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Why You Need a Business License When You Have a Condo for Rent in D.C.

EJF Real Estate Services - Thursday, July 23, 2020

Owning a rental property in Washington, D.C. requires you to follow certain unique rules governing your condo for rent in D.C. The government of Washington D.C. has set out these standards—laws which need the following if you'd like to avoid a legal dilemma—for two key reasons. If you expect to be able to rent out your property, you'll need to comply with these regulations in order to offer a rental home that meets the expectations of this licensing law.

For any rental property owner, the main focus here is compliance. Before you go down the path of renting your condo and running afoul of these laws, you need to do your due diligence in the form of research so you can understand why you need a business license in the first place. Once you understand why you're expected to comply, execution becomes simple—or at least as simple as acquiring a business license in the District of Columbia can be!

If you have a condo for rent in D.C. and you'd prefer not to have to follow-through with regulative rigamarole, turning to a D.C. property management partner that understands local law can make this a far easier process for you as the property owner! Let's go into the details of why the district makes this requirement of rental property owners so you can see why you won't be able to avoid it any time soon!

 

As a note: This post is not a substitute for proper legal counsel. When in doubt, it's best to reach out to the local experts at EJF Real Estate Services or to obtain guidance from a skilled attorney.

The Requirement for a Business License as a Rental Property Owner

We briefly touched on the fact that the government imposes these requirements on D.C. property owners for two key reasons. Let's detail these reasons for you, so you have a better understanding of why partnering with a property management partner can save you the trouble of going through this process yourself.

The District Wants to Confirm Your Property Is a Legitimate Rental

The first reason is that the government wants to be sure that your condo for rent in D.C. is as stated: a legitimate condo for rent! This largely prevents property owners from charging a premium on their master closet space and labeling it as a room for rent. If the rental property does not meet the district requirements of a rental property during the inspection process, then the business license granting does not occur—meaning you won't have a rental to offer to potential renters.

The District Needs to Know How to Evaluate Your Rental for Tax Purposes

The other big reason for the business license requirement is centered around taxes. Of course, taxation of any kind continues to be a subject we hold near and dear to our hearts here in the District of Columbia for obvious reasons. As a rental property owner in the district, you are still required to pay taxes on any rental property income you earn. To be able to adequately track your income and figure out just what you owe to Uncle Sam, the business license requirement is necessary.

If you intend to carry this out for yourself, we've outlined the steps in more detail below, so you know what you're walking into when considering a business license for your condo for rent in D.C.

Wooden Blocks with the text Fees

The Business License Process

  • The first step in obtaining your business license is the registration of your property.
  • You need to decide whether to register your property as exempt from or under rent control.
  • If you do not know how to do this, work with skilled D.C. property management to navigate the issue.
  • You'll need to make a trip to the Department of Consumer and Regulatory Affairs (DCRA) to complete registration.

The district government will also require you to register your rental property as a business. When you go through the registration process, you will receive a unique tax identification number. This identification number will directly link back to your rental property business you'll need to use during tax time.

Once you have completed these steps in the filing process and successfully registered your property, you are ready to move forward with the business application. The business license application process is something you can complete in a few different ways.

  • You can apply for a business license through the online application portal provided to rental property owners.
  • You can also apply for a business license at the Department of Consumer and Regulatory Affairs office in-person. 

No matter which way you decide to manage the business license application process, you can expect to pay some fees. Investing is often a "pay to play" kind of business, and that is no less true than in the District of Columbia. When you pay the fees and submit the application, you are on the right track to getting your business license. However, there's one more crucial step you'll need to pass.

Regulation written on multiple road sign

the Property Inspection

The final piece of the puzzle does not end with the application for a business license. Once the business license application is in, the next step is to move forward with an inspection. Your rental property will need to have an official inspection conducted by a Department of Consumer and Regulatory Affairs agent.

  • The inspector will thoroughly investigate your property to ensure it's sound and appears as described.
  • They will do a deep dive to ensure it meets all criteria to be a suitable rental property for your future renters.
  • As they do the inspection, they can also provide you with those requirements if you request them.

If you want to be sure your condo is ready to pass the inspection ahead of time, working with a D.C. property management professional can help. If they're well-established and familiar with local law, they'll know how to prep your condo to pass with flying colors on inspection day.

Stepping Into the World of Rental Property

After you complete this gauntlet of red tape, you will be on the road to renting out your property for the first time. Working with D.C. property management professionals can save you a tremendous amount of stress and time, so it's worth considering the aid of a skilled property management partner.

If you need further guidance on this process, reach out to us! We'll be happy to help you navigate this tiring procedure. We've been serving the D.C. community for over 25 years, so we are well versed in this process.

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