Five hidden risks if you rent out your home for the summer

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Summer's here, and that means plenty of opportunity — and risk — for beach-house owners who want to rent out their dwellings.

Reservations at Airbnb are up sharply year-over-year for beachside destinations, in the U.S. and abroad. Havana, Cuba — where you can rent a swanky seaside home for $528 a night — has seen a 940 percent increase in bookings.

In the U.S., travelers are interested in Destin, Florida, where Airbnb reservations climbed by 232 percent from last year. There a two-bedroom condo with private beach access will run $229 a night.

Though short-term rentals can be lucrative, homeowners or lessees should do their homework before listing their properties.

Failure to do so can put you on the wrong side of local zoning regulations, your landlord or your homeowners association. In the worst case, your insurer may not cover any property damage while you're hosting.

"The prospect of side income is very exciting, but there are serious legal issues," said Ron Leshnower, a New York-based real estate attorney and author. "You can't just try hosting guests and then postpone your research."

Here are the five biggest risks to hosts who invite summer guests into their homes.

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Your insurance excludes short-term rentals

A standard homeowners policy may not cover any losses when you have guests over, so you'll likely need a specialized insurance policy.

"Some insurance companies may allow a homeowners or renters policyholder a short-term rental, assuming they've notified the company," said Loretta Worters, vice president of the Insurance Information Institute.

In other situations, your insurance company may require you to add an endorsement or rider to your policy.

If you expect to host guests for short-term visits on a regular basis — say, every summer — then that constitutes a business. You'll likely need a hotel or bed-and-breakfast policy, as a standard homeowners policy won't cover business activities, said Worters.

If you want to rent to one guest for a long period — say, six months or more — you'll probably need a landlord policy to cover any damage.

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Your city has additional requirements for hosts

Know your local laws before you rent. New York City, for instance, imposes a bunch of taxes on hosts, and zoning laws may apply.

Some local rules call for permits, inspections of the property and licensing fees, said Kendra Carberry, a partner at Hoffmann Parker Wilson & Carberry in Denver.

"The complaints we hear about these rentals relate to trash pick up, parking and noise," she said. "Make sure you're compliant with your local ordinance."

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Your lease or homeowners agreement bars it

Leases and homeowners associations can prohibit short-term rentals. "Homeowners associations can take legal action against you, but their biggest weapon is fines," said Carberry.

If you're a renter and you want to sublet, the homeowners association may go after your landlord.

Depending on the city, rent control/rent stabilization laws may apply, which can limit your ability to host guests.

"If you're in a rent-controlled or rent-stabilized building, you may have special rules," said attorney Leshnower. "It could be that you can't rent your apartment for the short term or that you can do it with a permit under certain circumstances."

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You don't have enough liability insurance 

While Airbnb offers host protection insurance — liability coverage up to $1 million per occurrence — you may want to boost your own policy in the event of a dispute with a guest who gets injured on your property.

Check in with your insurer to see if you need more protection than your current insurance offers.

"If someone falls off your deck and your railing is faulty, then there may be an exclusion for that," said Carberry of Hoffmann Parker Wilson & Carberry. "You don't want to be liable if someone gets hurt on your property."

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Your mortgage bars short-term rentals

Call your lender to make sure you aren't violating the terms if you rent out your property.

"Some banks have provisions that say that if you transfer possession of your property, that this will violate the mortgage and they can either fine you or foreclose on your home," said Carberry.