How Does the Proposed Short-Term Rental Cap Affect Your Ability to Pass it on to Your Heirs?
Many permanent residents on the Isle of Palms rely on short-term rental income to help support their families and retirement. Many residents are concerned that the proposed referendum to place a cap on short-term rental licenses will negatively affect their family and their ability to pass the property on to their heirs.
The proposed referendum will only allow STR licenses to be transferred with property by sale or inheritance if your loved ones, children, and heirs make the property their permanent residence. They would not be able to continue to live where they are and rent the house out if the cap has been met, but would have to move into the property, only to rent it out for 72 days or less.
There has been much discussion about STR rental transfer over the past few weeks, and we wanted to discuss some facts about the cap and your estate.
Does the current language in the referendum allow STR license transfer?
The current language in the referendum allows for 4% residents who hold STR licenses with their properties to pass this license to their heirs. However, once the heir(s) owns the property, it will be reclassified as a 6% investor/ non-primary resident property subjected to the STR cap.
This means the property classification will be the same the following April when all STR licenses are up for renewal. The inherited property will be reclassified at that time unless your heir(s) can establish permanent residence there.
Why will heirs lose their STR license?
Once a property with a STR license is inherited, the current permit will only be valid until April. At that time, your heir(s) will need to apply for a new STR license because their current one will be invalid, and their property will be reclassified as an investor/ non-permanent resident.
Due to the STR cap, they will lose the right to rent this property less than a year after settling the estate. Their only recourse will be establishing permanent residence at the property to continue seeing STR income. (click here to read referendum)
Save your estate
The language in the referendum makes it sound like STR licenses are transferable with no change to your estate’s beneficiaries. This is true for less than a year, and then at least one of those beneficiaries must establish permanent residence in the inherited property to continue renting.
Permanent residents should consider this STR cap’s potential impact on their heirs before they vote on November 7th.
Consider the potential impacts of the STR cap before November 7th
The chamber has discussed the potential economic impact of passing the STR cap in previous articles. Voters must learn all the facts about the short-term rental referendum before the November 7th election.
How can Isle of Palms protect its sense of community if it does not allow residents to preserve their legacy by transferring rental properties to their children and loved ones?