By DAVID BROOKS   Monitor staff      Published: 6/26/2021 11:00:06 AM

A judge has ruled that you don’t need a real estate license to handle short-term rentals for other people through online marketplaces like Airbnb, the latest debate over rules and regulations of the fairly new industry.

It’s unclear whether the ruling, handed down in October by Merrimack County Superior Court Judge Andrew Schulman, will affect ongoing debates about whether towns and cities can control these short-term rentals, but it does confirm that no such system exists at the state level.

“The legislature has not yet developed a comprehensive statutory scheme to govern the rapidly changing practice of ‘home sharing’,” Schulman wrote.

“This shows that the state cannot regulate short-term rentals at all under the current legislative scheme,” said Peter McGrath, whose law firm represented the defendant, Kerri McCauley, noting that the situation is different in other states. “It leaves a question as to whether each community should start to regulate short-term rentals.”

Short-term rentals are a source of controversy in some areas, particularly tourist-oriented locations. Supporters argue that they provide a flexible source of income for property owners, while opponents say that they can ruin the local quality of life due to noise and traffic, and can make apartments and homes more expensive by removing units from the local housing stock.

The town of Conway has been particularly aggressive on the issue. It put the matter on the annual meeting warrant – where voters OK’d the idea of rentals but gave selectmen permission to regulate them – and has petitioned the Superior Court for authority to control the rentals. In recent years Canterbury has sent cease-and-desist orders to some renters, alleging violation of zoning laws, while the question of Portsmouth’s ability to regulate rentals went to the state Supreme Court, which upheld it.

October’s court ruling was spurred by a New Hampshire Real Estate Commission charge that McCauley of Conway was acting as a real estate agent without a license for handling other people’s rentals through Airbnb and Homeaway, for which she collected a fee. According to the ruling, the commission has sought to have criminal charges, not just civil charges, brought against McCauley.

Judge Schulman ruled that short-term rentals were not covered by state law regarding real estate transactions, which concern the legal term “leasehold.”

“No three-day Airbnb guest would believe that he or she obtained an interest in real estate. It is not even within the periphery of imagination that a family with a contract for a week-long Airbnb stay would … (record) the agreement at the registry of deeds,” he wrote, adding that the state rooms and meals tax “applies to short-term tourist ‘rentals’ just as if they were motel rooms” and the law “exempts such ‘rentals’ from landlord/tenant protections.”

Schulman did allow some aspects of the Commission’s complaint against McCauley to go forward, “to determine whether McCauley crossed the line into real estate practice” as part of her services.

The complaint was filed in October 2018 and covered activities stretching back several years. Its passage through the court was delayed in part by the retirement of Judge Richard McNamara, who heard a May 7, 2020, hearing on the merits of the case.

(David Brooks can be reached at 369-3313 or [email protected] or on Twitter @GraniteGeek.)

https://www.concordmonitor.com/rental-short-term-license-real-estate-court-41080125

Limited Liability Protection is not always granted to protect your assets from third-party creditors even if there is a validly formed LLC.

Here are some additional steps that you can take to ensure your asset liability protection.

Proper Organization of the LLC

In order to properly form a LLC, you must first file an Articles of Organization with the Secretary of State and receive a Certificate of Existence. While some think the Articles of Organization can be easily attained by filling out a questionnaire online, this is not a safe and efficient way to protect your assets.

CAUTION: Consult an Experienced Corporate Formation Lawyer to achieve proper formation and asset protection.

To preserve your limited liability protection while forming the Articles of Organization you will need a Federal Tax Identification Number, a separate bank account specifically for the LLC, and to ensure you keep your personal and business affairs separate.

If  you do not have all of these things the court will not protect your assets, such as your home  or bank accounts, against creditors from a lawsuit. The first two are simple, however the last requirement will require additional steps.

Separating Business Affairs from Personal Affairs with an Operating Agreement

To ensure you are perceived as an agent of the corporation, and to preserve asset protection, you must show you are keeping your business affairs and personal affairs separate. One of the best pieces of evidence to present to the court is an Operating Agreement.

Think about it, if someone asks you how you run your business or the structure of the business, you should be able to present to them a written document that outlines those features. This would be the operating   agreement.  An Operating Agreement is essentially a contract that shows the structure of the  organization.

If you do not have an operating agreement, your state’s default rules will outline the structure of your business. While  this may not be the  worst scenario, the default rules are generic and can often generate unsatisfying  results.

Additionally, some banks require an operating agreement to set up a bank   account.

When it comes to protecting your business, you do not want to cut corners and hurt yourself in the long run. Anything worth doing is worth doing right . Protect your home, bank accounts, and other important assets by consulting an experienced corporate attorney before filing a single member LLC.

McGrath Law Firm has extensive experience protecting its clients when structuring your business.