City of San Diego Going After Transient Occupancy Taxes for Month-to-Month Rentals

The City of San Diego has recently started going after property owners who are conducting month-to-month rentals claiming they owe transient occupancy taxes, and are required to obtain a transient occupancy certificate.  I have received several calls from homeowners in the last six months who are being notified by the Office of the City Treasurer that they are operating a short term rental business in violation of the Municipal Code when they are conducting whole month rentals. 

Under the San Diego Municipal Code Section 35.0102 “ ‘Transient’ means any Person who exercises Occupancy, or is entitled to Occupancy, by reason of concession, permit, right of access, license, or other agreement for a period of less than one (1) month.  A month is defined as the period of consecutive days from the first calendar day of Occupancy in any month to the same calendar day in the next month following, or the last day of the next month following if no corresponding calendar day exists.” 

The majority of cities in California have enacted short term rental regulations that restrict rentals for periods of less than 30 days.  Our City’s Municipal Code language was enacted in 1999 well before the short term rental craze of Airbnb hit San Diego and arguably is an incorrect interpretation of what the definition of a short term rental is.   This statute effectively requires that all property owners have the same check in and check out date of the month (for example if you have a “check in” date of June 1 you would have to have a check out date of July 1 to be in compliance with the municipal code).  Property owners conducting month to month rentals where the guest or tenant takes occupancy on June 1 and vacates on June 30 would not be in compliance with the statute and the owner would owe transient occupancy taxes based on the entire month’s rental income. 

It is my personal opinion that this statute is ripe for a legal challenge, and that the express language in this statute with the use of the word “to” and not “through” is essential in the interpretation.  The first day of occupancy TO the same day the following month is NOT inclusive of the same day of the following month.  For example, under my argument, a move in date of June 1 and termination date of June 30 should be in compliance with the code. However, this is not how the City is interpreting the statute despite my letters to the contrary.  Moreover, it is common knowledge and routine practice in the real estate world that a monthly rental begins and ends on the first and last day of each calendar month.  If we were to follow the City’s interpretation of the statute, a monthly rental would be for a period of a month and a day with the second month’s rental starting on the second day of the following month (ie/ June 1 to July 1, and July 2 to August 2).  By this reasoning, all month to month rentals in the City of San Diego would be in violation of this code section and all landlords would owe transient occupancy taxes which would be absurd. 

Short term rental regulations are enacted by Cities with the primary purpose of taxing short term rentals and hotels, and to combat the lack of long term housing available.  By going after property owners who are conducting month to month rentals, the City will face a major backlash from owners and will likely see more true short term rentals being conducted to offset the taxes owners have to pay. To the best of my knowledge, this statute has never been enforced by the City previously.  It appears from my conversations with my clients, that many of them are being targeted due to their online postings on Airbnb, VRBO, Homeaway, Flipkey, etc. since they show a minimum night stay of less than 30 days on their page.  Cities across California are now using companies like Host Compliance LLC to monitor and report owners that violate STR ordinances through searching property address and hosting platform listings.  San Diego homeowners may want to consider updating their hosting platform listings to reflect a 32 day minimum stay to avoid the City’s radar even if they are accepting reservations from guests for periods of less than that.

Owners who want to challenge this law should write to their City Councilman/woman for their district to voice the need for an update to this law. 

This article is for informational purposes only and does not constitute legal advice. It is specific to the laws of the State of California. For specific questions related to this article, please contact the Law Office of Ashley M. Peterson.

Comments 2

  1. Recently bought a beach house on Lido Island, Newport Beach CA as primary residence. And when up North rent it out through property management weekly vacation rental.
    We specifically bought home to final retirement but also to be compliant as our partial 1031 exchange. Our home we sold was 5000 sq feet and had a granny unit we rented out for 9 years. Thus allowing us to do a partial 1031. The purchase house on Lido zoned R3 allowed us to get weekly rental permit so when we are up Northern CA we can rent it out.
    A Neighbor complained to association HOA but there is no mention in CCR’s about leasing or weekly rentals. We bought home based upon that fact and that home was allowed a weekly permit with the City if Newport Beach. We obtain proper business license and permit (rare on Lido) We go through high end property management company. Home high end resort furnishings and services. Pay all appropriate city taxes and county taxes. No large parties no disturbances among guests etc. Can you help us? (408)981-5489 Thank You

    1. Post
      Author

      Hi Tammy. If the CC&Rs don’t have any leasing restrictions (Ie/ leases must be for a term of 30 days or more, no transient use, no hotel use, etc.), then the HOA cannot cite you for your short term use. The HOA can however amend their CC&Rs if they get the requisite vote on the board/members as required. If you have all permits/licenses for short term rentals through the city, and there is no language in the CC&Rs, you should not be subject to penalties or notices from the HOA.

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