Bulletin 1999 V30-3

Legislature passes Vacation Rental Act into law

New law goes into effect on January 1, 2000, and applies to vacation rentals transacted (placed under contract) after that date.

By Thomas R. Miller, Special Deputy Attorney General

During its 1999 session, the North Carolina General Assembly passed into law the Vacation Rental Act. The new statute establishes uniform rules governing tenants, landlords and their agents in short term rentals of residential properties. In North Carolina, these transactions are concentrated in our beach, mountain, and golfing resort areas and are vital to our state's overall economy because of our position as a national tourist destination.

The legislation resulted from a Vacation Rental Advisory Committee review of the state's law affecting resort rentals. Created by the North Carolina Real Estate Commission in 1998, the committee was composed of representatives from the vacation management business, the North Carolina Association of REALTORS®, and public and private consumer advocacy organizations. The Commission created the advisory group at the request of the Vacation Rental Managers Association (VRMA), a trade organization made up primarily of real estate licensees whose principal practice is the management of beach and mountain homes and condos. The VRMA appealed to the Commission because of growing concerns that North Carolina's landlord-tenant law no longer adequately addressed the increasingly specialized short-term vacation rental transaction.

After a series of meetings, the advisory committee determined that new legislation was necessary and drafted proposals for a bill to be introduced in the 1999 session of the General Assembly. Their efforts took on added importance in April 1999, when the North Carolina Supreme Court handed down its ruling in a case involving serious injury at a vacation rental property; i.e., members of a family renting a beach home were seriously injured when the second story deck collapsed underneath them. Although the Court found that the deck was unsafe, it held that the tenant protections in the landlord/tenant statutes did not apply since a property rented for vacation purposes is not the tenant's "primary residence." In its written opinion, the Court requested the General Assembly to enact new laws to govern vacation rentals.

Here is a summary of the new Vacation Rental Act. The Act:

  • Applies to all landlords (whether or not they use an agent),, and to the landlord's agents who rent residential property to any person for vacation, recreation or leisure purposes for periods of less than 90 days. [Motel, hotel, and other specified lodgings are exempt from the Act but are subject to other legislation.]

  • Requires all agreements for vacation rentals to be in writing.

  • Authorizes the landlord to collect payments from the tenant in advance of the tenancy, but requires the landlord to deposit the monies so paid in a trust account. Prior to the tenant's occupancy, the landlord may withdraw from trust and use money equaling no more than 50% of the gross rent to be paid by the tenant.

  • Requires that the landlord refund the tenant's payments if the landlord is unable to provide the property to the tenant in a fit and habitable condition or to substitute a reasonably comparable property.

  • Governs any monies collected as a security deposit in connection with a vacation rental.

  • Provides that when property subject to vacation rentals is voluntarily sold or transferred, the grantee takes the property subject to rentals which are scheduled to end not later than 180 days following the recordation of the grantee's interest. Landlords selling such properties are required to disclose the existence of vacation rentals to the purchaser and the purchaser must disclose to the tenants their rights under the Act immediately following the sale. Tenants whose rentals are not protected by the Act are entitled to a refund of any monies paid.

  • Creates an expedited eviction procedure to remove tenants in vacation rentals of 30 days or less when the tenants have held over or materially breached their rental agreements. The magistrate must hear such cases not sooner than 12 hours, but not later than 48 hours after service of the complaint and summons on the tenant. If the landlord prevails, the tenant must vacate at a time set by the court, but not later than eight hours following service of the order. The Act provides significant penalties for abuse of the expedited eviction procedure.

  • Imposes upon the landlord the duty to provide the tenant with fit premises and to keep the property repaired and safe.

  • Provides that the tenant must maintain the property and not deliberately or negligently damage it.

  • Provides that tenants required to evacuate a vacation property by state or local authorities are entitled to a refund of their rent unless the landlord or landlord's agent previously had offered the tenant insurance to cover the potential risk.