make sure you keep the answering letter in a safe place. Should you have a tax dispute later no phone call memory or email will protect you. All that counts is what you get in writing.
Please see the website section for other ideas:
- Forms & Contracts (Download free Guest Booking Confirmation)
INPUT:
As always I seek your input. Please share you tips, techniques compliments and complaints on this or any other subject by writing me at Director@VROA.org.
HOME OF THE WEEK:
Emily & Alfred Glossbrenner have written a great "how-to" book about owning and operating their vacation rental. Check out their Bucks County Cottage http://www.vrbo.com/7951. Read excerpts from their book at www.FireCrystal.com. It has lots of good info.
*** If you want your place added to the list of weekly contenders just drop me an email.
FEEDBACK:
Greetings from Las Vegas~
I must say that I believe the membership fee investment that i've made in VROA is one of the best values I've received - the information you provide is excellent! I do have a suggestion for your suggestion box - it has to do with the rating system for properties. Everyone knows the difference between a 3, 4 & 5 star hotel - why not use the same rating system so as not to confuse prospective renters? I would be much more interested in participating in the rating system if you did. Thank you for taking the time to read this and keep up the good work!
- Cynthia, Las Vegas NV
Thanks Cynthia, please reread the inspection & ratings info on the webpage. Each inspected property receives the Blue Ribbon Award AND between 1 and 5 stars.
- Wm. May
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VROA OWNER NEWSLETTER
Published weekly for all Members
Copyright - Vacation Rental Owners Association
Read this and all prior newsletters at www.VROA.org
Director & Editor - Wm. May Director@VROA.org
Membership - Penny Taylor Membership@VROA.org
PO Box 21305
Seattle, WA 98111-3305
Voice: 206-343-7777
Fax: 206-628-0839
Email: Info@VROA.org
Web: www.VROA.org (for Members)
Web: www.VROA.com (for Guests - coming soon)
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