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Law Proposal for Short Term Rentals

The Costa Rican Congress introduced a bill to regulate non-traditional lodgings such as AirB&B or VRBO.

 

The Proposal

The proposal for the law intends to regulate the short-term rentals or vacation rentals. It will be applicable to various types of properties, whether it is a home, an apartment, villas, chalets, bungalows, rooms or any other type of construction that is either individual or part of a number of units. In addition, it is intended to develop the instruments to protect the people using this type of service whether it is directly with the owner of the property or rented through an online platform.

According to the bill, the law will be applicable to all people (hosts), whether it is a person or a company who on a regular basis and for profit is dedicated to provide lodging services to tourist (foreign or national tourists) for rental periods not exceeding one year and for no less than 24 hours.

Some of the obligations of the hosts may include:

  1. Produce to the guest all sufficient, accurate, clear, understandable, objective and unequivocal information regarding the pricing and conditions of the contract.
  2. Produce payment receipts via digital invoice (factura electronica).
  3. To provide the services in the property that has been offered. The property offered must be the same as the one given to the host.
  4. Provide information about any natural risk associated with the property.
  5. Handle the complaints and disputes through the Tourism Board (ICT).
  6. To register as a service provider (host) with the ICT.
  7. To register as a taxpayer with the Revenue Service (Ministerio de Hacienda).
  8. Obtain a license from the county for Non-Traditional Lodging.
  9. To pay the taxes as described below:

In the event the host provides the lodging services contrary to what is established in the law, the government will have the prerogative to take legal action against the host through the Revenue Service, Department of Health, Municipalities or any other competent authorities, depending on what the noncompliance.

 

A Bill in Congress

Currently, this is only a bill in Congress, which means that it is not a law yet. The Costa Rican Congress unlike many other democracies has only one chamber (small country, small congress). As a reference, the US Congress has two chambers, the House of Representatives and the Senate, and a bill must be approved by both chambers of the US Congress. In Costa Rica, since there is only one chamber, then the bill is reviewed twice.

This bill for the regulation of short-term rentals has already been approved in the first round of voting. Now, it must be approved in the second round. Chances are that it will be approved.

 

Issues

We believe that the law is not very well thought out. For instance, if the law requires hosts to obtain a business permit from the local Municipality, most of the time, it will not be issued due to zoning regulations. A lot of people who host through AirB&B have properties in residential areas, which are not subject to business permits. The bill as it is, will render a lot of properties legally unsuitable to be offered as a short-term rental.

Another problem is the requirement to be registered with the Board of Tourism and to resolve disputes through this agency. Currently, platforms such as AirB&B offers dispute resolution, which may be more practical to the parties involved considering that the online platform can be accessed from anywhere around the word. Creating an obligation to resolve disputes through the ICT will put the guest in a disadvantage, specially if the guest is from abroad. In such a situation, the guest will not have the resources to deal with the ICT from abroad.

We will keep monitoring the progress of the bill in Congress and will be sharing any updates related to this topic. In the meantime, please feel free to reach us with questions or comments regarding your short term rentals.

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María José Corrales

María José Corrales

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