Consumer Law

Renting Your Stuff Isnt as Easy as It Sounds

Have a camera sitting in the closet collecting dust? Need a camera for a special event but don't want to spend the money to buy one? Peer-to-peer renting may be the ticket for you, but you need to beware of some pitfalls.

How it Works

Peer-to-peer (or person-to-person) renting isn't new. It's been a craze in Europe for years, and since 2010 or so its popularity has increased across the US.

It's devilishly simple. You offer an item for rent on a specialty web site like Zilok or SnapGoods - anything from a camera to a car, along with a rental price. It's typically a per-day price. Someone finds your item and agrees to rent it from you. You arrange a face-to-face meeting where you deliver the item to the renter.

Depending on the service or web site you use, rental payments may be made online through the site or payment may be made in person after the renter returns your property. The web site or service usually charges a fee to you or the renter.

Sites like Zilok and SnapGoods let owners and renters leave feedback about each other; renters can leave feedback about your item, too.

There's also usually protection for damage to your property or if it's not returned at all. Sites like SnapGoods require renters to give a security deposit, and you set the amount. So long as the renter uses a valid credit card or PayPal account - and doesn't change it after getting your property - you won't have a total loss.

Potential Pitfalls

It's easy to see how a deal like this can be a win-win for both sides. Beware, though:

  • As the property owner, rental payments you get are income for tax purposes, so you have to report that money on your federal and state tax returns
  • If you make a living from renting your personal property, you're probably engaged in a business as far as the IRS is concerned. This opens you up to self-employment taxes, and maybe even the obligation to collect and pay other taxes, like state sales and use taxes
  • Security deposit or not, you run the risk of damage to or loss of your property. You may not be able to find a an exact replacement
  • If the renter is injured using your property, you could face a personal injury lawsuit, especially if you didn't warn the renter about a problem or defect with the item that you knew about
  • Renting your car or other vehicle may cancel or void your auto insurance because the rental may make it commercial use, and not the personal use the policy was written for

What You Can Do

You can still enjoy a win-win deal if you're careful:

  • Check out any reviews or ratings on a property owner, renter, or item before agreeing to a deal
  • Make sure you set security deposits high enough to cover the complete loss of your item
  • Take pictures of any item before you rent it out or take possession of it, and make a written note, in each other's presence, of any damage to the item. You both should sign and date it. Get a copy, too
  • Consider asking the renter to sign a waiver or release to protect you against lawsuits if the renter is injured. Check with a lawyer in your area to see what types of waivers, if any, are valid in your state
  • Owners and renters should contact their insurance companies to see which policy, if any, covers the car being rented. Some states, like California, let your private insurance cover your car when you rent it out
  • Talk to professional tax preparer or a tax lawyer if you have any questions about how to treat rental payments on your tax returns

Don't rush into a deal blindly. You can protect yourself, and make or save money, if you go about peer-to-peer rentals with your eyes open.

Questions for Your Attorney

  • Are liability waivers valid in my state? How much will you charge to write one for me?
  • How can the IRS find out if I'm paid rent for my personal property?
  • Can I get into legal trouble if an item I pay rent for turns out to be stolen property?
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