Host: Christine Karpinski Guest: Melinda DiPerna Topics Covered: What to do when a vacation rental ban is proposed Why are vacation rental bans proposed? How to create a dialogue among homeowners about the ban The process of overturning a ban The benefits of being involved in your HOA The process of voting on a vacation rental ban How to avoid vacation rental ban proposals

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Host, Christine Karpinski:  I am Christine Karpinski. Thank you for listening to the How To Rent Vacation Properties By Owner podcast. Today's guess is Melinda DiPerna. She is going to speak to us about an experience that she had that hopefully you will never have to experience, but unfortunately it might be coming up on your shirttails. She is going to talk about her experience with a proposed vacation rental ban with her homeowners' association.

Melinda is a proud owner of three vacation rental homes, a coastal cottage in Midcoast, Maine, a golf condo in Palm Desert, California, and a beach condo in Oceanside, California. She started renting her vacation homes in 1999 to help pay the mortgage in Maine, and is now not only a by owner manager but she also manages properties for other owners in her neighborhoods. She's got a website, as well as listing on VRBO and HomeAway. Her personal website is www.RentThisPlace.net.  Welcome Melinda, thank you so much for joining us.

Guest, Melinda DiPerna:  Hi Christine.

WHAT TO DO WHEN A VACATION RENTAL BAN IS PROPOSED

Christine:  OK, so, I was sort of a little involved when you were first faced with this vacation rental ban, back a few years ago. Was it just last year?

Melinda:  It was only a year ago.

Christine:  Oh, my gosh, it seems longer. [laugh] And Melinda is also on the Yahoo board, it's a chat board where vacation home owners chat back and forth and that's how I got introduced to the issues that she was facing with these vacation rental bans. But do you want to just give us brief history of what came about and how it came about?

Melinda:  Sure Christine. I own a condo at Palm Valley Country club in Palm Desert, California, and I bought that in the spring of 2005. When I bought that condo I read the CC&Rs, I checked the minutes of the meetings, I looked at the local ordinances, I paid my property taxes and my transient occupancy taxes, and ran quite smoothly there for a year.

And then one day when I walked out to the mailbox, I found a letter in it. And it said, "In a month we will be sending you a ballot and that ballot will ask the community to vote on whether to ban rentals of 30 days or less." Imagine my surprise. My hands started shaking. I thought, "Oh my goodness, this is my livelihood," because this condo I did buy as an investment and there was no way I could afford it without renting it out.

Christine:  Wow, so what did you do next?

Melinda:  Well, the next thing I did after I calmed down was to email my HOA and to find out what was happening. And then to call and talk to the general manager and find out what the reasoning was behind this. The next thing I did was to get on VRBO and HomeAway, and all the other rental listing sites, and to start to gather the names, telephone numbers, and email addresses of owners who rent.

Christine:  Right.

Melinda:  The point for that was I think you've said also about just general communities, like you mentioned in Big Bear. To start to network with them, to see if we have any power in numbers, and to see if there was anything we could do.

Christine:  And were you successful in gathering home owner's names, email addresses, and contact information, or did VRBO send out something on your behalf?

Melinda:  I didn't ask VRBO to do that.  I did it the hard way.

Christine:  Oh, goodness.

Melinda:  And in fact, actually about a month or two before that I had actually started to create our own Yahoo group ‑‑ kind of a subgroup for our community to share referrals. I have a unit down in Oceanside that we do that very successfully. So, I had already gathered some of the names and numbers for that purpose, and I didn't want to get myself banned off of one of the vacation rental sites by sending out mass email. Because they're not supposed to be used for that purpose.

Christine:  OK, so here is the deal just for our listeners: here at HomeAway, and VRBO, the Owner Community, we serve this purpose. If you have an impending ban, let me know, and we can send out an email on your behalf. We obviously have to have proof and all those sorts of things. We have to make sure it is truly an impending ban and what the issues are. And we can actually assist you in those things.

So, don't be afraid, and I know this is hindsight for you, Melinda, but this is for the listeners as well, don't be afraid to email us and let us know. We are here to help; we are all in this industry together. But, certainly what you did was you took your anger and you turned it into positive energy and really worked toward the cause. So you contacted these owners and then what happened next?

Melinda:  Well, we asked for the board to give us an open meeting and delay the vote. We asked them to not send out the ballot, and to allow us to talk and have a dialogue to work together.

Melinda:  Half and half. We were successful in the sense that we did have an open meeting and we were unsuccessful in the sense that they would not withdraw the ballot.

Melinda:  It's kind of interesting. We looked in the history because we thought we might have to go forward with a lawsuit at one point. We looked to find out if there was any record of any complaint, or should we have seen this coming, were we doing something wrong? And when it came right down to it, what it really consisted of was people talking on the golf course, people talking at dinner, somebody complaining, 'Oh, there were people shooting balls on the golf course last night or into the lake.' More anecdotal type stories that were annoyances.

Christine:  And there's no guarantees that those are renters all the time.

Melinda:  You took the words out of my mouth. That is what we ended up finding later. I later served on a committee for the HOA about this. And one of the things that we found was we couldn't track whether these were renters or guests of owners.

The community is only occupied by about 30% of homeowners full time, year round. Because it is in the desert and it gets kind of hot in the summer. And then another, say, 30‑50% are seasonal residents or vacation home users. Leaving a small portion as actually being vacation rental owners. But like in most communities, people kind of fear what they are not, and they assume that it was vacation rental guests causing the problem.

Christine:  I find that true in a lot of aspects of life. A lot of times people fear the unknown.

Melinda:  Well, that was the tricky thing. We fell in a crack in the California law. Now today, by law, they have to supply you with that list.

Christine:  Which is by the way the law in most states, that if you request the list of all the rest of the homeowners they have to provide it.

Melinda:  Right. And they were willing to provide it but they don't have to do it free of charge.

Christine:  And guess what? The price just went up, $25,000.

Melinda:  It wasn't cheap. They weren't trying to be difficult but they were trying to obey just the letter of the law at the time. So, we circumvented that, and we found out something that most realtors already know is that a title company would be happy to give you a list of the names and addresses. We got it in electronic format as well as labels and such. And so we went ahead, and we kind of formed a steering committee with about five of us who could put the time and the energy in.

Christine:  And what about money? Time, energy, and I'm thinking money.

Melinda:  Well the good thing about the open forum meeting that we had was that we got to meet about thirty other owners, and many of them offered to contribute money. They didn't have the time or the energy, but they would contribute money. We got together with some local property managers. There's one to three of them that have a lot of listings in this condo development.

Christine:  What a great idea! That's another thing that people don't necessarily think about, is going to the property managers. Rent by owners automatically assume that property managers and rent by owners are two opposing forces but in reality they're not. We're really in the same industry, we're in the same business, it's just a matter of who the rental checks are being written to and what a great idea. Were the property managers receptive?

Melinda:  They were wonderful. They were fantastic. We had one in particular that has about 80 units, he actually has a physical building right outside our country club and he had already sent a letter to all of his owners, but then he also sent another one requesting that they contact us, that they contribute money, that they get on our email loop so that we could all be in communication, because remember at this point, we felt that we might even have as few as 60 days to beat this rental ban. That's hard, to get a lot of independent owners who live all across the country and even the world together to fight something.

Christine:  Wow.

Melinda:  And we're talking almost 1,300 units at Palm Valley Country Club. That's a lot of owners.

Christine:  It sure is. So after you were able to get this together, did you have to proceed with using a lot of the funding, or... OK what I really want to ask is, how much did it cost?

Melinda:  Well, the first mailing that we made, one of our owners is a realtor and has her own office so she donated the time and the supplies and all we had to pay for were the postage costs, so the math of 1,300 units times 30 cents.

Christine:  Yeah, pretty minimal.

Melinda:  It's pretty minimal, we got some additional funding through and through, and I just found out yesterday that we've got about $100 left in the account.

Chrstine:  Oh wow.

Melinda:  So we sent out, I believe it was, two or three mass mailings, and we also used the funds to conference call our steering committee. And the rest of the materials and labor we really got in kind because many of the owners are small business owners and were willing to work with us that way.

But it wasn't something that I could have done as one person, or that I would have liked to have done. I guess I could have because when you're looking at a condo that costs half a million dollars, that's a big investment to lose. The real estate market was starting to soften at that time and the thought of a lot of condos going up for sale because they could no longer rent them just sounded disastrous to me.

Christine:  You know, that's a great point, is that if something like this does happen, it affects everybody's property value and just to let those permanent residents know, it affects their values as well.

Properties in complexes or HOAs where they allow vacation rentals, those properties typically have a higher appreciation rate, their values hold stronger because the affordability of that property with the ability to rent it out definitely gets factored in. If all of a sudden they banned vacation rentals, all these properties would go on the market at the same time and it just would not be good for anybody.

Melinda:  It's funny to hear you say that, and I know that to be true, but there are a lot of owners out there, and I quote from the 2,000 HOA meeting, it was suggested that an overabundance of rental units bring down property value.

Christine:  Oh my word...

Melinda:  So a lot of it, what we found out as I worked on this ad hoc leasing committee over the last year, was communication and information and de‑bunking old myths. Because we kept hearing over and over again, "Gee if all property owners were like you and a few of the others, we wouldn't have any problems here," and we said, "You know what, most property owners are like that." And most guests are just like you. We don't want anyone partying and overcrowding and ruining our golf course and doing anything to our properties any more than you do.

Christine:  And the thing is too, it's pointing out that the people that you're renting to, this is not a typical landlord situation. When you're a landlord you're renting to people who may not necessarily be able to afford to be a homeowner, maybe they don't know how to take care of a home, and when we rent vacation rentals, we're first of all renting at a pretty hefty price per week, you're talking about renting to a demographic of doctors and lawyers and professionals, this is not landlording.

Melinda:  No, this is entirely different Christine. I own both types of properties and people will ask me which one I prefer, I said vacation rentals by far.

Christine:  Oh my gosh.

Melinda:  I never have damage. I never withhold security deposits, I treat them like my guests, I put good things in my rentals and they take good care of them.

Christine:  I know, it's amazing, I have one place that I visited last week, it's a high‑end place and we put really nice stuff in it and high‑end, even pots and pans, we put in stuff, we've got nice Egyptian cotton sheets, and I had been there after a year of not being there, I'm embarrassed to say that it was a whole year, my husband was there in the interim but I hadn't been, but I just was amazed, people take perfect care of my property. It's just wonderful, it is.

So once you got together with all these people, you formed the committees, you were informing the rest of the community, how receptive were they to that information that you were informing them about the owners that are good?

Melinda:  Well you know what, it's like anything. 99% of the people are receptive and want to be educated, and there's that 1% that makes you cry, that sends a nasty email or "How did you get my address? Don't send me anything else", but the majority of the people were happy to be educated because they understood that we weren't telling them to do things our way, we were just trying to educate them that we should have this right and with that right comes responsibility and we're willing to live up to our responsibility.

Christine:  Right. Now when it came to the actual process I suppose you then all had to go for a vote, and do you know if money was a motivator at all with regards to possibly opposing the ban? I personally know, I've sat on HOA boards, I know that it's very costly to amend your homeowners' association documents. I know the one community that I sat on, it was about $30,000 to record, rewrite, because it all has to go through attorneys and so it's a very costly endeavor as well to amend your HOA documents. Was that brought up at all in any of the arguments?

Melinda:  Well I think what happened was early 2006, the board had decided that they were going to bring our CCNRs up to date as they said, and our rules and regulations. And they chose first a sign amendment, which had to do with for rent and for sale signs, and they decided to include this ban in the same amendment.

Christine:  Hey they work just like politicians!

Melinda:  Absolutely, and we got them to split them out because it became pretty clear after a week of phone calls that we weren't going to sit silently by and let this happen, and we said, we're not opposed to limiting the way people do signage, that's not the way business is done any more anyway, but we are opposed to losing our rights to rent and rent responsibly.

But anyway, so they were in the process of changing CCNRs and they decided to send this out and it's interesting, one board member still contends that he feels this was a good effort because it got our attention. And to some extent he has that point, when you have any HOA group that most of the residents don't live on‑site, it is hard to get us to go to their meetings. It's a hardship to get us to go to the annual meeting which was the one thing I would say, "Shame on me."

Shame on all of us, because we weren't there at the annual HOA meeting in 2006 when this first idea was presented. And we were all there in 2007, I'll tell you that, even though we had to rent hotel rooms to stay there.

Melinda: We actually lived in a neighborhood in Atlanta that had a very strong HOA. It was amazing that even permanent residents don't show up to the annual meeting. You have to have a quorum in order to have a vote, and I'm finding more and more people are showing up.

And, kudos to the homeowner's associations as well. A lot of times, what they're doing is that they're having neighborhood meet‑and‑greet weekends on their annual homeowners weekend. It becomes a whole, big party and everybody gets to meet everybody.

There are covered dish suppers and drinks and all those sorts of things so that everybody can get to know each other. It's really, really, really important to go to your HOA meetings.

Melinda:  You know, I have to give a great example of an HOA that does this. I do own a place down at Oceanside, CA. They had a lot of friction, I guess, ten years ago, before I owned there, between vacation rental owners and permanent residents.

They do a really smart thing, among other things, now, that they do smart. They hold a post‑season party. After the busy summer season, they have a post‑season party. That way, it's not a hardship on anyone. It's a more relaxed, less crowded time.

They also hold a holiday party, and it's kind of like what you're talking about. Although it's not a meet‑and‑greet, bring your own, it's something that we all contribute to. It gives us a time to get together when it's not a hardship on any owner.

Christine:  Right.

Melinda:  It's really a fantastic community. It's a great example of the HOA, the permanent residents, and the rental owners working together.

They've got something there that is kind of my example for anyone. They have a rental owner's coalition. The sole purpose of that group, now, is to deal with issues with rentals. They both protect their interest, but also work with the HOA and work with the permanent residents.

They understand that there is a cost associated when suddenly, you have another 500 units occupied in the summertime. It does change their lifestyle. If you live there year‑round, it could bug you. All of a sudden, the pool is full.

Christine:  Right. And the parking lot is full.

Melinda:  Oh, at the beach. And somebody parked in your one‑and‑only spot, yeah. There are a lot of issues that we, as the owners, have to take responsibility for, and recognize that we are impacting those people there who make that their home year‑round.

Christine:  I'll have to admit, I've even become one of those residents when I go to one of our vacation rentals.

We were at one of our places last week, and we have a designated parking spot. It's kind of a weird pole that we have to put a key in, pull it down, and then drive over the top of it. Then, when you leave, you fold it back up so nobody can park in your spot.

Well, we just went out for ten minutes and we said that we wouldn't pull the pole back up. We came back, and somebody else parked in our spot! I'm thinking, "Hey, $25,000 for this doggone spot!" So, I became one of those enraged owners.

It is true. I think it's really, really important to get together with those other owners. As you're talking about this, all I see, I mean, yes, there were negatives that happened, but I see a lot of positives.

I bet you met a whole bunch of owners that you didn't know before. I bet you now know a little bit more about each other. You're probably friends with some of these people now. Is that true?

Melinda:  The positives are innumerable. Not only did I get to know some of my neighbors that lived there permanently better, I got to know board members who I can count as friends.

I've got to know other rental owners who I can count as friends, one who has become a very close friend. At our HOA meeting back in February, we had a rental owner cocktail group before the meeting that night. Just to get together and give ourselves a pat on the back. To say, "Let's keep this friendship going." We even chuckled and said, "In 20 years, will we be the retirees living here, saying 'those doggone rental owners'?"

Christine:  I hope not!

Melinda:  That's what we said. But we laughed at ourselves and said, "Probably," because the same things happen over and over again. But, it's mostly good things that have happened.

Christine:  So, you got together. You guys talked. You communicated, you did mailings, all of that. Now, what happened when it came time to vote? Did you guys have a quorum? Did people show up? Did they send in their ballots?

Melinda:  Well, the first round of voting did not have a majority. We are an HOA where you only need 51% now, to change a CCNR. We did not have 51% one way or the other.

The board then had the discretion to stop the vote, but they decided to go forward with it. I'm sure some of it was legally motivated, because they could have been sued by the other side, that they didn't do due process.

They continued through, to find out. In the meantime, remember that we had an ad‑hoc committee going now, working with the HOA.

Christine:  Excellent.

Melinda:  They sent out another ballot, and eventually, they had a deadline for that one two. So they sent out a second ballot to people who had not yet voted. It came back, and it was a close margin that we won by. We called it the "Vote No on Three" measure.

The signage restrictions passed, and the rental restrictions were voted down by a narrow margin.

Christine:  Oh, excellent.

Melinda:  Which is really good news, but it also sent a clear message to us that we couldn't just sit back and put our feet up.

Melinda:  It is. In fact, before I spoke to you, I was just on the phone with our property manager for our HOA, or general manager, I think that they call her. We do still have ongoing work, and we have made recommendations.

Christine:  Excellent.

Melinda:  But the biggest work that we have to do is that we have to communicate with each other. We have to continue to keep those lines of communication open, so that if we do see a pattern of problems developing again...which, by the way, they've said that just talking about it, they've seen the problems decrease dramatically over the last year.

Christine:  You know, I find too that sometimes, it's just lack of education. When we were down at our place, one of the other owners who I happen to know very well, she had a bunch of college kids in her place.

I hesitated call her, because I thought [makes conflicted noise]. Then I thought, "You know what? If this happened and she were down, I would want her to call me."

So I called her. I said, "Look, I'm really sorry to call you, but do you know that the renters that you have are under 25?"

She said, "Oh, my gosh!" She had no idea. As it all turned out, it was fine. They didn't cause a problem, but it was definitely good to communicate with each other about it.

The thing is, that could have gotten blown way out of proportion and a lot of bad could have happened from that. But, what happened with her, was that she had given over the rentals to her daughters.

Her daughters were now in their thirties, and she said to them, "You guys start taking over." Come to find out, it was the first rental that her daughter took. She didn't know about screening the guests, and especially screening out for those under 25 year old kids, and all that.

She won't do that again, I'm sure. We find that most often, it's not due to intended malice. It's just due to lack of knowledge in how to go about screening your guests, getting the best renters, and making sure that all of the communications are in order.

When you send out your directions to your renters, make sure to mention to them that there are a lot of permanent residents. We have quiet time after 10:00 p.m. Or 11:00 p.m., or whatever it might be.

Just informing them of these things that puts it on their plate to be cognizant of, because sometimes you just don't think about it when you're on vacation.

Melinda:  You're absolutely right Christine. Right not only on communication with the guest, which is so critically important of setting their expectations of their behavior as well as yours, but there's something else you mentioned. You have the telephone of your neighbor to call.

Christine:  Yeah.

Melinda:  That's one of the things I tell anybody asking my advice for new rentals. Go around and give your card or your telephone number to every neighbor one, two, three over and tell them, "If there's ever, ever a problem with a guest, with plumbing, you think someone's there that shouldn't be, please call me." I tell you it makes a huge difference, because you're not there and they're your eyes when they feel like they're a partnership in that.

Christine:  Right.

Melinda:  Unfortunately, even with great contracts and what I call "tips for a smooth start" that I send out to my guests ‑ even with what I feel like are pretty good recommendations to guests I've had problems occasionally. I was fortunate enough to have a neighbor call me and say, "You know what? I'm calling you because I know it's not you. That's why I'm not calling the guards," because we do have a gated, guarded community. He said, "I know it's not you, I know it's a guest. They're throwing hot dog buns in my spa! And my mother‑in‑law is there right now and she's really upset.”

Christine: Oh goodness.

Melinda:  Just a phone call like that. Then you can take care of the problem like a mature, responsible neighbor.

Christine:  Yeah, in my circumstance she was very happy that I'd called. She had no idea of course, and again, I knew that that wasn't like her, and that was what made me call. I'm like, "I know she has no clue," because she's been renting for years and I know that she turns away guests all the time. That's not her motivation; hers is different.

HOW TO AVOID VACATION RENTAL BAN PROPOSALS

Christine: Now looking back at this whole process it all turned out positive, the vote went in your favor, it really got you guys all together and got you communicating. There were a lot of positives that happened. Moving forward you've got a proactive approach. Is there anything that you look back and say, "Maybe I shouldn't have done that," or "I could have done it differently?"

Melinda:  Two things. I would have gone to the annual HOA meeting each year ‑ I had only been once. I think that I probably would have gone to an HOA board meeting and introduced myself and offered my services on any committees or if there were ever any issues. I think the best way to avoid it is to be involved, and that's the hardest way.

Christine:  It's also very important when you're looking at your board and what votes are coming due if in a circumstance, especially like yours where you've got a small majority of the homeowners who actually rent and the other ones who might just use it partially or use it full time, I think it's really important to at least have one board member who is a rental owner because we are part of the voice and I think that's really, really important.

When you are voting for your HOA you need to look at who these people are and what they do with regards to their homes. A lot of people tend to say, "I'm going to choose the person that lives there because they're there and they've got more time and blah, blah, blah." It's not always the best choice for you. You need to look at somebody that's going to represent you and your common interests.

Melinda:  It's funny Christine. I didn't set you up to say that either, to set me up, I swear. We just had our election and we now have three new board members. Although none of them are vacation rental owners at this community, as a group we kept that email loop going and we had what we called a "virtual candidates forum" because we didn't have one for our HOA. We asked them questions that were pertinent both to their opinions on rentals and just their opinions on our community in general. It was very enlightening and it is something we've now asked our HOA to do in the future so that we can all make educated choices.

Christine:  You know it's so funny because whenever there are votes in the HOA's that I'm in I always call each individual candidate; I'll speak with them candidly, I'll ask them questions. They're always amazed. They're like, "Christine do you realize you're the only person that's called me?" And I'm always amazed to find that out.

Why wouldn't you call somebody or email them and contact them to find out what their agenda is? Why are they running for the board? What do they think that they're going to do? There are people that run for their own agenda and you might be empowering them to do so by voting for them. Then there are others that truly have the vast majority in mind when they run. It's just something that we all sort of get those ballots in the mail, we're busy with other things in our lives, it's not our primary residence, but these things make all the difference in the world.

Melinda:  It has certainly been enlightening how much so.

Christine:  Oh.

Melinda:  Yeah.

Christine:  I always say these sorts of things turn around, they become educational, they become positive experiences, even though it might be a headache it works out to your advantage.

Do you have any other advice, maybe some quick tips that you would give to any homeowners who are facing this? Do you have any opposition to them contacting you, maybe via email or on the Yahoo board or something like that?

Melinda:  I would be happy to hear from other folks right now. It's funny, I had to take a break from the Yahoo board because these types of commitments were taking so much time.

Christine:  Of course.

Melinda:  But one of the first things I did was reach out to the owners on the Yahoo board as well as the owners of some of the vacation rental portals, including those of HomeAway. I think the HomeAway thing had just happened when this came up. It was really important to get those people's feedback and experience, especially in communities in Florida, and to understand my rights as well. The wheel doesn't need to be reinvented so of course. I call myself an advocate now because I think that we owe it to each other to make this possible around the country. It's such a wonderful vacation paradigm or model for people. I think we need to protect that right but do it responsibly.

Christine:  Right. On the owner community we have a whole section devoted to vacation rental bans. It doesn't look like a ton of information but believe it or not we've been researching this stuff for six months, literally going to the library and looking at microfiche and looking up online all these different case studies and stuff like that. I encourage everybody to at least scan through them, see the things that have happened. It's not only happening with homeowners' associations it's happening with municipalities, whether it's city, county and even states. It's happening across states. So if you think you're immune to vacation rental bans listen to Melinda, she can tell you first hand that it could happen to you.

Well thank you so much Melinda for joining us and for giving us all this information. I think it will be great for other people to listen to your experiences and hopefully learn from you. Again, her name is Melinda DiPerna and she has three vacation homes and rents her own as well as some others. Her website is http://www.rentthisplace.net/. She also advertises on VRBO.com and HomeAway.com. Thanks so much for joining Melinda.

Melinda:  Thank you so much.

Chirstine:  Well that wraps up this episode of the "How to Rent Vacation Properties by Owner" podcast.