Essential Clauses in Short Term Rental Contracts

A short term rental contract is the legal agreement that defines the terms and conditions between the property owners and their guests in a temporary stay arrangement. 

It doesn't matter whether it is through Airbnb, VRBO, or directly with the guests, making the right contract is very important so as to safeguard one's interest and avoid future litigations. 

It makes all issues regarding responsibility, terms of payment, house rules, and liability clearly evident. 

Without a formal agreement, owners are in danger of damages, non-conformity to local laws, and miscommunication over cancellations and repairs. 

While templates can be readily found, most do not include critical clauses for mitigating specific risks involved with short-term rentals. 

In this blog we discuss what should be included, terms often missed, and some best practices for effectively managing rental agreements. 

Key Takeaways 

• A short term rental contract provides clarity and avoids disputes and misunderstandings among property owners and renters. 

• Essential terms include payment information, cancellation policies, house rules, and liability provisions that would have to be spelt out clearly to avoid ambiguous situations. 

• The addition of missing clauses, including pet policies, guest limits, and emergency contacts, will guard against potential problems. 

• Property owners must ensure adherence to local regulations in respect to zoning laws, tax obligations, and safety standards. 

• Digital tools such as contract management platforms help streamline the process of creating, managing, and tracking rental agreements for smooth operations. 

Why You Need a Short Term Rental Contract 

Short-term rentals can become very profitable, but they always come with risks that a well-drafted contract can mitigate. 

Without a rental agreement, disputes over damages, unpaid rent, or overstaying will be costly and stressful for both parties. 

A well-written contract protects property owners, clearly outlining responsibilities, to minimize liability and ensure all the local laws are observed. 

The contract also acts as a safeguard while renting out private homes or a vacation property since it helps keep both parties lawfully safe throughout the period of the rental. 

The Essential Elements of a Short-Term Rental Contract 

1. Property Description

A good short-term rental contract must first describe the rental property. 

Include the address, type of property, and the number of rooms, as well as the availability of certain amenities and parking. 

All these details will help prevent future misunderstandings. 

If there are certain restrictions, such as no garage access or shared outdoor spaces, this should be included. 

Transparency ensures that the renter understands what they agree to. 

2. Rental Duration

The rental period defines the start and end dates of the agreement. 

Specify the exact times for check-in and check-out, as these details help in managing expectations and smooth transitions from one renter to another. 

A 3 PM check-in and 11 AM check-out facilitate cleaning and preparation. 

3. Payment Terms

This part should outline the rental fee, due dates, and acceptable modes of payment. 

This part should indicate the existence of a security deposit and if it is refundable. 

Also, mention the additional charges like cleaning fees and damages penalties. 

When the renter cancels, the party should outline the refund amount. 

It protects both parties from confusion regarding payments and also rules out financial disagreements. 

4. House Rules

House rules establish the boundaries for the renter's actions in the rental property. 

They may cover aspects of noise, smoking, animals permitted, and the maximum number of people who can occupy the home. 

If certain limitations exist, for example, no loud music playing after 10 PM or no admittance to certain areas, these need to be explicitly mentioned. 

Defined rules create a feeling of mutual respect and serve as a guarantee that the home will be treated appropriately with minimal conflict. 

5. Maintenance and Repairs

Explain the process for addressing maintenance or repair issues that might occur during the rental period. 

Mention whether one is supposed to contact the owner directly or seek assistance through a property manager. 

Define the renter's obligations, which may include timely reporting of damages and taking responsibility for damages that resulted from negligence. 

In this way, issues will be handled as soon as possible, preventing potential arguments over the condition of the property. 

6. Liability and Indemnification

This clause protects both parties, as it defines their responsibility concerning damage or injuries during the rental period. 

Explain that the owner is responsible for the accidents resulting from defects on the property and that which covers the renters in terms of travel insurance. 

This clause indicates that the tenants are liable for personal injury from their negligence. 

7. Termination or Cancellation Policies

Mention the conditions under which a party may cancel the contract. 

Specify the notice period of cancellation and any penalty incurred. 

One might have a policy to permit a renter to cancel a booking up to 14 days before the start date, returning the full amount paid. 

Another might only offer partial refunds when cancellations occur within such a time frame near to the rental date. 

Some Overlooked but Crucial Clauses to Add 

Access to Premises 

Specify the circumstances under which you may enter the property while a guest is staying there. 

Include provisions for emergencies such as fires or water leaks, and indicate regular maintenance or inspections that require advance notice. 

This clause strikes a balance between an owner's need to safeguard his property and a guest's right to privacy, so that both understand what is expected of them and avoid potential disputes during the rental period. 

Force Majeure 

Natural disasters and pandemics can make property uninhabitable. 

In such circumstances, a force majeure clause excuses obligation, so you won't be liable for refunds. 

State what types of events are covered and what to do next for both parties. 

This clause gives clarity and fairness when outside circumstances make it impossible to fulfill the contract and protects all parties involved. 

Insurance Requirements 

Require guests to carry personal liability insurance during their stay. 

Clearly state what your homeowner's insurance covers, such as structural damage, and highlight exclusions, like personal injuries or guest negligence. 

This clause shifts the responsibility of any unforeseen incidents and ensures guests are adequately prepared to handle any financial repercussions, adding a layer of protection for you. 

Governing Law and Jurisdiction 

In case of a legal dispute, determine which state laws will be applicable, and which court must hear the litigation. 

This provision simplifies the resolution of disputes since jurisdiction is determined beforehand. 

If your property is located in Florida, determine which laws govern the contract under Florida law. 

This guarantees a fair and predictable judicial process for both parties in case there are any disputes. 

Guest Behavior and Local Laws 

Ensure compliance with local regulations about noise, trash disposal rules, and HOA in particular. 

This clause both avoids possible legal or community problems and makes one's guest accountable for upholding the standards of the neighborhood. 

All these expectations become crystal clear for guests, leaving them fully aware of all the responsibilities toward making the situation peaceful for all parties. 

Managing Short-Term Rental Contracts 

Handling multiple short-term rental contracts can be complicated, not to mention managing several different properties. 

A streamlined system using a contract lifecycle management system (CLM) on a Microsoft 365 platform will only make the process more fluid and less stressful. 

1. Leverage Pre-built Templates

You can make templates in Microsoft Word to help streamline the process of creating contracts. 

You can then change specific details like guest names, check-in and check-out dates, and payment terms for each rental without starting from scratch every time. 

2. Centralize Your Documents

All contracts must be placed in a safe, secure storage such as SharePoint or OneDrive. 

It ensures easy and prompt access to agreements at any time and still controls who can access sensitive information and also avoids misplaced or even duplicate contracts. 

3. Automated Alerting for Deadlines

With Power Automate, set reminders for important dates such as contract expirations, upcoming check-ins, or payment due dates. 

These automated alerts will help you stay on top of deadlines and avoid last-minute issues. 

4. Simplify the Signing Process

Collecting legally binding electronic signatures is quick and hassle-free when incorporating tools like DocuSign or Adobe Sign into your Microsoft 365. 

5. Track Edits and Revisions

Microsoft 365 version history ensures that you see who made changes to what in your contracts and return to previous versions if so desired, keeping all such updates organized and transparent. 

Final Thoughts 

A short term rental contract is not a formality but rather one that protects your rights, prevents the likelihood of disputes, and guards against losses. 

A rental contract, therefore, can include essential and sometimes overlooked clauses in ensuring a smooth operation for both parties involved. 

Leverage Microsoft 365 tools to further ease the management of these contracts. This will bring efficiency and peace of mind. 

Taking time to carefully draft an agreement is an investment that brings long-term security and helps build trust with your guests.

Schedule a demo today to see how a contract management system can simplify your rental process.

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