Any disruptive startup which rockets to global popularity can expect to be the recipient of a little controversy, right? Yes, but Airbnb has been consistently plagued by criticism and litigation, coming under fire from hotel groups, affordable housing advocates, property owners, residents and regulatory bodies.
In spite of their tricky relationship with traditional concepts of regulation and taxation in the service industry, Airbnb has tapped into two overlapping demands:
- that of travellers seeking cheaper alternatives to hotels, and
- homeowners looking to make a little extra income.
Airbnb founder, Brian Chesky, is adamant that current codes and regulations regarding short-term rentals are simply out-dated, but the company hasn’t had a smooth relationship with regulators, and they are no stranger to controversy. Recently they won a huge legal battle in San Francisco which the company has poured $8 million into fighting and lobbying locals to drum up support.
Let’s Be Real
While Airbnb’s slick marketing makes everything seem fun, trustworthy, and safe, there are actually some very serious implications to letting strangers into your house.
Airbnb presents itself as a lovechild of the “sharing economy,” but let’s be clear, this is still very transactional and functions as a business. While the company will happily skim a 6-12% guest service fee PLUS a 3% host service fee from that transaction, they nevertheless place much of the burden of complying with the law into the hands of the hosts themselves.
It’s important to sit down and ask yourself about those uncomfortable “what ifs” because there’s no guarantee they won’t happen to you.
Airbnb Legal Risks
If you are an Airbnb host, or are considering becoming one, here are the basic outlines of the six issues you will have to approach seriously to ensure you stay within the bounds of the law while federal, state, and municipal regulations shift gears to fit this new mode of service industry.
1) Check Your City’s Laws
You need to take responsibility and stay up-to-date about the regulations in your city regarding short-term rentals. Carefully examine the zoning laws, and establish if the type of property you live in falls within the allowable limits. Check how many days per year you will be allowed to sublet.
This can be quite complicated, especially as the goalposts are constantly shifting. For example, in New York a Class A multiple dwelling, classified as occupied by three or more families living independently, can only be used for “permanent residential purposes.” This law effectively prohibits Airbnb in an apartment block, unless the host is personally present during the guest’s stay, with an upper limit of 30 days per year.
The consequences of operating illegally can be harsh. Fines in New York and San Francisco are especially steep. It’s hard work, but do your homework first and save yourself a LOT of pain later.
2) Register, Get a Permit, or Obtain a License
Again, you will have to do your homework with this one. In some cities, if you want to operate a short-term rental, you’ll have to register and apply for a permit. Again, unregistered properties listed on Airbnb could see their owners receive a nasty fine. Cities like Boston and San Francisco are trying to crack down on illegally run hotels where large commercial enterprises exploit the system and run under the guise of Airbnb.
3) Pay Your Taxes
Many Airbnb operations are covertly avoiding paying tax which is causing huge problems for municipal governments. Worst of all, Airbnb has consistently refused to hand over private data on the owners of Airbnb rentals. Just because many others are skipping on taxes, it doesn’t mean you should too. Airbnb may eventually release that information. You don’t want to find yourself with a surprise back-payment and a fine when the tax office finds out.
Also, don’t expect Airbnb to step in and save you. Be a responsible citizen, keep your finance books in order and own up to your extra income stream.
4) Check Subleasing is Permitted
If you own your property, then that’s a different matter. It would seem a large number of Airbnb hosts lease their apartments, a fair few of whom neglect to check their lease agreement and see if subleasing is permitted.
There have been more than a few cases of Airbnb hosts being evicted by their landlords on these grounds – even the poster child of one of Airbnb’s advertising campaigns who gave stranded tourists free shelter during Hurricane Sandy was evicted just months after the event hit national headlines when her landlord wised up to her sideline operation.
Not every landlord will be happy about you handing over the keys to strangers you have interacted with only a few times online. It is much safer to ask first and seek written permission. Finding a new place to rent with that kind of black mark against your name could be pretty tough.
5) Take Out A Robust Insurance Plan
The cross-section of the Airbnb traveller demographic has wonderful, kind, and interesting people at one end, and nightmare guests at the other. Make sure you’ve got a robust insurance plan that will have you covered if your guest throws a wild party or sets your house on fire.
Your standard homeowners plan may not be enough either. While Airbnb promises coverage with its $1 million Host Guarantee, read the fine print closely, and you’ll see there are many eventualities and damages it will not extend to. Don’t play a statistics game and think it will never happen to you. The hosts who took that risk in the past have truly regretted it.
6) Health and Safety
For now, it doesn’t seem like Airbnb rentals will be forced to comply with the same stringent health and safety regulations that apply to traditional service industries like hotels. Nevertheless, it could quickly get nasty if you found yourself at the wrong end of a lawsuit when a guest was injured while staying at your property.
Do the sensible thing and have a careful read through Airbnb’s guidelines on Responsible Hosting. This includes basic things like providing a first aid kit and a fire extinguisher, checking your smoke alarm and carbon monoxide detectors are functioning, ensuring the fire escape route is clearly marked out, and providing the numbers of the local hospital and emergency services. Make sure there aren’t any exposed wires, the ventilation is working, and the air conditioners and heaters are fully functional. Establish safe occupancy limits and don’t allow more people to over the limit at any one time.
We know that is a lot of homework, but choosing to host on Airbnb is not necessarily the safe and quick cash cow that it is cracked up to be. Being a host takes a lot of time and effort.
Although taking the extra precautions may cut into your net profits, in the long run it may save you from heavy fines, being evicted, or being sued. Don’t add yourself to the long list of Airbnb horror stories which are piling up online.
Saskia Kerkvliet is an Editor at LegalTemplates.net, a company which is harnessing cutting-edge technology to help people create reliable legal documents at an affordable price. Follow us on Twitter @LegalTemplate