Why the house that Airbnb built stands on shaky legal ground

airbnb shaky groundAirbnb, the startup darling and innovator of the peer-to-peer home vacation market, has a history of legal trouble. It all started last year, when a handful of horror stories went viral. Users said they’d had their homes trashed and defiled, information stolen, and complained that Airbnb’s response was less than satisfactory.

But the company stepped up to the plate, issuing a mea culpa heard ‘round the Internet, and increasing security controls. Airbnb also recently introduced its $1 million insurance guarantee, a reassuring effort for all of the renters out there nervous about the threat of damages.

Destroyed homes aside, there are a couple of much bigger problems looming in the shadows for Airbnb – and they start with your landlord and continue on to zoning laws. 

Playing the blame game

A recent story from a power Airbnb host detailed how his landlord served him papers for renting out his rented apartment using the site.

This got me thinking about the one and only reason I’ve never signed up to be an Airbnb host. I’ve rented rooms, homes, and even a tugboat-turned-houseboat with the help of the site, with generally very positive experiences. And given that I travel fairly often and live in downtown Portland, Oregon, I’ve considered clicking the site’s prompt to list my apartment several times. What always stopped me is the fact that I don’t own my apartment, and I never could quite believe that it was legal for me to make money off a place that my landlord owns.

Lo and behold, Airbnb’s Terms of Service have some pretty interesting language about this very issue. “Airbnb’s responsibilities are limited to: (i) facilitating the availability of the Site, Application and Services and (ii) serving as the limited agent of each Host for the purpose of accepting payments from Guests on behalf of the Host.”

Alright, so basically what Airbnb is saying is we have this platform, do with it what you will. The marketplace, that’s on us. The activity you create on it, that’s on you.

And there are some more detailed references to landlord-leasee rights:

“You acknowledge and agree that you are responsible for any and all Listings you post. Accordingly, you represent and warrant that any Listing you post and the booking of, or Guest stay at, an Accommodation in a Listing you post (i) will not breach any agreements you have entered into with any third parties and (ii) will a) be in compliance with all applicable laws, Tax requirements, and rule and regulations that may apply to any Accommodation included in a Listing you post, including, but not limited to, zoning laws and laws governing rentals of residential and other properties and b) not conflict with the rights of third parties. Please note that Airbnb assumes no responsibility for a Host’s compliance with any applicable laws, rules and regulations.”

When I reached out to ask Airbnb about illegal subletting, I was pointed back to the TOS. “This is clearly explained in the Terms of Services section on the Airbnb Website,” the company says. “Additionally we remind hosts in our Hosting Manual as well as other FAQs on the site that they need to be compliant with any contracts they have. Most tenants know whether they have the right to sublet their apartment or not; they likely know how their landlord will regard renting on Airbnb.”

There are plenty of property owners using the site to rent out their places. The problem is that, in most cases, renters using the site to host people are breaking their rental agreements. Real estate attorney Joshua Price tells me that the majority of leases have a clause prohibiting subletting – which is, essentially, what Airbnb facilitates – without a landlord’s consent. There are exceptions to this rule, and he mentions that in New York there is a statute giving renters a loophole around such clauses. Airbnb says there are currently no numbers on how many hosts rent or own their properties on the site.

The illegal subletting evolution: From Craigslist to Airbnb

craigslist sublettingWhile many renters using Airbnb might be operating outside the law, this is hardly something the Airbnb platform is responsible for. Check any Craigslists apartment and housing section and you’re sure to find a number of people trying to find subletters. The reasons are many: college kids who are going home for the summer and don’t want to fork over the rent while their apartments sit empty (which I’ve done); anyone who decided to fill up that extra room with a new roommate but was too lazy to add them to the lease (also, see me in college); frequent travelers who for some reason like to keep an apartment for the brief intervals between their vacations (unfortunately not me).

The difference is that Craigslist, if you want it to be, is anonymous. You don’t even have to provide your own contact information or any photos, if you really don’t want to. Yes, it’s entirely possible that if your landlord happened upon your post seeking a subletter (the more information you provide, the more likely this is), you could find yourself in hot water. But compared to the plethora of info Airbnb requires from its hosts, Craigslist is a veritable wasteland.

airbnb roomNot only are you encouraged to add as many high-res photos as possible (or take advantage of the professional photography Airbnb can supply), but for safety reasons you need to identify yourself. Which makes total sense: Every time I’ve used Airbnb, I’ve done a decent amount of research on my hosts, making sure I wasn’t going to become a cautionary tale.

Airbnb wants to help its hosts advertise well and make them money, and you can’t fault the company for that. And for all of the property owners using the platform, that’s great – but renters are just giving visibility to their illegal activity. Don’t think your landlord knows about Airbnb? I’d think again: The site has blown up over the last year. It’s not highly likely you’ll get caught, but every day you’re taking a greater risk as the site’s popularity grows. I asked my own landlord what she thought of Airbnb – she loves it and uses it to find vacation rentals all the time. She also tells me, however, that she rents out properties in three different states and all of her contracts contain no subletting agreements.

Landlords are going to (and are beginning to) grow wise to this game and start checking the site for their own properties. And that’s where you can get in trouble.

There are two questions we need to ask here, one of them being more of a stretch than the other. First: Is Airbnb acting as an enabler in all this? The site has provided a platform allowing us to monetize the space we (to varying degrees) live in without putting any language front and center about the fact that we might be breaking the law. Of course, that isn’t Airbnb’s fault exactly. If you choose to rent out your extra bedroom, your landlord sees it, and you get yours, then according to the terms of service, that’s your problem. And there are plenty of online platforms that could be used to break the law. As long as that’s not their intended use, though, it will come back to the user every time.

Still, I find it rather alarming that any notice about your contract with your landlord is buried in the terms of service. Would it kill Airbnb to have a prompt when you try to list your unit, asking what your ownership situation is? The site already has a few available checks and balances front and center, but none of them refer to this specific question.

It’s really easy to blame Airbnb in all this. But that’s analogous to blaming torrent sites for piracy, even though many also host plenty of legal activity. Which raises the second, bigger question: Because it provides the marketplace, is Airbnb responsible for what users are doing there?

Share and share alike

Airbnb is undoubtedly a disruptive service. It’s changing the vacation property game at warp speeds, and now the industry has to figure out either how to catch up and adapt, or use legal means to change Airbnb. Whether you call it the peer-to-peer economy, sharing economy, or “collaborative consumption movement,” the way we buy things has changed thanks to the Internet and tech startups.  The idea of ownership is very different than what it used to be, and Airbnb forces renters to ask: If this couch is my couch, why can’t I make some money off of it?

collaborative consumption infoLegislature is a big part of what’s standing in the way of all that. Airbnb’s own home, San Francisco, specifically prohibits exactly what the site does. Renting a property for fewer than 30 days is illegal — in order to do so, you have to get a special permit. And that’s if you own — renters are, of course, still subject to the clause in most leases that prohibits subletting. The law isn’t just meant to protect landlords, it has to do with a slew of issues: Bed and breakfasts and hotels can only exist in certain zones, and some people are buying up properties for the sole purpose of renting them out in popular tourism locations. This means that places people are desperately trying to find affordable apartments to rent in are being consumed by Airbnb properties, which are more valuable assets to the owner as short-term units. These ad-hoc hotels are taking up units in popular residential areas where finding a rental is already incredibly difficult. Owners may not only be motivated by ease of renting on the site, but because it allows them to get around complicated applications and expensive licenses that bed and breakfasts have to pay. They may think Airbnb represents a loophole, but the same owners often fall under the city’s definition of a B’n’B, and thus are breaking the law.

Of course, the laws exist for a reason — typically to protect your neighbors in the case of zoning. If you’re gone for two weeks a month and renting out your apartment, your next door neighbors will be subjected to your (potentially unpleasant) guests — something they are unprepared for since they weren’t aware they lived in a zone permitting you to run what is essentially a bed and breakfast. All of this is really only the surface of an inherently complicated issue, and it’s one that San Francisco is actively attempting to deal with

And Airbnb is working with them. The company tells me that the San Francisco Mayor’s Sharing Economy Working Group was formed with the intentions of trying to address the tension between current legislature and businesses like itself. “Airbnb seamlessly integrates travelers into a neighborhood’s existing infrastructure, relieving congestion in tourist zones and distributing their economic impact to new neighborhood economies – which is a win-win for residents and businesses in those areas,” the company says. “Our hosts and guests practice collaborative consumption, which encourages innovative ways to use existing resources, such as the extra space in a home, rather than exploiting new resources. The underlying philosophy leads to more sustainable and productive communities and helps to drive new business to the existing businesses in each area.”

Entire marketplaces are springing up for getting things that we want, cutting out the middleman and lowering costs by allowing us to share or get rid of extraneous add-ons we don’t need (in the case of Airbnb, a hotel restaurant, turn-down service, your towels cleaned for you, etc). And renting rooms is only the beginning: Car-sharing networks like GetAround and Wheelz are part of this, as is ThredUP, a childrens clothing-swap platform. ParkatmyHouse turns your driveway into a parking garage. 

Consumers aren’t the only ones who benefit. Reusing, sharing, and exchanging goods can cut down on waste; if we all share driveways for parking thanks to a network the allows us to organize and connect for this purpose, then we could potentially eliminate ugly, half-empty, space-consuming parking garages in high-demand real estate areas.

It’s a matter of efficiency, and with that comes job loss. If you effectively compete with and eliminate the magnitude of a product’s use, jobs will be sacrificed. If the consumers relying on services like Airbnb, Zipcar, and TaskRabbit continue to increase, it could hurt a variety of industries. And again, there are laws complicating the legality of many of these services.

And that’s where the debate over how Airbnb will proceed from here enters, and why the legal discussion is ongoing and being led by city boards and lobbyists. 

How do we solve the peer-to-peer rental dilemma?

We can discuss the merits and shortcomings of the collaborative consumption movement all day long, and while they play heavily into the issue of Airbnb and its relationship with zoning and pricing regulations, it doesn’t solve the renter’s dilemma. As it currently stands, renters who are acting as hosts on Airbnb are, by and large, violating their leases. The punishment can range from a first-time offender slap on the wrist, to eviction or legal action to claim part of the money you earned. 

Whether you agree with the ethics of a sharing economy or not — and for the record, I do — the fact remains that this is the way house leases are generally written, and have been written for a long time. They are the rules that many of you reading this agreed to when you signed that contract. Given that this is the case, how should users approach using Airbnb?

First of all, if you want to be a host, you should check out your lease. Who knows? Maybe you just happen to be the lucky minority without a subletting policy in your agreement. If you do have one, it’s a risk you have to personally weigh. Consider talking to your landlord and explaining the situation and the site. Chances are, since these are property owners who rent apartments, they’ve heard of Airbnb before. You also need to take your neighbors into consideration, and screen your potential guests carefully — whatever your apartment’s house rules are should apply to them as well. 

Renters shouldn’t be the only ones who give a little, though. Maybe it’s time for property owners to get a little flexible as well and consider integrating language that makes it possible for their renters to use Airbnb. Maybe they take a cut, maybe they get to help approve guests. Airbnb is open to cooperating with landlords and finding a solution. 

None of this is a problem Airbnb asked for, mind you. The site’s intentions were to give property owners a way to share their empty homes, rooms, apartments, porches, couches, and so on. Now the platform has unwittingly struck a cord on both sides of the rental market, and it’s up to landlords to adapt and lawmakers to decide how the Airbnb evolution will continue.