The number of South Carolina short term rentals has steadily increased with each passing year. Homeowners and landlords, though, should understand the different regulations and tax laws that may apply to them. Membership in a homeowners associations also adds another layer of complexity, as many of these communities enforce restrictions on rentals in general.
Understanding South Carolina Short Term Rentals
The market for short term vacation rentals is growing at a consistent pace. There is a high demand for these rentals because they offer comfortable and homey accommodations at an affordable price. Plus, their scattered locations give vacationers a wider range of options. Similarly, short term rentals favor rental owners because they act as an additional source of revenue.
Short term rentals, though, do pose some problems for cities and neighborhoods. Due to their nature, short term rentals see a constant stream of strangers over a short period. Vacationers also don’t tend to take care of the rentals as they would their own homes. All of this can negatively affect the security, appeal, and value of the surrounding community.
Moreover, when short term rental services like Airbnb and VRBO first rose in popularity, the hotel industry took a huge hit. More and more people began to prefer renting from these services over booking hotel accommodations. This led to some pushback from the hotel industry at large.
Does South Carolina Allow Short Term Rentals?
The short answer is yes. In general, South Carolina does allow short term rentals, though with some variation depending on where you are. Some local governments have imposed South Carolina Airbnb laws, requiring owners to secure permits before operating.
Currently, there is no all-encompassing or statewide law governing short term rentals. However, that does not mean there has not been an attempt to enact one.
In 2023, the South Carolina Legislature introduced House Bill 3253. The bill sought to prohibit local governments from prohibiting short term rentals. While the bill did not pass, it could resurface in 2024.
Local South Carolina Short Term Rental Laws
While South Carolina does not have a statewide law on short-term rentals, several local governments have enacted their own. Here are just a few examples.
South Carolina Short Term Rentals in Charleston, SC
In 2018, Charleston ended its ban on vacation rentals and enacted stringent restrictions on short term rentals instead. One restriction dictates what types of buildings can be used as short term rentals. This restriction seeks to protect historic buildings and prevent owners from constructing new buildings to rent them out.
Short term rental owners must also apply for a permit before starting operations. Furthermore, owners can determine the eligibility of their property here.
South Carolina Short Term Rentals in Greenville, SC
Owners in Greenville must first find out if their property is zoned for short term rentals. For properties zoned for rentals of less than 30 days, owners will need to apply for a business license and a short term rental permit. For properties zoned for rentals between 30 and 90 days, owners will only require a business license.
South Carolina Short Term Rentals in Columbia, SC
In Columbia, rental owners must secure both a business license and an STR permit. This applies to all owner-occupied and non-owner-occupied STRs that are open to renters for periods of less than 30 consecutive days. This requirement took effect in May 2023.
What Is the South Carolina Short Term Rental Tax?
Short term rentals in South Carolina are subject to tax requirements. Under the state’s tax laws, short term rentals are rentals that go on for less than 90 continuous days. These rentals must account for state sales tax, state accommodations, and local tax.
However, owners don’t need to collect state accommodations tax if:
- They only rent out a property for less than 15 days during the taxable year; or,
- They rent out six bedrooms or less in a property they own and live in (provided they don’t use a short term rental marketplace for rentals).
To collect state taxes on South Carolina short term rentals, owners must register for a retail license with the South Carolina Department of Revenue. Owners who rent out their accommodations for less than a week in any calendar quarter are not required to register. However, they must still collect and pay lodging tax.
For owners who exclusively use a short term rental marketplace such as Airbnb or VRBO, no state registration is necessary. These owners also don’t need to collect state short term rental taxes. Active retail license holders, though, must still file state lodging tax returns. If all rentals went through a marketplace, that would result in a zero return.
Local governments may also have individual tax laws.
Can HOAs Restrict Short-Term Rentals in South Carolina?
In general, homeowners associations in South Carolina do have the ability to restrict short term rentals. Such restrictions, though, should appear in the association’s governing documents.
While the state’s scrapped House Bill does not directly affect HOAs, as its prohibitions only apply to local governments, that does not mean STRs in HOAs are free from restrictions. Owners wishing to rent out their homes must abide by local ordinances and HOA rules. If their HOA permits short term rentals, they must still secure the necessary licenses and permits from their city or county.
Some HOAs prohibit short term rentals altogether. Others, though, impose South Carolina short term rental rules. These rules can vary from one association to another. However, it is common for an HOA to limit rentals to a certain percentage or number in the community.
Associations also tend to require owners to take responsibility for their renters’ actions. For example, if a renter breaks an HOA rule, such as parking in a prohibited space, the owner must answer for the violation. Typically, that means paying a fine or having their privileges suspended. The owner can later collect the fine from the renter if they choose.
South Carolina Short Term Rental Rules in HOAs
As mentioned above, community associations can generally restrict South Carolina short term rentals within their neighborhoods. However, an association’s governing documents, particularly its CC&Rs or operating rules, should include these rental restrictions.
While there is no one-size-fits-all when it comes to HOA short term rental rules, the most common of them include the following:
1. No Rentals
Believe it or not, there are many associations in South Carolina that ban rentals completely. Such bans seek to preserve property values within communities, which is why a lot of homeowners support them. However, some associations have encountered some pushback, which is only normal.
An association may attempt to use its “single-family use” requirement within its CC&Rs to prohibit short term rentals. The argument here is that single-family use covers non-commercial use, which STRs may fall under. This is a dangerous slope, though, as some courts have chosen to rule against HOAs this way. Therefore, if an HOA wishes to prohibit rentals, it is best to expressly include the provision within its governing documents.
2. Limit Rentals
Some associations want to reach a compromise. Instead of prohibiting rentals altogether, these associations permit them but only to a certain degree. More often than not, this manifests in the form of limiting rentals in number or percentage.
An HOA might amend its CC&Rs to only allow an X number of homes or a certain percentage of total homes in the community to be rented out at any given time. With such a restriction, other homeowners will have to wait until other rentals give way if the maximum cap is reached.
3. Rental Prerequisites
Another way to control rentals within an HOA community is to impose a prerequisite, such as requiring an owner to have lived in the home for an X number of years before they can rent it out. This requirement usually aims to discourage buyers from purchasing a home in the community for the sole purpose of renting it out. Institutional investors are a good example of such buyers. With a prerequisite like this, an HOA can prevent corporations from taking over the association.
4. Rental Requirements
An HOA that allows rentals in any shape or form should have a proper rental policy in place. This policy should include all the requirements an HOA wishes to impose on landlords. Common provisions include requiring owners to submit a rental application, have a lease agreement, and provide the HOA with the tenant’s information. This way, the association can track its rentals properly and have documentation for everything.
5. Tenant Restrictions
One of the primary reasons HOAs dislike rentals is the liability associated with allowing tenants to live in the community. Tenants are not shareholders, so they don’t care as much about the neighborhood as homeowners do. As such, they are more likely to break the rules, damage property, and disrupt the peace.
To combat these downsides, an HOA should require tenants to follow the same HOA rules and regulations as residents do. If a tenant breaks the rules, their landlord should be liable for the penalties or damages. These terms should appear in the lease agreement between the landlord/homeowner and their tenant. The landlord can then have the tenant reimburse them for the penalties or damages.
South Carolina Short Term Rentals: The Bottom Line
There has been some debate surrounding South Carolina short term rentals. While many seek to restrict or even outright prohibit them due to their impact on communities, others work to protect them. It is clear that short term rentals have both positive and negative effects. The key is finding the right balance through the enactment of regulations.
Cedar Management Group helps homeowners associations and condominiums navigate short term rental laws. Call us today at (877) 252-3327 or contact us online to learn more!
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