Limitations on Association Short-Term Rental Fees

Quick Summary

Homeowners associations in Pennsylvania may charge short-term rental fees only where the fee reflects the actual cost of administering the community’s rental program. Fees that exceed administrative cost — or that fund general community expenses through an STR-only charge — are improperly assessed common expenses under the Pennsylvania Uniform Planned Community Act. This article outlines the statutory limits on association STR fees, the remedies available to affected owners, and the potential for recovery of attorney fees. Contact Eric B. Smith at Timoney Knox to review a fee your association has imposed.

As a Short-Term Rental (“STR”) operator, rental and registration fees (“Fees”) charged by an Association are part of the financial calculation. Those Fees dictate the rates you charge, profit margin, reviews and, in total, whether or not renting is worth it at all. Also, STR Fees impact the value of your property as a turn-key operation. The higher the Fees, the more it impacts the entire financial picture.

That is not to mention that often Associations use the STR Fees to fund other projects, such as storm water, or entrance improvements, or community security, or to blame STR operators for “wear and tear” on various common amenities, or to fund ordinary common expenses like roadways, trash, reserves, and the like.

When Is an Association’s Short-Term Rental Fee Lawful?

Under the Pennsylvania Uniform Planned Community Act, an association may charge an STR-specific fee only to the extent that fee reflects the actual cost of administering the community’s rental program. Any portion of the fee that exceeds administrative cost — or that funds general community expenses charged only against STR operators — is an improperly assessed common expense under 68 Pa.C.S. § 5314. Common expenses must be allocated across all units in accordance with the common expense liability set by the community’s governing documents.

Fortunately, the Uniform Planned Community Act (“Act”) specifically limits the authority of an Association to impose fees beyond general common expenses. Section 5314(b) of the Act provides that all general common expenses must be assessed against all units in accordance with the common expense liability allocated to each unit. Of course, there may be special allocations under Section 5314(c) when fewer than all of the units being assessed benefit. In that instance, the assessment may be made “exclusively against the units benefitted.”

An assessment of an STR Fee to STR operators only that benefits all other unit owners cannot pass muster under Section 5314(c). Rather, such a Fee is merely an improperly assessed common expense liability. Common expenses must be allocated to each unit as allocated with the governing documents, and if not stated, with the Act. Most common expense liabilities are assessed equally. Reserve fees too are a common expense liability that cannot be borne by any particular individual or group of unit owners.

Of course, an Association may assess units that engage in STRs with an STR Fee which addresses the actual cost of the administration of the community’s rental program. Any part of the Fee that is greater than the actual cost is nothing other than an improperly assessed common expense.

How to Challenge an Improperly Assessed Short-Term Rental Fee

Where an association has improperly assessed an STR fee, an affected owner may bring a declaratory judgment action in the Pennsylvania Court of Common Pleas to have the fee struck, seek disgorgement of amounts already collected, and in the proper case recover attorney fees and costs under 68 Pa.C.S. § 5315(g). A properly brought declaratory judgment action may also carry an immediate right of appeal to the appellate courts.

A challenge to an improper STR Fee could be brought to the Court in different ways. One path would be an action for declaratory judgment, which, if properly brought, may allow for an immediate appeal from the County Court to the state-wide appeals court. An aggrieved owner or group of owners should also pursue disgorgement of all improperly assessed Fees, requiring the return of the funds.

If your Association improperly charges an STR Fee, bear in mind that you may be able to collect your attorney fees and costs in the proper case. Section 5315(g) of the Act, relating to liens for assessments, includes a recovery of costs and reasonable attorney fees for the prevailing party. There may be additional remedies available under the Pennsylvania Non-Profit Corporation Law.

If you believe that your Association is improperly charging an STR Fee and allocating the monies to common expenses, you should contact an attorney to review your matter. Such an action may result in a correction of unlawful Association conduct, striking the Fee, return of paid unlawful Fees, and recovery of attorney fees and costs.

Frequently Asked Questions

Can my homeowners association charge a short-term rental fee at all?
Yes, but only to the extent the fee reflects the actual cost of administering the community’s rental program. Any portion of an STR fee that exceeds administrative cost is an improperly assessed common expense under the Pennsylvania Uniform Planned Community Act. If you are separately questioning whether your association has the authority to restrict STRs in the first place, our related article on [association covenants and short-term rentals](link to Article 6) addresses when restrictions on STR use are actually enforceable. 

Can my association use short-term rental fees to fund general community expenses?
No. General common expenses, including storm water, road maintenance, trash, security, entrance improvements, and reserves, must be allocated to all units in accordance with the common expense liability set by the community’s governing documents. Charging those expenses only to STR operators is an improper allocation under 68 Pa.C.S. § 5314(b).

When may an association make a special assessment against only some units?
Under 68 Pa.C.S. § 5314(c), a special assessment may be charged exclusively against certain units when fewer than all units being assessed benefit. An STR fee charged only to STR operators for services that benefit all unit owners does not satisfy this requirement.

What remedies are available if my association is charging an unlawful short-term rental fee?
Available remedies may include a declaratory judgment striking the fee, disgorgement of amounts already collected, and recovery of attorney fees and costs under 68 Pa.C.S. § 5315(g). Additional remedies may be available under the Pennsylvania Non-Profit Corporation Law depending on the facts.

Can I recover the fees I’ve already paid to my association?
Potentially, yes. Disgorgement, the return of improperly assessed fees, is a remedy an aggrieved owner or group of owners may pursue as part of a challenge to an unlawful STR fee.

Is a fee charged by my municipality different from a fee charged by my association?
Yes. Municipal STR fees are governed by public law, the municipality’s police power, and must be commensurate with the cost of administering the permit program to be lawful. Association fees are governed by private contract and the Pennsylvania Uniform Planned Community Act. See our related article on unlawful municipal short-term rental fees for the standard that applies to municipal fees. 

If you are facing a dispute involving short-term rental rights, association restrictions, municipal regulations, or rental fees, Eric B. Smith can help evaluate your legal options. As Chair of the Litigation Group at Timoney Knox LLP in Fort Washington, Pennsylvania, Eric focuses on real estate, municipal, and commercial litigation matters throughout Pennsylvania. To discuss your situation, contact Eric directly at esmith@timoneyknox.com or 215.540.2653.