19 Perils of Predatory STR Management Companies

Predatory STR managers make their own rules and hide in their own shadows

Beware of Predatory STR Management Companies (Part 2)

So you have decided to look for a short term rental management company to handle your vacation home when you are not using it.  There is nothing wrong with the hands-off approach except if you yourself fall into the wrong hands. This article will help you identify the perils of predatory STR management companies.

In Part 1, we presented some general considerations for quickly identifying a predatory STR property manager. In this second article we will discuss some specific pitfalls that can get you into trouble.  This list does not represent every possible scenario, we just hope to demonstrate that no reasonable person can anticipate how these clauses can be weaponized until its too late.

The first consideration is to not buy into more than you need. Some STR management companies offer “full-Stack” services from marketing to scheduling to guest vetting to accounting.  What you may not know is that these services are far better provided by the STR platforms such as AirBnB and VRBO. For example, AirBnB pays you in 12 hours after check-in, the predatory STR management company will hold your money for 60 days – even after they are paid in 12 hours by AirBnB. Another example, many platforms provide damage insurance policies – STR management firms do not.  By taking these services off the platforms, you may be losing valuable insurance, oversight, or regulatory guardrails that protect you.  You don’t need full stack services unless you intend to not use the Internet platforms.  In 2023, there is little reason to go it alone.

19 Perils of predatory STR management companies

Read the terms and conditions in the most suspicious and cynical manner and seek legal advice. Every word has a reason for being there. Assume that every detrimental condition that is mentioned in the T&Cs can happen and will happen because it has happened to someone before you.  The predatory STR company knows the game better than you ever will – they make their own rules and hide in their own shadows. No reasonable person could predict the possible outcomes reading the T&Cs at face value.

1. Assume that the length of the companies T&Cs directly correlates to the number of things that will go wrong if you hire that company. Extensive T&Cs are not always necessary except to avoid otherwise regulated standards and precedence.  The Real Estate industry and the Commercial Property management company T&Cs are nowhere near as long as some STR management companies.  You could be signing away protections that otherwise exist automatically.
2. The predator often hides in the shadows of shell companies, affiliates, and d.b.a. letterheads. Look-up their corporate structure with the Secretary of State. Look for the registered agent and look at other companies using the same registered agent.  If you find a black hole of confusion, congratulations, you’ve arrived at a stark reality. Remember, you are giving the keys to your home to a person who does not want you to know where they live.  Know your STR manager!
3. Beware of generic branding. Some predatory STR managers may try to sound local when they are anything but local. The branding may contain the [geographic feature] plus some synonym for [hotel]. For example, names like “Lake Union Lodging” or “Puget Sound Havens” are invisible to Google searches that may contain negative reviews.
4. Make sure that your STR management company has a physical corporate address, not just a series of P.O. boxes or an archaic answering machine. Get your information directly from the secretary of State website. Find that physical address on a map or even visit them if you can.  Again, would you give your keys to someone who won’t give you theirs?
5. Beware of clauses that allow the Predatory Manager to book guests outside of the contract period. Homeowners who select a 1-year to 5-year contract are really being lead into a 1-5 year + (up to) 18 months advanced booking. So 12 months can actually mean 30 months which you are obligated to serve their bookings under their control. If the home is not kept up to “hospitality grade” because something happens in your life where you can no longer offer your home, you may be on the hook for years. Be prepared to pay big money to buy yourself out of the obligation.
6. Be very aware of termination notification rules – The predatory STR Manager may specify a tiny window of cancellation requiring you to send notification in triplicate by certified mail to an out-of-town PO box. If you miss this window for any reason even sickness or family emergency, don’t expect an ounce of sympathy.  You are trapped – or prepare to pay big money for early termination.
7. (related) Avoid any form of “auto-renewal” clause.  Some companies have an arbitrarily tiny window where you are permitted to notify them that you are exiting the contract. If you miss that window, you can be stuck in your contract for a long time – or prepare to pay big money for early termination.
8. Be aware of any clause that specifies their right to put a lien on your home. There should be absolutely no scenario where you would ever fall into debt to an STR management company such that they could encumber your property.  The fact that they would even mention this should be a big red flag.
9. Be careful of abstract calculations for their exorbitant termination fees. If you get stuck in a 5-year agreement that you must terminate for health reasons, for example, those fees can theoretically exceed the value of your home.  Prepare to pay big money in termination fees, attorney fees or expect to endure litigation to get out from underneath these predatory terms. 
10. No not agree to any anti-disparagement clause. If you give them a poor review on social media, expect to hear from their lawyer and prepare to pay big money.  The State of Washington has rules protecting disparagement speech so don’t sign your rights away.
11. Beware of, and do not accept, any non-compete clauses after termination of your contract – yes, they will try to keep you off the market – to deny you of your livelihood.  Don’t sign your rights away.
12. They MUST HAVE a modern CRM system (customer relationship management) providing a single source of communication record. The predatory STR  management company will use a combination of telephone voicemail and emails from multiple different URLs or affiliate departments so that it is difficult to reconstruct a conversation (evidence) later.
13. Ask the management company for an organization chart in writing, describing exactly who answers to whom, what affiliates provide services to other affiliates under the same ownership, where the DBAs are applied and the roles that they are responsible for performing.  This shell game is designed to make it difficult to hold them accountable.  If your house burns down or if a crime is committed on your property – they are gone like dust in the wind.
14. Your STR property manager must have a web-based calendar that is contractual, meaning that it is reliable and secure enough to act as the sole admissible source of information.  Web access must not be revokable under any circumstances while under contract.  If you get into a dispute, the first thing they do is take away your right to access your information. Most platforms like VRBO and AirBnB already have integrated calendars.
15. Management response times to your inquiries must be as short as practical, 24 hours – not, say, 30 days.  If you get into a dispute, they will drag negotiations out as long as they can so that you incur higher legal fees and become demoralized.  They use time delays to agonize negotiations and run out the clock.
16. Beware of any provision that transfers your contract to new owners. If you need to sell – your property will be encumbered by your contract + 18 months. Your property may be worth less or you may lose your sale – or prepare to pay big money to terminate the T&Cs.
17. Transfer of bookings from one person to another must not be permitted – this is the STR equivalent of scalping concert tickets. Nothing stops the predatory manager from pre-booking their own dates for resale at a higher rate or creating phantom guests outside the contract period.
18. Compare marketing and advertising claims with the T&Cs – they must match word for word. Predatory STR management firms will try to flood you with information, bullet points, testimonials, and lofty assurances that divert your attention away from getting into the weeds of 7500 word T&Cs imagining every possible scenario in which they can hurt you.

There is a lot more to be aware of – all of which you should not need to be aware of if only you have alternative partners to chose from.  A local real estate professional teaming up with local house-keepers may be a reasonable option.  A manager that has a long and favorable social media presence, good reviews, has a strong familiarity with the geographic area would add the value that you need and where AirBnB / VRBO may be lacking.  Local references would be essential.  Have an attorney that specializes in contract law review the terms and conditions.  Accept 30-90 day cancellation terms at most.

Again, we believe that there is great opportunity in the STR space. Hopefully this article helps you think about who you are actually sharing your home with.  After several years of watching this sector evolve, it is clear that more work needs to be done in regulating the industry.  In the meantime, have fun, help people, make money and be very very careful of who you partner with in the STR Management domain.

Disclaimer: Please see part 1 here.  Please be aware that we are not Lawyers we are engineers experienced in municipal planning, building maintenance, construction, facility operations, and safety. Do not take these articles as legal advice.  Instead, make sure you hire an experienced  lawyer and ask the right questions.