Short-Term Rentals in Colorado

Colorado short-term rentals have continued to explode in popularity, even through the COVID-19 pandemic. The Centennial State gained about $25 million in tax funds from Airbnb in 2021 — a roughly 90 percent jump from 2019, the Denver Business Journal reported.

Inevitably, the rise in short-term rentals created headaches for many Colorado communities — exacerbating housing shortages and sending rents skyrocketing. In response, Colorado lawmakers have passed a number of regulations on homeowners and landlords that utilize short-term rental platforms like Airbnb, VBRO and Homeaway.

Whether you currently rent out your property or are considering jumping on the short-term rental bandwagon, here are some things you’ll need to know.

Colorado Short Term Rental Laws

The state of Colorado does not have a unilateral definition of short-term rentals. However, a short-term rental is generally defined as a residential property available for rent for a period less than 30 days.

While Colorado does not have a statewide definition of short-term rentals, it does have a few statewide regulations governing short-term rentals. For example, Colorado law requires short-term rental operators to collect and remit state sales tax. Sales tax must be paid at both the state and local level.

Beyond this, it is up to county governments to regulate short-term rentals within their jurisdiction. In 2020, Colorado legislators passed House Bill 20-1093, which authorized county commissioners to adopt ordinances that license and regulate short-term rentals (STRs).

County commissioners can fix fees, terms, and issue rules for obtaining and maintaining licenses. Colo. Revised Statutes § 30-15-401(s)

Therefore, rules and regulations about short-term rentals vary from county to county. Additional restrictions may be imposed city to city.

Learn more about Denver’s short-term rental regulations.

Who is Eligible for a Colorado Short-Term Rental License?

Again, eligibility requirements vary from county to county and even sometimes city to city. In Denver, for example, you must meet the following requirements to obtain a license from Denver Excise and Licenses:

• If the property is leased, a possession of property certificate showing the landlord’s approval to use the property as a short-term rental.

• A Colorado driver’s license or Colorado state ID showing your name and address and two of the following: Proof of valid motor vehicle registration, proof of voter registration, Federal or state tax returns or other financial documentation, or a utility bill showing the applicant’s address.

Source: denvergov.org

There are no specific documents that Colorado short-term rental owners need to present to the state. The only documents needed are those related to registering a business, getting an Employer Identification Number (EIN) if applicable, and getting a sales tax license. The documentation varies depending on the type of business, so Airbnb hosts should check what applies to their particular situation.

In some places, short-term rental owners will also need to apply for a lodger’s tax ID. You also must have the proper rental insurance.

Next Steps if You’re Eligible to Get an STR License

Eligible short-term rental owners to apply for a business license, which costs $25 per year. Additionally, Denver renters will also need to apply for a lodger’s tax ID and have the proper rental insurance.

Once you acquire the above essentials, you next must follow these requirements:

• Post your business license number on all ads, including Airbnb and VRBO listings.

• Provide guests with a rental packet notifying them of city rules and restrictions and pertinent rental safety information.

• Maintain general liability insurance in case of property damage.

• Ensure the property has working smoke and carbon monoxide detectors, as well as a fire extinguisher.

Denver renters who do not follow these rules risk receiving a $999 fine per incident and/or being reported to Excise and License Investigators. It’s important to stay knowledgeable and comply with state and local government rules on STRs.

Find out how R&H helped our clients obtain a short-term rental license after their initial application was denied.

HOAs and Short-Term Rentals: A Colorado Case

In the 2015 case Houston v. Wilson Mesa Ranch Homeowners Ass’n, the Colorado Court of Appeals ruled that short-term rentals do not fall under the “commercial use” label.

The court further held that a homeowners’ association (HOA) cannot prohibit short-term rentals under a “residential use only” covenant restriction:

The amendment to the administrative procedures that precluded unapproved short-term rentals and imposed fines for violations of the prohibition was unenforceable; while the homeowners association had the authority to enforce the covenants, it could not rely on that authority to enforce a nonexistent covenant provision. Houston v. Wilson Mesa Ranch Homeowners Ass’n, 2015 COA 113, ¶ 1, 360 P.3d 255, 256

In other words, your HOA cannot restrict short-term rentals unless it specifies such a restriction in its declaration of covenants, conditions, and restrictions (CC&Rs).

We Can Help You Get a Short-Term Rental License

Short-term rental license regulations vary widely across county lines in Colorado. Failure to abide by those rules could have disastrous consequences. The real estate attorneys at Robinson & Henry have had success in helping clients get short-term rental licenses, even when the license was previously denied by the county. Let our attorneys advise you of your county’s regulations so you are in compliance. Call (720) 927-5833 today to begin your case assessment.