Collaborative Consumption in the Short-Term Sharing Economy: How Community Associations are Grappling with Peer-to-Peer Based Transactions

Even before the pandemic and recent inflationary concerns occurred, there had been a steady rise throughout the country of individuals renting or borrowing goods rather than buying and owning them. This concept has carried over to residential communities whereby homeowners have monetized their homes and condominium units through peer-to-peer online activities involving the shared economy.

Of course, short-term rentals through platforms such as Airbnb and Vrbo have flourished in the past few years and have brought a whole host of challenges for community association managers and Boards. But now, because of the ease of mobile payments and certain online platforms such as Sniffspot, Swimply, and Curbflip, certain types of rentals have become even shorter for amenities that are used for as little as a few hours.

These alternative short-term use digital platforms are engaging in facilitation of homes and lots for a fee. Buyers are paired with sellers to temporarily rent or borrow everything from private pools, driveways, parking spaces, and garages for use by the public. As more people work from home, they find that they can easily supervise these types of activities. Also, for those who are “quiet quitting” their day jobs, they are increasingly looking to supplement their income through what appears to be a relatively hassle free “side hustle.” Statistics show that the phenomenon regarding this new sharing economy is set to grow globally to reach $335 billion dollars by 2025.

However, it’s not all rosy for everyone involved. As increasingly, community associations are dealing with the negative consequences that sometimes emanate from these types of enterprises. In many instances, Homeowners’ Association (HOA) and condominium managers and Boards are reporting an increased number of complaints from neighboring residents including excessive noise, traffic, crime, and trash. This leads to concerns regarding managing, patrolling, and insuring against potential risks, as well as the wear and tear on common area components that may be involved.

Similarly, government entities have attempted to regulate short-use pursuits with mixed results. The City of Palm Springs, California found that Swimply, a platform that allows folks to rent their pools on an hourly or daily basis to others, violates zoning codes. Therefore, it banned residents from listing their pools on that online site. Enforcement measures include a $500 fine to the resident and having their vacation rental permit reviewed for potential restriction or withdrawal. In other states, such as Wisconsin, lawmakers attempted to reclassify private pools as public and impose licensing and other construction requirements under a proposed bill that failed to pass the legislative process. Ultimately, Swimply and other companies in the industry lobbied aggressively against the bill and shot down the proposal by threatening legal action against the state.

It can be difficult for government to enforce what many argue should be allowed in a free and democratic society. Many times, it comes down to the same arguments that have been used to regulate short-term rentals. Is the primary purpose of the activity solely residential or part of a commercial enterprise that may be regulated and controlled by government like any other business in the community?

Negative attention was brought to these types of situations in the past few years by the so called “Maternity Hotels.” An unregulated and underground phenomenon wherein private homes are being used to care for newborns and their mothers that travel to the USA from abroad to allow women to have a baby in this country so that the child automatically can become an American citizen. In one instance, a large home located in a subdivision was being used to house up to 17 mothers, plus their babies. This put an inordinate amount of pressure on local sewage and sanitation systems, causing them to fail, and increased traffic in the area with many persons coming and going from the property regularly late into the night. The actual travel to this country and residing in the housing activity itself is not illegal per se. However, the operators of these business enterprises have been known to violate various zoning, building and fire codes.

This leads to the question of how community associations may regulate special uses of individual properties located in their communities. Group residential situations have been dealt with in the past and defined as two or more persons not living together as a single housekeeping unit. These definitions allow associations to regulate or ban shared living quarter arrangements in the community which may seek to be used as rooming houses, dormitories, parolee homes, or private residential clubs. But often those living arrangements require changing the character of the residential structure itself to accommodate large groups of people engaging in certain common activities.
The difference is that sharing-based transactions involve one residential structure and lot. The swimming pool, parking space, sheds, and decks are considered accessory structures secondary to the residential structure. As such, associations are similarly free to mandate rules which meet the requirements of the association’s governing documents and applicable municipal zoning and building codes. The basis for amending governing documents in this regard is based upon nuisance, health and safety concerns which interfere with adjacent residents’ quiet enjoyment of their unit, lot, or common areas. As such, Boards may enforce prohibition through bans, fines, and by placing liens on units if they fail to properly comply.

What needs to happen moving forward is that associations must determine what conduct is allowable, amend their governing documents accordingly, and perhaps adopt a model rule that is recognized as fair and reasonable under the unique circumstances of each community. This will avoid unnecessary court action and/or law enforcement involvement, while at the same time providing homeowners with the ability to understand what activities they can participate in without impunity or to the detriment of their neighbors.

John D. Gwyn is an attorney in our Livonia office where he focuses his practice on the representation of community associations, management companies and developers with a particular emphasis on real estate and commercial litigation. He has handled many types of community association related matters, including assessment collections, lien foreclosures, bylaw violations, civil rights defense, and creditor bankruptcy matters.

He has gained experience in community association law over the years through his representation of condominium and homeowners associations, as well as individual homeowners, in matters involving real estate, contract, and construction defect litigation issues. His extensive litigation and transactional background provides him with the experience necessary to handle even the most complex legal issues that neighborhood associations may encounter. He may be reached at (734) 261-2400 or jgwyn@cmda-law.com.