It depends. Yes, the general rule is that those involved in rental property management do need to work under a broker’s license in California.
But, California law carves out a couple of exceptions for those managing short-term vacation rentals functioning as hotels, motels, etc. As always, the devil is in the details. So provided below are those details or you can find a local California property manager to partner with.
California law exempts managers of transient occupancy dwellings from the licensing requirement. Under California Civil Code Section 1940, there are two ways (A or B) occupancy can qualify as transient:
A) The occupancy is in a hotel, motel, residence club or other facility when the transient occupancy is or would be subject to the transient occupancy tax under Section 7280 of the Revenue and Taxation Code.
B) Or if all of the following apply:
- Maid, mail and room services
- Occupancy for periods of less than seven days
- Facilities for safeguarding of personal property (See Section 1860)
- Central telephone service subject to tariffs covering the same filed with the California Public Utilities Commission
- The hotel or motel innkeeper retains a right of access to and control of the dwelling unit, and offers/provides all of the following services to all residents
- Food service from a facility located on or adjacent to the premises and owned or operated by the innkeeper or by a person or business with a lease relationship with the innkeeper
The simplest thing to do would be to ensure your establishment qualifies for the exemption to the licensing requirement stated under (A) above, by collecting and forwarding the Section 7280 transient occupancy tax (TOT). See the steps below on how to comply with Section 7280.
If you aren’t collecting the TOT, then your establishment has to meet all the requirements stated under (B) above.
Otherwise – yes, you need a broker’s license to manage the property.
Steps to Comply with Section 7280
- Register with Your County’s Finance Department
You’re to do this within 30 days after you start operating as a business, but I suspect they’ll be happy to hear from you, even if you’re late.
- Collect the Tax When a Guest Pays
Each time a guest pays, you just collect the tax. You have to show the tax on the receipt. You can’t hide it or waive it or pretend to waive it, and you can’t refund it, except as provided for by law.
- Maintain Your Records
Keep all documentation for at least three years.
- File a Tax Return
Normally this is done monthly with your county department of revenue.
Since this tax is administered at the county level in California, contact your county revenue officials for details specific to your location. Here’s a basic information page from Marin County, as an example.
Writing about personal finance and investments since 1999, Jason Van Steenwyk started as a reporter with Mutual Funds Magazine and served as editor of Investors’ Digest. He now publishes feature articles in many publications including Annuity Selling Guide, Bankrate.com, and more.
A very special thank you to Lisa Stratton, manager of the Office of Public Affairs, California Department of Consumer Affairs, for her assistance with this article.