Real estate investors must understand the laws and regulations before buying short-term rental properties 

Nov 29, 2022 | Business, Homeowner's Associations, Real Estate Law

By Peter J. Smith IV

As a business law firm with a growing real estate practice and offices in cities with booming population growth, we’re often asked for advice about short-term rentals. 

Particularly in markets like Coeur d’Alene and Spokane, where the demand for short-term rental properties is increasing and the high price of homes sometimes make first-time homebuyers inclined to rent a portion of their property out as an Airbnb, it’s important to know the state laws and local regulations. The appeal of a short-term rental to finance a vacation property in North Idaho or because you have a child entering or graduating from college is understandable given the return on investment and passive income that short-term rentals can offer. 

However, I’ve seen what happens when property owners don’t do their due diligence before setting up a short-term rental. Here are three considerations for anyone considering taking on a second mortgage to begin renting out an investment property. 

Know the laws.

If your home is in a neighborhood that is covered by a homeowners’ association (HOA) or other covenants that restrict use, the first step is to find out whether your future short-term rental is even allowed. Many neighbors are concerned that renters will be obnoxious and fear living next to a party house. You will likely need a plan in place to address these concerns. HOAs may also ask whether a property is being purchased specifically to be rented out, or if the owner will live there most of the time, but plans to rent it out short-term while they are traveling for a period of time. Legally speaking, you can rent out your home and you can purchase a home as a short-term rental, however, the HOA may have more requirements.

Owning a short-term rental looks different based on whether or not you live in a tourist town. In a resort town like Coeur d’Alene, especially in the summer, tourists come for Ironman, the 4th of July, and just to enjoy the lake and outdoors. These types of visitors usually come for a shorter period of time and are willing to pay a higher nightly rate. This means more turnover of guests, opening owners up to more conflict with neighbors. The shorter amount of time the renter is there, the more likely it is for renters to “party hard” on vacation. Second, neighbors are often annoyed by new people showing up every couple of days. The perception is the more people that come, the more likely some of them will be noisy or disrespectful of the neighborhood norms.

Read the fine print.

It’s important to understand the local regulations and definitions that govern a short-term rental in your area. For example, in Coeur d’Alene, any rental that is rented for less than 30 consecutive days is considered a short-term rental, with an exception for owners renting their home out for less than 14 days no more than twice a year. This could look like a rental of 2 days and another for 12 days. However, there can be no more than two separate rentals that total no more than 14 days. 

Most cities, including Coeur d’Alene, offer an online application that is then processed by the city in order for an owner to obtain a short-term rental permit. Along with a $285 application fee, the city requires basic contact information and the owner or property manager must agree to a “self-inspection checklist.” A new “self-inspection checklist” must be submitted to the city each year. Usually, there’s an annual renewal fee as well. 

Obtain comprehensive insurance. 

As the landlord, it’s your responsibility to provide a safe rental unit. There is always a risk of a short-term renter being injured on the property and suing the landlord. The best protection against this risk is a good insurance policy that adequately covers structures and liability risks. If your short-term rental includes toys (e.g., bikes, scooters) and a renter is injured, the renter could claim the landlord is responsible for the damages. If extras are provided, the landlord should make sure they are operable before each tenant shows up and make their insurance covers any damage to the renter.

Another reason landlords are sometimes sued by a third party is if the renters damage them personally or damage their property. The landlord has some responsibility to ensure that the renters know and follow the rules of the house. If a renter injures someone, it is possible that the landlord may be sued for the actions of the tenant. Though these claims are unlikely to be successful, it is still costly to defend such claims.

Be a good neighbor.

Lastly, it’s essential to be a good neighbor.  A landlord may be liable if the renters are a nuisance. This is especially true if the landlord repeatedly rents to people who are obnoxious. Even if the renters are well-behaved, a neighbor could still claim that the renters are a nuisance. What constitutes a nuisance is entirely dependent on the facts. Idaho Code defines a nuisance as “[a]nything which is injurious to health or morals, or is indecent, or offensive to the senses, or an obstruction to the free use of property, so as to interfere with the comfortable enjoyment of life or property…” Idaho Code § 52-101.

For landlords, the potential for lawsuits by groups of neighbors claiming nuisance from the short-term rentals has not yet happened but could be a substantial legal risk in the future. Consider how much you want to deal with the potential hassle before you decide to serve as your own manager of a short-term rental property. Having an experienced property management company in your corner may be worth the cost. 


Allowing short-term rentals has clear economic benefits to both property owners and city governments. To the owner, it generates income at a higher rate than longer-term rentals. In addition, tourists spend more money at local shops and restaurants. This in turn increases sales tax revenue to the local and state governments.

The difficulty comes in ensuring that the tranquility and character of our neighborhoods are protected. A neighborhood with full-time residents has charm. A neighborhood filled with short-term rentals does not. In high seasons, it may be bustling with renters and in low seasons, it becomes a ghost neighborhood. One of the draws of a short-term rental for visitors is the opportunity to experience a neighborhood in another city. This is why cities adopt a licensing regime to govern short-term rentals. The goal is to protect and preserve the neighborhoods from being overrun by short-term rentals.

Idaho Code § 67-6539 restricts city governments from being about to regulate short-term rentals. The statute prohibits the City from adopting an ordinance that “has the express or practical effect of prohibiting short-term rentals.” The City may adopt “reasonable regulations…protect the integrity of residential neighborhoods.” Whether any given ordinance violates this ambiguous statute will be tested in the courts. 

The City of Coeur d’Alene is in the midst of a code rewrite with changes that lean toward the protection of neighborhoods by adding restrictions to short-term rentals, including adding a two-night minimum. The proposed changes also remove the 14-day exemption for applying for a license. This means that any owner who wants to have a short-term rental of any length must get a license. Fines may also increase for violations.

It remains to be seen if these proposed changes will run afoul of Idaho Code. Idaho Code states that no ordinance may have the “practical effect of prohibiting short-term rentals” and the regulations must be “reasonable.” Ultimately these nuances will likely be determined by how the question is framed and decided by the Idaho Supreme Court. 

If you’re considering a real estate investment, Peter J. Smith IV, a founding partner at Smith + Malek, can help. Call (208) 473-7009 to set up a consultation.