If you don't have a cancellation policy, that they've agreed to, I think you should give the renter their money back.
If you have a cancellation policy, people tend to take their reservation a bit more seriously, in my opinion.
Perhaps they will agree to a 50% refund with the remaining 50% applicable to a future rental? Just an idea where everyone might be a winner. Hopefully, they don't have to cancel at all.
If there's no cancellation policy in the lease agreement, then it seems to me that they've contracted to stay in your house and paid for that right. Your house is available for that time, so everybody has held up their end of the bargain. Whether they actually stay there is their business and it appears to me that you have no obligation to refund their money. Even if you did have a policy in place, it would state that they would get their money refunded ONLY IF you were able to re-rent their week. Some policies state that the refund will still not be the entire amount but $XX deducted for your business costs.
A really nice (but not necessary) thing to do would be to allow them to choose another week, either this year or next, and their paid rent would be applied to that week. You're probably not going to get a renter for next week, so that's a loss no matter how you look at it.
Here is our printed cancellation policy:
"In the event you are forced to cancel, we will make every effort to re-book your villa for a
10% service charge. However, no deposits will be refunded unless a replacement rental is
obtained. We may be able to reschedule your visit to another time slot in the future.
Refund arrangements can largely depend on the amount of notice given to us of the
cancellation, and on the time of year. For peace of mind, we recommend cancellation
insurance available through your agent. No refunds will be given for early departure
unless there is a serious problem with the house that cannot be cured within
24 hours or causes the guest extreme discomfort or serious inconvenience."
May not be perfect, but has worked for us. You do need to have a written policy. In this case, you have all their money and we would assume they know they are in danger of losing it, but how you handle this is up to you. At this point it's doubtful you can find another renter. Have you spoken to them on the phone to ask about their situation? Maybe they can re-book or will not cancel after all.
Dear wiffle, lrbaldwin and stjvilla. Thank you for your advice. I clearly need to have a cancellation policy in place. Here is the e-mail I sent to my renter.
"I received your e-mail regarding a possible cancellation. As it is so only 10 days prior to your arrival , I would have difficulty finding a renter for that time frame. However, I would like to work with you. If you feel you need to cancel, I would be happy to apply your payments to another week later in the summer.
However, if that doesn't work for you, I'll be happy to refund your deposit, but will be unable to refund your payments.
I hope that you will be able to use your reservation next week or, in the event you need to cancel, you will be able to rebook a future reservation. Please let me know what you plan to do."
I think a version of what you wrote, stjvilla is what I will plan to put in my listing. I'll let you know what response I receive from my renter.
It would be good to just start somewhere with a basic cancellation policy and send it out as an email update to all of your existing reservations, too. It is there to protect you and to help them be as committed as possible to following through with their reservation plans.
If cancellations are an ongoing issue then you may want to consider offering a vacation rental insurance option that will help protect them against some of the causes of cancellation: sickness, death in the family, weather that seriously delays or cancels flights, etc.
I think it is always good to do your best to work with people, but having a Cancellation Policy in place helps to keep you protected against those few who would prefer to take advantage of an opportunity to back out of an agreement last minute.
RA, MBA, Ko Olina Resident
Hawaii Life Real Estate Brokers
"Another day in the life...the Hawaii Life!"
You are very lucky, Marilyn. That's great news. Now go get that cancellation policy in place! And as Munro wisely suggested, send an email to update all your soon-to-be arriving guests on the new cancellation policy. If guests have not paid in full for their rental, they can still purchase trip insurance from Travelguard (the company I'm most familiar with) and possibly other insurers. You might want to suggest trip insurance to them as a protection to their "vacation investment." We refer people frequently to www.insuremytrip.com.
I agree and disagree with posting. Once a person has paid you-- and you have no policy for refunds-- you have to take your lumps - if they cancel. You can not change polices. It will not appear ethical.
But I use reservation manager which tells guests there are no refunds for any funds they convey to me. I have had 2 cancellations where they paid the initial deposit ($300) and cancelled and before I finished saying "our policy is..." they said "Oh, yeah I know, no refunds." I had one person cancel for Thanksgiving 2011. I had it re-rented in 3 hours. So I offered the guest a refund and she booked it for next year. The guests who lost those prior reservations, if they come back I promised a good rate if the re-book. I also include info on trip insurance all over my emails and contracts. Also, HA sells something (ticks me off but they seem to need the money). So if they cancel, I try to be understanding but this is a business.If you say you will refund it a replacement rental is retained, you will get emails weekly asking if you had. NO REFUNDS, period -- then be Mr. Nice Guy if you can. I have also had guests try to cancel and when I remind them of the policy suddenly that dying Grandpa LIVES! They can come! They found a cheaper place. TOUGH.
I really liked your letter to your guests and so glad they did not have to cancel. It almost sounded like they were hemming about coming and waiting to see what you would do and your response made their decision for them. I know sometimes when I plan something and things get hectic or suddenly everything in my home is breaking I think how I wish I had not planned that trip...but because it is paid and I don't want to lose my money I go and realize that I really really needed that vacation after all!
I also love stjvilla's cancellation policy, it is very pleasant. Mine reads a little harsh, but I had it reviewed by an attorney and they just make things a little dry sometimes. I may try to rework my own to be kinder sounding and then have them review to make sure I didn't do anything to mess it up. Thank you all!
In our rental agreement that is signed by our guests, we have a line that states: "We will not be responsible for cancellations at any time. We recommend trip insurance. Check on line for this coverage. Once payment reaches us it is non refundable". This totally eliminates this problem. A single rental unit is not like a hotel where people stop in all the time to stay. It's booked and is off the market. If someone needs to cancel or asks about the policy, we tell them that we will gladly refund any $ collected if we can re-rent their time. We have had two groups during ski season rent for 5+ nights and try to cancel the week before arrival. They always use the excuse that someone was ill or hurt. They may be totally truthful, but they also could have found another place to go or another thing came up. We can't afford to refund and once people know this could happen they will take advantage of you. Condo rental is a business for us and we use the income to make HOA payments and all of the other costs in operation of a condo like this. If they bring up the cancellation policy that sends a red flag to watch out during the entire rental. Since our condo is located in a ski area, we would refund or re-arrange time if the conditons for skiing were poor. You need to be reasonable with people. On the other hand people renting for early or late ski dates need to realize the mountain area might not be 100% skiable. I might call and get info on conditons before they leave home. This has only happened once in over 5 years. They re-arranged for the next year and were very happy.