Understanding Scottsdale’s New Short-Term Rental Ordinance

The short-term rental industry has grown fast, in Arizona and across the country. In 2021, the short-term vacation rental market in the U.S. was estimated at more than $30 billion, with a projected compound annual growth rate of 10.3% through 2030. It’s an industry with a fairly low barrier to entry, and has drawn everyone from established corporations to individual investors with multiple properties to homeowners with an extra apartment on the property.

When an industry mushrooms, regulation soon follows, and that time has come in Scottsdale. Though we’re talking about a single local ordinance right now, it’s reasonable to expect that other local governments may follow suit. As of September of 2022, the Arizona legislature amended ARS §9-500.39 and ARS §11-269.17 to significantly expand the power of city and county government to regular short-term rentals.

What Does the Scottsdale Ordinance Do?

Scottsdale Ordinance 4655, which took effect on January 8, 2023, requires property owners offering short-term and vacation rentals to obtain a license for each property they are offering for rent. The annual  license fee is $250 per property, and the license must be issued before the owner can offer the property for rent. 

If you already have short-term rental listings, you should have received a letter from the city with more information about the ordinance. But, if you didn’t get a letter, don’t assume that means you don’t need a license. The ordinance applies to all short-term rental properties in the city.

Other Requirements Under Ordinance 4655

Licensing is just the first step in Scottsdale’s stepped-up regulation of short-term rental properties. Some additional obligations imposed on property owners are:

• An obligation to update any required information within 10 days of a change
• Compliance with all relevant state, federal and local laws, rules, and regulations
• Ensuring that the property is not used for non-residential purposes or special events that would require a permit or license
• Having a designated emergency contact who will respond within one hour
• Maintaining liability insurance coverage of at least $500,000, unless the property is exclusively rented through a marketplace that provides a like or greater amount of insurance 
• An obligation to include the rental license number in any advertising 
• Compliance with health and safety regulations, including: 
  • Having trash and trash containers out only during designated pick-up windows
  • Ensuring that each property has working smoke detectors
  • Displaying a floor plan with emergency exits, placement of fire suppression equipment, and other related information
  • Cleaning of the property between stays
  • Regular pest control treatments
• Conducting a sex offender background check for each guest at least 24 hours in advance of a stay

Owners are also required to post the full text of a notice of prohibited activities that is included in the ordinance.

What Happens if a Short-Term Rental Property Owner Isn’t In Compliance? 

In the original draft of the ordinance, some violations were classified as misdemeanors. However, pushback from the industry resulted in a scaling back of penalties for violations of the ordinance. Still, owners who fail to comply with the ordinance can face fines. And, some violations or combinations of violations may result in suspension of the short-term rental license. 

For example: 

• Operating without a license or with a revoked or expired license will result in a fine of “not less than $1,000”
• A designated emergency contact who fails to respond is subject to a $500 fine, and to a $250 fine if it takes longer than an hour to respond
• A property owner, if different from the emergency contact, may also be fined in connection with the designee’s failure to respond in some circumstances
• Not carrying the required insurance triggers a $500 fine, but this can be reduced to $100 if the owner obtains the required insurance coverage
• Not showing the rental license number in advertising triggers a $500 fine, but this can be reduced to $100 if the owner comes into compliance
• Not conducting a sex offender background check as required or knowingly renting to a sex offender can mean a fine of $1,000 or more

The grounds for suspending a short-term rental license are a bit complicated. For instance, three violations within a 12-month period will trigger a one-year license suspension, but there are a few minor violations that don’t count toward the three strikes. And, certain violations are considered so serious that a single transgression can trigger license suspension. These include: 

• Certain criminal activity committed by the owner or the owner’s designee
• A serious injury or death at or in connection with the property, if caused by the owner’s or designee’s intentional, knowing, or reckless conduct
• The owner or designee intentionally housing a sex offender, allowing offenses related to adult-oriented businesses, sexual offenses, or prostitution, or operating or maintaining a sober living home
• The owner or designee knowingly or intentionally allowing the use of a vacation rental or short-term rental for a special event that would otherwise require a permit or license pursuant to this code or a state law or rule or for a retail, restaurant, banquet space or other similar use

All suspensions are for a period of one year, though a suspension may be reduced to six months if the owner takes substantial steps to remedy the issues that triggered the suspension. If your short-term rental license is suspended, you have the right to appeal the suspension. But, you’ll have to act quickly. You have just 10 days to appeal and 10 days to respond if additional information is requested. 

Have Questions about Ordinance 4655? 

The new obligations, procedures, and potential fines and suspensions are a lot to manage. If you’re uncertain about what you need to do to protect your short-term rental business or have received a notice of violation or planned suspension, an experienced Scottsdale business lawyer can be your best resource. Call 602-362-2396 today to schedule a consultation.