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This week, the first statewide short-term rental regulations were signed into law in Massachusetts with a number of crucial details. We also note that big money is moving into the startup funding world, which indicates potential future partnerships in the industry, including those between short-term rental giants like Airbnb and co-working communities.

Regulatory & Legal Developments

Massachusetts governor signs law regulating short-term rentals
Smart Cities Dive - News on Jan 2, 2019
Massachusetts will be the first state to require short-term rental hosts to register, pay excise tax and carry insurance.

Transactions & Investments

The Wing gets $75M from Sequoia, Airbnb
TechCrunch on Dec 19, 2018
The Wing, the inspirational New-York based network of work and community spaces designed for women, announced a $75M round of funding. Airbnb, a company that does not regularly invest in startups, and WeWork, are two of the investors in The Wing.

WeHo short-term rental startup AvantStay snags $5M in funding
Real Deal - LA Real Estate News on Dec 20, 2018
AvantStay, a platform that offers short-term rental options for group travel, recently won $5M in funding to further expand its technology initiatives.

In our Short-Term Rental Update this week, we focus on developments in the industry.  New regulations in Los Angeles, which are expected to go into effect in July 2019, will prohibit “rogue hotels” but allow limited home-sharing. The Las Vegas City Council has restricted the number of legal home-sharing units by limiting the number of new permits that are available to owner-occupied homes. In a very close vote, the only areas in South Lake Tahoe that will allow short-term rentals include commercial zones and the tourist core. Additionally, as the cannabis industry continues to benefit from legalization efforts across the globe, we can expect to see more short-term rental owners market their rental units as cannabis-friendly. Cannabis Air has opened in Toronto, which is not exactly a hotel concept, but instead presents as a short-term rental to guests. We look forward to continue sharing with you the vast number of ways this industry is revolutionizing the way people travel.

In our upcoming Short-Term Rental Updates, we will share with you the latest news and stories related to short-term rentals, with a focus on industry-wide trends and regulatory developments, enforcement, and practical implications for owners and operators. Anyone involved in this industry knows that it is continuing to experience immense expansion pressure from companies looking to play in the space, from long-standing industry behemoths to scrappy start-ups and everything in-between. The growth side faces strong competition from local governments attempting to regulate an industry that is constantly evolving and innovating. In this inaugural Update, I'd like to share with you some interesting notes from this week’s news:

Seattle building assessmentThe City of Seattle recently implemented a new progressive energy efficiency policy that requires certain commercial buildings in Seattle to get a tune-up assessment every five years. The program encourages commercial buildings to run more efficiently by reducing energy and water costs, which is good for the environment and good for lowering building operating costs. We expect that most commercial landlords will try to pass through the initial cost of obtaining a building assessment to commercial tenants via common area maintenance (CAM) charges. The upside is that, in the long-term, energy and water costs are expected to decrease as the systems become more efficient.

Before commercial landlords decide to pass through any tune-up program costs to tenants, they should first analyze their leases to confirm whether they are allowed to do so. Conversely, commercial tenants should also review their leases to understand their rights, including potential savings that could be passed through.

Retail tenant still openTwo recent court decisions confirm that retail tenants cannot ignore continuous operation covenants as both ruled the retailers’ stores must remain open for business.

Starbucks Blocked from Closing Teavana Stores

In an epic battle between mega-shopping center owner Simon Property Group and seemingly ubiquitous retail tenant Starbucks, Simon has won a crucial battle. Last summer, Starbucks announced publicly that it was closing hundreds of its Teavana stores, most of which are located in shopping malls around the country. Simon, reportedly the largest shopping center operator in the United States, responded by filing suit against Starbucks in Indiana to block the closure of Teavana stores located in Simon malls. With the battle lines drawn, an Indiana judge ruled in favor of Simon and issued a preliminary injunction prohibiting Starbucks from closing 77 of its stores in Simon malls.

This article originally appeared in the August 2017 edition of the Oregon Real Estate and Land Use Digest, Volume 39, No. 4, a publication of the Oregon State Bar Section on Real Estate and Land Use.

water pipesThe Court of Appeals recently weighed in on the “ripeness” of claims for inverse condemnation and to interpret a judgment issued after a prior condemnation trial under the Uniform Declaratory Judgments Act. The case demonstrates the importance to both a condemner and property owner of clearly and unambiguously describing the scope of a taking in the conveying document – in this case a condemnation judgment.

void cannabis leaseIs a commercial lease for cannabis operations void as an illegal contract under federal law?

While a cannabis operation may be properly licensed and permitted under state marijuana laws, the federal Controlled Substances Act makes it unlawful to lease property knowing it will be used for the illegal production or distribution of controlled substances.  An Arizona-based cannabis business was confronted with this very issue after an attempt by its landlord to revoke the operator's lease. Find out what the court decided in the latest post on GSB's Cannabis Business Blog.

The Central Eastside Industrial Council and other interested businesses sought LUBA review of the City of Portland’s decision that a houseless rest area and tent camp for houseless persons was a Community Service Use allowed in the General Industrial Zone (IG1 Zone). The city’s decision would have allowed the Right 2 Dream Too (“R2DToo”) Camp to relocate from downtown Portland to land near Oregon’s Museum of Science and Industry. The subject property is designated as an industrial sanctuary in the city’s Comprehensive Plan.

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Garvey Schubert Barer is proud to sponsor the 2016 Housing Land Advocates Conference: Seeking Prosperity: The Role of Housing in Local Economies held on Friday, November 4, 2016 at David Evans & Associates in Portland, Oregon.

In Harbor Missionary Church Corp. v. City of San Bueanaventura, 642 Fed. App. 726 (9th Cir., 2016), plaintiff had a church ministry serving the homeless. Defendant told Plaintiff it needed a conditional use permit (CUP) and, when it applied for the same, denied it. Plaintiff then brought a suit under the Religious Land Use and Institutionalized Persons Act (RLUIPA), requesting a preliminary injunction to keep its ministry available pending appeal. The trial court denied the injunction, finding the church suffered no substantial burden under RLUIPA because it could move its ministry elsewhere and that the denial of the CUP was the least restrictive means of meeting the City’s concerns.

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We regularly update clients about changes in real estate law and on industry trends. This includes briefing clients on legislative proposals in the federal tax, housing and other legal areas affecting their businesses. Staying current enables you to anticipate and prevent legal problems as well as capitalize on new developments.
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