Rental agreements
While most reservations will go smoothly as planned, there may be times when you'll be asked to produce a signed Rental Agreement. Even hotels have you sign an agreement at check in, at the same time they ask for your ID and credit card. Agreements can be signed manually or digitally–and both methods are legally upheld in the courts.
Most owners allow guests to reserve dates by clicking "I agree" to their online sample contract, along with a partial or full payment amount. Then the reservation is officially confirmed, as soon as the signed agreement is returned.
Know Your Local Laws
If you aren't already familiar with your local laws, go ahead and start learning them now. A short term Rental Agreement will differ from a long term tenant lease. First, find out if a Rental Agreement is required for short term rentals in your area. Your local laws may require specific information to be included in the agreement.
For example, North Carolina is governed by the North Carolina Vacation Rental Act. This Act spells out owner obligations, guest protections, and what clauses must be included within the agreement. Regulations will vary among different states and jurisdictions.
Potential Lawsuits
If you ever need to sue a guest in court, or are named as the defendant in a lawsuit, the first thing the attorneys or judge will want to see is the Rental Agreement. If your insurance company becomes involved, they too will ask for this information and will review your agreement's clauses and disclaimers.
This is why it's highly recommended to have an attorney draft your agreement, as they can review your insurance policy and determine the types of language your agreement should contain.
Assuming you have the proper liability insurance, it's also important to speak with your insurance company to determine what required documents are needed if you ever need to file a claim. Will your insurance company pay out a "loss of income" claim based on past reservations printouts? Or will they require an actual signed agreement between you and the guest?
An attorney is well worth the cost–and a solid Rental Agreement along with the proper insurance, can actually dissuade potential lawsuits.
Credit Card Dispute
If one of your guests ever files a credit card chargeback, you may be asked to produce a legally signed Rental Agreement. Often times, credit card companies will not acknowledge a "click to accept" (checkbox) as a legitimate cardholder signature.
Additionally, you may be asked to prove the cardholder is the same person who signed the agreement. This is why it's a good idea to always ask for the cardholder's ID after booking.
The card companies also have specific policies of how the merchant (you) must present certain information to the cardholder. For example, they may require that the guest's initials or signature are close to the stated cancellation policy, and may not consider a single signature on the last page to be sufficient.
Depending on the chargeback person assigned to your case, the checkbox acknowledgement may be acceptable, but why take the chance?
Not only should local law and insurance requirements be considered, but the card companies' policies as well. Below are sample agreements that other Houfy members have given permission for anyone to use. Feel free to take parts from any or all, and customize your own.
Do not rely on any of these samples as "legal documents" that will meet all of your needs. It's also a good idea to take notes of applicable sections you like, and bring them to your attorney for review.
How to edit the rental agreement and remove some sections of the rental agreement
- Click plus -> Rental agreement
- My rental agreements -> Click edit
To edit the content of the rental agreement, click on a section to view and edit its content.
To remove the section, click Remove section.
To re-order the sections:
Click on the handle and drag the section to re-order them
This post explains how to add the host's signature to the rental agreement.
- Click plus -> Select rental agreement
- Edit the rental agreement
- Add a section "Owner's signature"
- Do your signature and click save singnature.
How the guest can view, sign, attach id proofs and send the rental agreement
There are 2 ways the guest can sign, attach id proofs and send the rental agreement.
While booking
- Click on the rental agreement in the Review Rules section
- Scroll down -> Sign
- Upload photo or Take photo
- Download or Submit
After sending the request
- Go to Reservation details
- Go to Policies & Rules
- Click on the rental agreement. It will open the rental agreement page where you can sign, upload ids and submit.
How to create a rental agreement online
- Click on plus -> Rental agreement
- Select Houfy default template
- Chose the listing for the rental agreement & click Get started
- Edit the rental agreement with Houfy agreement builder
- Log in>Menu> Manage Listings>Edit>Settings>Rules.
- Upload Rental Agreement or drag and drop.
Where Does My Guest View the Agreement?
After guest enters dates and clicks "Request to Book," the screen below will appear. Guest can download the agreement for review before checking the "I agree" box.
How do I ask the guest for signature and collect ID?
This final step is not required but highly recommended.
- In your House Rules you can mention a signed agreement and ID of the credit card holder will be required before the booking is confirmed.
- Choose an E-signature service to obtain the guest's signature OR
- Message the guest through your Houfy inbox. Upload the agreement there and ask them to print, sign, and scan back along with copy of ID.
- Email the guest directly. with agreement and your requests
Feel free to use any of this wording to help customize your own policy.
The property has external cameras placed in the front deck, parking area, facing the fire pit, and facing the back door.
This video footage is not shared publicly and is recorded in cases of a break-in, death, injury, guests sneaking in pets, guests disregarding the maximum occupancy allowed, and in no way infringes upon guests’ expectations of privacy in these public areas of the property.
Any attempt at disabling or obscuring the cameras is prohibited and may result in the guest being evicted without refund. The full deposit is forfeited if any of the above are found. You will be asked to leave the property immediately with no money returned.
How many times have you heard travelers complain about a $200 cleaning fee–yet happily pay a $600 service fee to an online travel agency?
Have you ever noticed both Airbnb and Vrbo only use the words "Service Fee" in their price detail breakdown? And neither site puts their company name in front of it?
At a glance travelers can easily assume the "service fee" is charged by the host. Take a look at what travelers are shown during Airbnb's checkout.
And take a look at Vrbo's traveler service fee. The traveler must hover over the "?" symbol to learn more information.
Guests should clearly understand what money their host receives, versus fees paid to the platform. The guest may believe they paid you several hundred dollars more, and their expectations for your home are higher. It's always a good idea to include a detailed price breakdown in your guest rental agreement.
Don't forget to educate departing guests to always google a vacation property's name to find the best rate.
How to create a rental agreement for your listing on Houfy by using Houfy's tool for creation of the rental agreement
1. Click on plus to open the menu. Choose a Rental agreement that will bring you to the agreement builder page.
2. Choose Houfy's default template or create own. With Houfy's default template it will bring some predefined sections for you to start with your rental agreement. You can always edit all those sections.
3. Choose the listing for which you want to create a rental agreement.
4. On clicking "Get Started" it will create a rental agreement.
5. You can re-arrange or modify the agreement sections.
Follow the below article on how the guest can send you the agreement.
Requesting an ID from guests is actually quite easy, and one of the benefits of booking direct. Remember, this is your business and you have every right to know who is renting your property. First, let's clear up a common misconception hosts have in regards to verifying IDs.
I Will Scare Away the Traveler
This is a marketing tactic (an ingenious one at that) used by listing sites as a means for you to pay a commission. Until recent years, travelers and hosts were transacting directly all the time, without needing a 3rd party's protection. Here are some best practices to keep in mind:
- Keep your reviews up to date on Houfy. If you haven't done so, import your reviews from Airbnb and VRBO/Homeaway, and show them to travelers. Directing travelers to other sites to read your reviews is making those brands even stronger. It only perpetuates an endless cycle of trying to gain direct bookings, while simultaneously advertising the very brands that strive to keep you from booking direct.
- Sometimes travelers just need a gentle reminder that their credit card already provides fraud protection. If they have any questions, point out you have been verified by Houfy and remind them of their bank's protection policies.
- Finally, some loyal Airbnb followers will only book through Airbnb. Do not take this personally! If you've already mentioned the above, just accept the booking and be a great host as usual. Then thank the guest for staying, and remind them of saving through Houfy for their next vacation.
Personally, I have never had an issue of a guest not sending me a copy of their ID. Remember, there is no sensitive information on there anyway, as social security numbers no longer appear on driver's licenses.
Asking for ID Helps to Prevent Fraud
One of the best ways to prevent scammers and the use of stolen credit cards, is to ask for ID of the credit card holder. It's especially important for new hosts to do this, as scammers often view them as easy prey.
Hosts with little to no reviews, and properties priced below market, are common targets for scammers. It's assumed new hosts are inexperienced and more likely to accept a booking with no questions asked. Fraudsters realize new hosts are eager to get those initial reviews under their belt.
Another scenario to be alert of is last minute bookings, and especially those from the same city as your rental. People using a stolen credit card tend to book very last minute, as the real card holder may not immediately notice the fraudulent activity. By the time the card is reported stolen, the scammer has already fulfilled their stay and left the property.
One caveat: Do not assume all last minute bookings are a red flag, as I often receive bookings just one day before arrival. This is why it's important to ask for a signed rental agreement: you need to match the agreement signature against the one on the ID.
How Do I Ask for ID?
Ask for the ID of the credit card holder and don't assume it is the person who made the reservation. In my case, it's usually the same person anyway. The reason you want to ask for the credit card holder's ID, is in case of a chargeback dispute. The credit card company is going to ask you to produce a signed rental agreement with the card holder's signature.
Feel free to use any parts of this:
"Hi Guest,
I've attached the rental agreement, departure checklist, and house notes. Please read through all docs and print, manually sign, and scan back the rental agreement.
- Initial anywhere on the 1st page
- On the 2nd page be sure to sign both the cancellation policy, and the bottom right side of the agreement. Please fill out only the right side of the agreement.
- Along with the agreement, I will need a scanned govt ID of the credit card holder
Let me know if you have any questions. I am sending you all the local information and house details from Houfy shortly.
Thanks."
But What If I Don't Want to Ask for ID?
You don't have to of course. Do whatever makes you feel comfortable. Maybe you are an onsite host who accepts mostly one night bookings. You're more than welcome to never request an ID from anyone.
If you currently rely on Airbnb for verification, they don't share the guest's ID with you anyway. Even if you need to press charges with the police, Airbnb will not provide you with "real" ID information. In essence, by not asking for ID–it's the same as accepting an Airbnb reservation and not really knowing who your guest is anyway.
If a chargeback on a one night stay, or stolen credit cards is not a concern, then by all means don't feel guilty if you don't ask for ID. Just be sure it's not required in your area. In some areas, hosts are required to keep guest IDs on file for a certain period of time.
Be Aware of Friendly Fraud
Keep in mind "friendly fraud" has been on the rise. This is where someone in the group makes the reservation but uses another group member's credit card. After the stay, the card holder claims to not "recognize" or have "authorized" the transaction. Technically, this group just received a free stay at your property. As long as you understand the pros and cons of asking for ID, then you are good to go.
Overall, most scammers don't have the time nor interest to produce fake IDs. It's easier to target those who do not require the information. I'm not saying scammer "over achievers" don't exist, as some may go through the trouble of producing these documents–it's just that the chances are small. Just decide what feels right and makes the most sense for both you, and your vacation rental business.
This sample template is not any kind of legal advice. Make sure your attorney reviews any rental agreement you create.
John Smith,
Thank you for choosing our home for your vacation. The property is located at:
222 Vacation Road.
Lake Sewer, FL 28756
Phone: 555-555-5555
Your confirmation is as follows:
Check-in date: Saturday, May 25th, 2019 (after 4pm EST)
Check-out date: Monday, May 27th, 2019 (no later than 11am EST)
Number of guests allowed: 4
Pet Policy: No pets allowed. This is a pet-free property.
Visitor Policy: Any day/night visitors must be approved by owner, and maximum number of guest/visitors combined is six persons (this includes infants and children). Additional overnight guest/visitors are $20 each per day.
Refundable Damage Deposit: Waived as long as credit cardholder agrees that ALL members of the rental party (and any visitors) will have read entire arrival guidebook and departure checklist. Please let us know if you prefer to pay a $250 damage deposit instead.
I acknowledge and understand the Pet Policy, Visitor Policy, and Damage Deposit Policy:
Signature: ______________________________________________
One hundred percent of rental rate, turnover clean fee, refundable damage deposit, applicable lodging taxes, and signed rental agreement must be received to confirm reservation.
Rental rate:
Nightly rate (4 nights) $300 each night $1,200
Additional persons ($20 each per night) $0
Turnover Clean per reservation $125
Damage deposit waived $-0-
Total collected by us $1,325
FL lodging tax collected by Airbnb (13%) $172.25
Airbnb Traveler Service Fee $188.15
Cancellation Policy
Cancellation policy is NO refunds. Once dates are taken off the market, they become unavailable to other renters. With owner approval, guest may find a replacement renter or gift their dates (not future dates) to someone else. Guest MUST cancel the original reservation before owner will assist in trying to rebook the dates. I acknowledge and understand the Cancellation Policy:
Signature: ___________________________________________________
Trip Cancellation/Interruption Insurance
It is highly recommended guest purchase trip cancellation/interruption insurance in case of family emergencies/bad weather delays, flight/rental car cancellations, job loss, snow/ice, Covid-19 bans/restrictions, etc. If you live in an area prone to hurricanes, forest fires, etc. and cannot make your trip, please seek reimbursement through your travel insurance.
NO refunds are given unless there is a mandatory evacuation in our area. Please check what travel insurance your credit card may offer. You can also visit www.insuremytrip.com.
I acknowledge I am responsible for purchasing my own travel insurance:
Signature: ___________________________________________________
Guest agrees to abide by information in this agreement and in the arrival guidebook, and shall cause all members of the rental party (anyone else Guest permits on the property) to abide by them as well.
The parties agree to the terms of this Short Term Rental Agreement, as evidenced by the signatures set forth below.
Guest Name (Print) ______________
Guest Signature ________________
Phone number _________________
Guest Permanent Address ____________________
Date _______________________
Vacation Rental Owner
Name (print) ________________
Signature __________________
Date _____________________
Place a clear Photo ID (driver’s license) of the credit card holder on this page. Scan back all 3 pages.
Feel free to use any parts of the rental agreements below. These are ONLY examples to give you ideas for content. It's best to work with an attorney who is well-versed in short term rental regulations, insurance, etc.
Need an Agreement Right Now? Use The Site Below for an Emergency Agreement and Other Helpful Info.
Sandy Claws, Corolla NC
The below is for informational use only. Feel free to copy any of the verbiage into your own agreement. Have an attorney review before use.
Short Term Rental Agreement
Thank you for choosing our home for your vacation. The property name is Sandy Claws and is located at: 1569 Sandpiper Road, Corolla, NC 27927
As stated in the property listing: 4WD or high clearance AWD vehicle is needed to access the property. You must air-down tires to drive on the beach. 10-15 PSI is recommended for best traction, and it will not damage your tires or result in a blow out.
Your confirmation is as follows:
Check-in date: ________________________________ (after 4pm EST)
Check-out date: _______________________________ (no later than 10am EST)
The lease signer must be over 25 and reside at the property for the full duration of the lease.
Number of guests: _______
Names and ages of guests (this helps us customize your Welcome Package):
1) ___________________________ Age: ____ 7) ___________________________ Age: ____
2) ___________________________ Age: ____ 8) ___________________________ Age: ____
3) ___________________________ Age: ____ 9) ___________________________ Age: ____
4) ___________________________ Age: ____ 10) ___________________________ Age: ____
5) ___________________________ Age: ____ 11) ___________________________ Age: ____
6) ___________________________ Age: ____ 12) ___________________________ Age: ____
Pets are not allowed. If guests bring a pet to our non-pet home, not only will it invalidate this rental agreement allowing immediate eviction with no refund, but it can greatly affect guests who require an allergen free home. Board your pets, do not sneak them into our allergen free home.
Elevator: Does anyone in your party have mobility issues requiring the use of the elevator? Yes / No
*The elevator is not a toy and it is not a cargo elevator. The key will only be issued to guests in need.
Rental Rate:
Weekly rate (7 nights) $__________
Optional Grocery Delivery & Stocking fee Yes / No: $75.00
NC State & Lodging Tax on total (12.75%) $__________
Total: ___________
*Security Deposit: $750.00 (not taxed)
Total + Security Deposit: $__________
Amount Paid [Month Date, Year] $__________ (Includes Security Deposit)
Amount Due [Month Date, Year] $__________
*Security Deposit of $750.00 will be refunded within 14 days of check out if post check out inspection is favorable.
Rental Provisions/House Rules:
1) PROPERTY CONDITION: Leave the home as you found it and it should be relatively ready for the next guests. Guests are responsible for maintenance and repair costs should the premises or furnishings be left in a lesser condition.
2) DO NOT REARRANGE THE HOUSE: We request you refrain from rearranging the furniture or reorganizing the kitchen. You’re on vacation, please spend it relaxing rather than determining a “better” location for items. There's a $50 fee for every item that must be replaced to its original location by our cleaning crew. This includes beds, chairs, tables, and everything outdoors. Additionally, inside furniture and decor should remain indoors.
3) ACCIDENTS/DAMAGES: Please report all accidents, damages, and any non-working appliances immediately so that they can be corrected before the next guests arrive. Discovering these issues after checkout often means the next guests won’t have access to usage until a service call can be scheduled, which is very difficult to do on turnover day. If the cost of the damage is more than the security deposit or if extra cleaning should be involved, the cost incurred will be billed to the guests.
4) NEIGHBORHOOD AND NOISE LEVELS
- You will see horses on the property and around the neighborhood. DO NOT feed them and remain 50 feet from them AT ALL TIMES. Exception on distance is only when they are in our yard and you're on a deck.
- The majority of our neighbors are vacationers like you. Please minimize noise between 10pm and 8am to ensure everyone enjoys their vacation.
- If any neighbors report excessive noise, your vacation rental agreement could be terminated and you’ll be asked to leave our property. Should this happen, it will result in a loss of the rental amount.
5) EXTRA GUESTS AND VISITORS: A maximum of four visitors is allowed during the day. Any extra overnight visitors must be approved in advance. It is the responsibility of the renter to ensure that any visitor also complies with our House Rules.
6) PARTIES AND EVENTS: No parties or events are allowed without prior approval from owners. Any small gathering is restricted to four additional visitors and must comply with the rules regarding noise.
7) PARKING: Please park your vehicle under the house near the elevator, to the left of the front door, or out front on the gravel provided. Do not park on the right (south) side of the home. This level field area is our septic leach field and the weight of vehicles will damage it.
8) SAFETY
- The First Aid kit is located in the pantry, on the left, top shelf.
- In the entryway near the elevator, you will find the electric panel. Please do not open it unless in the unlikely event of a power outage or tripped breaker.
- Guests are responsible, at all times, for the safety of their children while on the premises. Do not allow them to climb on the railings, or stand on chairs near the railings. This also applies to drunks.
- Wash off sand and lotion prior to using the hot tub, an outside shower is provided. Securely close the cover when not in use. All long hair should be secured in a ponytail prior to using the hot tub. NO GLASS near the hot tub, this includes beer bottles. Use provided plastic. The hot tub is not a pool, do not attempt to swim in it. Reduce temperature to 80 at the end of stay.
- If you use the grills, you must clean them after each use or you could incur additional cleaning fees of $75 per grill. North Carolina law states grills that are not permanently affixed to a gas line must be a minimum of ten feet from the house structure at all times, this means you should NOT move the charcoal grill under the house, even if it is raining.
- Please use only plastic dinnerware and plastic glasses when dining outside.
- The elevator key is only given to guests with mobility issues. It is not a cargo elevator, and NO CHILDREN under 16 should use, play with, or ride in the elevator alone. An unattended child died in a Corolla elevator in the summer of 2021, this warning is a serious one.
9) SMOKING: Smoking is not permitted anywhere inside the property. If you want to smoke, you may only smoke outside. Please dispose of your cigarette butts and ash in the garbage (after it’s safe to do so).
10) APPLIANCES/HOME SYSTEMS
- Do not move the internet modems. We've lived there for months, both modems currently reside where the best signal can be found.
- Do not leave doors and windows open while the air conditioner is on. If you want ocean breezes inside, turn the air conditioner off. There is a humidity gauge on the thermostat, and it will shut off the air conditioner if the humidity stays high for an extended period of time.
- You’re welcome to use the washer, but make sure that you don’t overload it and shake sand outside BEFORE washing items. Sand can destroy a washer and guests will be charged to replace the washer.
11) GARBAGE DISPOSAL
- We ask that our guests be so kind as to dispose of food in the available kitchen garbage bin as we DO NOT have a garbage disposal.
- There are recycling bins in the pantry, as well as a blue garbage can outside for bagged recyclables.
- Garbage pickup is a private service and we’ve arranged pickup from the outside garbage cans on Wednesdays and Saturdays. We advise placing garbage out the night before in case of early morning pickup.
- Secure all garbage can lids tightly, as our food can kill the wild horses.
- DO NOT flush any sanitary products, paper towels, or wipes down the toilet. We have a septic system and these items will damage it, resulting in an easily avoidable expense to the guest for repair.
- If fishing, do not leave fish entrails in the kitchen garbage. Dispose of entrails in the ocean or feed to seagulls.
12) LIABILITY: The tenant’s personal property is not covered in the insurance purchased by the owner against loss, theft, or negligence. The tenant indemnifies the landlord and the property free and harmless against any liabilities like accidents, loss of property, injury, or death of any person.
COMPLIANCE: Failure to follow any of these house rules is a breach of the terms and conditions of your reservation.
I acknowledge and understand the above Rental Provisions/House Rules:
Signature: ______________________
Cancellation Policy: Refunds 61 days prior to date of stay is 100%, at 60 days or less there’s no refund unless the owner can rent the dates to another guest. Once a reservation is made, those dates are taken off the market.
I acknowledge and understand cancellation policy:
Signature: ________________________
Trip Cancellation/Interruption Insurance: It is highly recommended that guests purchase trip cancellation/interruption insurance in case of emergency/bad weather, hurricane, Covid-19 bans/restrictions, etc. as NO REFUNDS will be given. Please visit www.insuremytrip.com to purchase.
I acknowledge the recommendation to purchase trip insurance:
Signature: __________________________
Guest agrees to abide by information in this agreement and shall cause all members of the rental party (anyone else Guest permits on the property) to abide by them as well. The parties agree to the terms of this Short-Term Rental Agreement, as evidenced by the signatures set forth below. Reservations are confirmed upon receipt of signed rental agreement and a copy of your ID (driver’s license or state/government issued ID).
Guest Name (Print): __________________________ Phone number: _______________________
Guest Signature: ___________________________ Date: ___________
Guest Preferred email address: ______________________________
Guest Permanent Address: ______________________
______________________
Vacation Rental Management Company: LLC name you created to sublease your rental property on your behalf, thus removing your personal assets from liability claim.
Signature: _________________________ (Your Name, manager of LLC you created to sublet a year long lease on your home)
Date: ___________________
Company name
Location
Contact Info
Feel free to use any/all parts of these refund policies:
Cancellation Policy 1 - Moderate
Due to the nature of the vacation rental business, we cannot accept cancellations occurring later than 45 days to the arrival date. You will forfeit all sums paid unless we are able to re-rent the property, in which case we will refund an amount equal to any subsequent rental less a $100 handling fee. If a cancellation occurs prior to 45 days to arrival, full refund will be issued less a $100 handling fee.
Cancellation Policy 2 - Strict
How it appears to a traveler in Houfy traveler checkout:
Below is how it appears in the actual rental agreement that is sent after I have accepted the booking. I strongly recommend obtaining the signature of the credit card holder very close to the cancellation policy. This is in addition to the credit card holder's signature at the bottom of the agreement.
Note: the cancellation policy and trip insurance are two separate sections in my rental agreement as shown in the screenshots.
Copy/Paste text below to format
Cancellation Policy
Cancellation policy is NO refunds. Once dates are taken off the market, they become unavailable to other renters. With owner approval, guest may find a replacement renter or gift their dates (not future dates) to someone else. Guest MUST cancel the original reservation before owner will assist in trying to rebook the dates. Owner is under no obligation to find a replacement renter. I acknowledge and understand the Cancellation Policy:
Signature: ___________________________________________________
Trip Cancellation/Interruption Insurance
It is highly recommended guest purchase trip cancellation/interruption insurance in case of family emergencies, funerals, bad weather delays, flight/rental car cancellations, job loss, snow/ice, Covid-19 bans/restrictions, early departures, etc. If you live in an area prone to hurricanes, forest fires, etc. and cannot make your trip, please seek reimbursement through your travel insurance.
NO refunds are given unless there is a mandatory evacuation in our area. Please check what travel insurance your credit card may offer. You can also visit www.insuremytrip.com.
I acknowledge I am responsible for purchasing my own travel insurance:
Signature: ___________________________________________________
Click the link to view this sample rental agreement:
Feel free to use any wording in this rental agreement. Be sure to follow local laws and use an attorney.
Number of guests allowed: 4
Pet Policy: No pets allowed. This is a pet-free property.
Visitor Policy: Any day/night visitors must be approved by owner, and maximum number of guest/visitors combined is six persons (this includes infants and children). Additional overnight guest/visitors are $20 each per day.
Refundable Damage Deposit: Waived as long as credit cardholder agrees that ALL members of the rental party (and any visitors) will have read entire arrival guidebook and departure checklist. Please let us know if you prefer to pay a $250 damage deposit instead.
I acknowledge and understand the Pet Policy, Visitor Policy, and Damage Deposit Policy:
Signature: ______________________________________________
Join Houfy's Book Direct market network or Say Yes to Houfy facebook group.
"I am about to sign up with Stripe or Square and I am wondering who decides if a guest can get a refund. What if a guest files a chargeback because they want to leave early and the host stands firm on their cancellation policy? Does Stripe or Square decide if the guest will get their money back even if the guest agreed to my cancellation policy?"
The issuing bank determines the outcome of credit card disputes (chargebacks).
What is an issuing bank?
An issuing bank is the financial institution that issues a credit card to the cardholder (your guest's bank).
What is a credit card network (association)?
The most popular networks are: Visa, Mastercard, American Express, and Discover. American Express and Discover are both issuing banks (issue their own credit cards) as well.
What is a payment facilitator?
Stripe, Square, and PayPal are just a few examples of payment facilitators.
What is a merchant?
The vendor who sells services/goods (you). If you use a payment facilitator, it may technically be a shared merchant instead of a "traditional" merchant account with your bank. For simplicity, consider yourself the merchant even if your payment facilitator is the "merchant of record."
Whether you are a restaurant owner or sell jewelry at art festivals, when you accept credit cards, the cardholder can file a credit card dispute (chargeback) with their bank.
Have you ever noticed hosts say an Airbnb rep. told them they cannot charge a guests credit card without their permission? What about owners who said their Vrbo guest agreed to their cancellation policy but still won in a chargeback dispute?
The credit card networks (VISA, Mastercard, Discover, American Express) set certain policies that merchants must abide by when accepting their cards. And these policies can vary between industries. One of these policies is how a cancellation policy should be presented to the credit card holder.
Some owners have lost chargeback disputes because they did not follow the credit card network policies. But who reads through all that fine print?
The card network may have required the merchant to obtain the card holder's signature within so many inches of the cancellation policy. This information could have been buried on page 50. And the host was told a signature at the very bottom of the rental agreement was not sufficient to meet the card network's requirements.
Always require Id of the credit card holder so the guest does not claim the transaction was not authorized. Include a signature line within less than an inch of your cancellation policy. Bold some of the text so the font is conspicuous as well. It's much more difficult for a guest to dispute they overlooked a policy like this:
The above will wipe out 95% of issues. Guests will still often ask what their cancellation options are, even after agreeing to your policies. And you are always free to override your policy and make an exception.
Both Stripe and Square have their own best practices for fraud and chargebacks. I will highlight those in another post.