How Airbnb Earned Me $20,000 And A Restraining Order From My Landlord
fastcompany.com
fastcompany.com
The author of the post seems shocked that he's in violation of anything. Perhaps he'd like to share excerpts of his lease before he feigns such shock.
Come on, the guy lives alone in a 3+ bedroom apartment in Brooklyn. We all know he signed that lease specifically to run a pseudo-hotel business under the guise of an Airbnb profile. He whines that he can't afford to live in the New York rental market without roommates; so get roommates or move somewhere cheaper.
BTW, the author is a professional writer who (gasp!) has a brand new startup to plug.
edit: It sounds like this guy has a sincere love for the experiences and newfound social life he's found when acting as an ambassador for his city. His heart is in the right place. He would make a great Couchsurfing host and probably make even greater, long-lasting relationships.
Categorically not true. Chris is a good friend, and he had a long term roommate until recently. He took on the lease because he knew they could cover rent whether or not the third room got let out. It is an amazing apartment in an awesome building, and his involvement in airbnb is not cynical or presumptuous. His listing was great value and he is an excellent host. I met him through airbnb and am incredibly grateful for it. So, try not to presume.
Illegal transactions are often great value.
There's a lot of people trying to rent out rooms on AirBnB now, and many of them think it's a "small issue," as likely to be ignored as, say, hosting a close friend for a month or two while they're looking for a flat after an explosive breakup. But it appears that a typical landlord disagrees with that opinion, and some shout-outs to that effect might be really helpful.
"When I delivered my rent at the beginning of the next month, I found the management company’s office under construction. It's now a hotel. The “loft-style” rooms are now listed on Airbnb for $169 a night."
Is this how airbnb was intended to be used? Isn't the point of a bed and breakfast-style experience the small-scale feel that the author described? Are guests really going to get the same attention/enjoyment out of airbnb if it's more-or-less a run of the mill hotel experience? Also, aren't there different regulations in place for rentals vs. hotels? The property manager may be violating laws as well.
to: Fred Wilson
date: Fri, Feb 20, 2009 at 10:00 PM
subject: airbnb already spreading to pros
I know you're skeptical they'll ever get hotels, but there's a continuum between private sofas and hotel rooms, and they just moved one step further along it.
[link to an airbnb user]
This is after only a few months. I bet you they will get hotels eventually. It will start with small ones. Just wait till all the 10-room pensiones in Rome discover this site. And once it spreads to hotels, where is the point (in size of chain) at which it stops? Once something becomes a big marketplace, you ignore it at your peril.
--pg
NYC hotel laws are strict. Its very possible what the landlord is doing is illegal. If the OP was staying in his room, may be it qualified as a bed & breakfast. I don't think the landlord would meet that qualification.
That the market is expanding is not surprising. There are a lot of empty bedrooms around. We've yet to see someone doing this with their foreclosed property but I'm sure that will happen too. Like Ebay, AirBnB seems to have a 'let the user do what they will and let whomever thinks they are harmed go after them.' A good example of this was the way software companies responded to people selling old copies of software on eBay or enterprise gear that normally requires a service contract. It may start a sort of 'race to the bottom' for some folks, we'll have to wait and see.
It's critical to the landlord to have it on the record that he was running a pseudo-roominghouse out of his apartment in order to evict him later.
Otherwise, you get held up in housing court.
In addition to all of that, often codes simply don't allow boarding houses, regardless of who is running them. One of our renters tried to run a boarding house without our knowledge, and when the police were called to one of their parties, the city threatened to levy considerable fines against us for running a boarding house, regardless of whether we were actually running it or getting any money from the tenants.
By the sound of this place, the landlord could probably do quite well out of airbnb. But in that case, why not just approach the guy and cut a deal or explain that he wants him out to rent the place himself?
Seriously, this is flippin' AirBnB, not the slaughterhouse industry. I only asked you to think about the costs, not to roll everything back. Is this a knee-jerk reaction to straw-man arguments which you happen to imagine coming from your least-favorite Republicans, or what?
If you want a more closely related set of laws, look at tenement housing. The Jungle was not the only example of an industry that badly needed reform.
Labor laws protect the needy and powerless, taxes pay for schools and city services, permits keep us safe and hold businesses accountable if they fuck customers over or violate things like heath codes...
In the situation of AirBnB, the externalities are imposed on all the other residents of the building and the neighborhood who signed up for apartment leases on the assumption that random people would not be coming and going. The value that accrues to the AirBnB host is generated partially by the loss of value to his neighbors. So what you have is not a creation of value, but rather the opportunistic transfer of value.
Hmmm. I'm not sure that it's so easy for courts to take on all these cases. I'm especially worried that it's too much burden on individuals to defend their rights. Maybe we should try to find a consensus on what's OK and have the police hand out tickets?
And this is a specific occasion to see the costs. Most occasions you won't get to see the costs. They'll be behind the veil of obscurity and all you'll actually see is a bunch of (possibly self-interested) Republicans talking about abstractions, if the costs are mentioned at all.
Perhaps now that we are better enabled by technology we can get all or substantially all of the benefits with fewer costs in the future? Then everyone can be happy happy freedom joy double rainbow all across the sky puppy-kisses. For srsly. :)
okay i'm done here. :)
Face it, AirBnB is just the next hiding place for illegal rentals after tax and zoning officials caught on to vrbo. I don't understand how so many people think that they can turn the property under their control (owned or rented) into a business without liability or regulation. Just write the word taxi on your car, pick up some fares, and see what happens.
Why let such silly things as laws stand in the way of profit? Who cares if someone else gets hurt...
Couldn't the landlord just up the rent? That way, presumably everyone would be happy.
I don't buy your innocence here. I've been leasing houses for ~10 years now during and after college. The leases have always required a mix of landlord approval for subletting, banned running a business from the house, and prohibited occupation by non-lessees.
Here are two clauses from an older lease[1] I happen to have in my desk:
* Tenant shall not assign this Agreement, or sub-let or grant any license to use the Premises or any part thereof without prior written consent of Landlord.
* The premises shall be used and occupied by Tenant and Tenant's immediate family... exclusively, as a private single family dwelling.
Your faux innocence is pretty annoying actually. You were abusing the property for commercial purposes and you're surprised he didn't give you a friendly phone call?
1 Looks like the lease was originally snatched from www.academichomes.com/downloads/ExampleLeaseAgreement2.doc
OP would be 'abusing' the property if he were running a crack den. I see no problem with tenants doing whatever they want with the property that they are leasing - as long as no damage is done & neighbors are not troubled.
That's why landlords define "damage [being] done" and "neighbors [being] troubled" in a legally binding contract called a lease, and when you break that contract, you can get evicted.
I strongly suspect most resistance to these basic facts in this thread is typical Airbnb/pg/HN apologia. It certainly isn't coming from anyone who has rented in NYC, that's for sure.
I don't find it that hard to believe that someone would blindly sign a lease after only quickly skimming over the important bits and then never look at it again. I remember one landlord looking quite surprised when I sat in his office and read all 8 pages of the contract, asked for clarifications on a couple of points and asked for one clause to be changed. It seemed to me that she'd never seen anybody do that before.
When said person is making a fulltime income solely from renting space in an apartment that he is only leasing, well, "most people" would think "I should probably take a look at my lease first"...
I don't find that hard to believe either.
What I find revolting is someone not reading the lease, violating it, then playing the victim.
Now that you were cranking tons of guests through for personal gain, you were surprised when your landlord took exception. If I found out that somebody was blatantly disregarding the rental agreement they'd signed with me for commercial gain, they would not be getting a friendly "hey brother, can you please stop?" phone call either.
Read leases before you sign them in the future.
He signed an agreement with another party saying he would not do what he ended up doing, for profit. How are you equating that with the landlord collecting rent?
Maybe if the landlord signed an agreement with one rent price, then started charging a higher price, you could equate the two behaviours.
for the reason I stated, someone to look after the place while multiple Airbnb guests come and go. Otherwise you'll need to pay for a cleaner and check the place every time someone stays. That middleman is taking a lot of the pain of managing a property away from the landlord.
Has anyone here ever rented?!
If I was his landlord, I would have more than enough leverage with the breech of contract to get him to sign a new similar contract, this one charging maybe 2 times more rent. The landlord gets paid more, which in turn covers his slightly higher (or possible the same) landlords insurance and then some. The landlord lets his tenant do what he's good at (maintain a sterling Airbnb profile and choose good renters) and the landlord takes a larger cut. Worst case scenario, his tenant doesn't take the deal and the landlord proceeds to kick the tenant out for breech of contract (could possibly lead to a court battle, but breech of contract is a pretty cut and dry phenomenon and the contract most likely has breech of contract clauses built into it) and do was he was going to do anyway (rent it out through Airbnb or otherwise).
As it stands the landlord will be throwing money at lawyers (possibly covered by landlords insurance, but could effect the premiums later), which may not turn out favorably for the landlord in court, to ultimately do something that is outside his area of expertise (act as an Airbnb hotel himself).
That's what I think at least.
He seems quite aware of his position.
But they aren't running a hotel (their tenant is), so what're they complaining about?
If I was a landlord I'd have no more problem with this than if I was a wholesaler whose customers resold the stuff retail.
Until you are a landlord, you can't really say for sure what you'd do as a landlord. I just recently started renting out my house. Going into it I was all "as long as they pay the rent on time and don't trash the place, I don't really care who rents it". But then I started getting into the fine points of liability and eviction rights and all the icky stuff you never see as a renter. And then I started showing the place to prospective tenants and started to realize how critical it is for me to choose the right people to live in my house. After doing all that, I would really hate to see the tenant let someone I know nothing about rent the place. And so the lease states they can not. The wholesaler -> customer relationship is not the same as landlord -> renter.
If you were a landlord who was an AirBnB fan, you could certainly choose to not include clauses that specifically forbade this sort of activity. This guy chose to lease somebody else's property and then go ahead and use it in a manner that was expressly forbidden by his lease agreement to line his own pockets.
I have zero sympathy for him. He got slapped down for misusing somebody else's property and rightly so.
So, naturalists observe, a flea.
Hath smaller fleas that on him prey;
And these have smaller still to bite 'em;
And so proceed ad infinitum.
-- Jonathan SwiftHe's not a normal landlord, he's a shark. He owns several dozen buildings, prefers paying fines to getting permission, and once had our whole building manned with thugs to prevent a city agency from entering the building and confirming that he was constructing a unit on the roof without a permit.
He even connected several of his buildings' toilets and sinks directly to storm drainage pipes, dumping raw sewage straight into the creek (http://bit.ly/L3f8Ey).
The current option, of crowd-sourcing information about possible lodging, wasn't previously possible. While we still need regulation to prevent the dumping of raw sewage, we could get so much more out of the space we have with decentralized, information-rich decision making.
Plus, it's not like regulation has actually kept people like him from doing illegal things. As long as the punishment is "a fine" breaking the law is just another cost of doing business. If instead the government could evict him from his properties he might possible decide its worth following the law.
1. Violated his lease.
2. Documented exactly how much income he received during that violation.
3. Probably thew up some red flags to ensure the IRS double-checks that he declares that income on his tax returns.
And all of this before he finds out what the courts have to say about his actions.
You're technically violating contract law and opening yourself and the landloard up to a ton of liability by doing this. Leasing and renting is much more complex than simply letting someone sleep over at your property. A property owner can get in some serious trouble if something were to happen (someone gets hurt, robbed, etc..) and he/she hasn't taken the correct steps to protect his/herself. Not to mention the issues around covenants, local ordinances/regulations, taxes, mortgages, and insurance.
There are also clauses in leases that are completely unacceptable to break. For example, paying rent.
On top of that you have landlords who tell you "oh, such and such won't be a problem" even though it says in the lease that it's a problem and that the lease comprises the whole of the agreement. (cough hi, J Warvro and Associates, it's me again cough) And no one wants to modify it because it's too legally risky.
</semi-topical-rant>
In the absence of a written lease, the obligations of a tenant to the landlord are to not cause damage to the landlord's property -beyond ordinary wear and tear-, to pay the landlord the agreed-upon rent in a timely manner, and to not interfere with the quiet enjoyment of others tenants in the building. A landlord's obligation to his tenants are to provide a place that's fit for habitation (There are some things like a functional phone jack in definition of that), ensure that any hazards that may be caused by damage to the building are rectified in a timely manner, and to address any tenant's complaints regarding those two items.
A written lease will generally only add restrictions on one or both parties. Unless explicitly changed by the terms of a written lease both parties are required to live up to the basic obligations that they would be held to in the absence of a written leasing agreement. (And even then, there are certain obligations that a landlord cannot free himself from.)
Edit: Replaced "waive" with "free himself from" in last paragraph. "waive" wasn't the right word to use.
The SFAA lease contains things that are... battle-tested.
If you're a tenant, it's not your problem, but if you're a landlord, you probably don't want to be one of those guys who ends up with a tenant that's impossible to get rid of, stays in the apartment forever, and pays half of what you could get if you could legally rent the apartment to someone else (which you can't).
"if there are multiple tenants in the apartment and their rooms are the same, they may not split the rent unequally. it must be split proportionally. so decreeth the rent board."
Do you have a citation for this? The only possibly relevant section that three minutes of searching turned up was 37.3(c) "Initial Rent Limit for Subtenants".
"[The] Rent Board ... declares random things legal and enforceable or not legal and not enforceable."
Law at all levels is more like quicksand than bedrock. At least the Rent Board has a consistent and public agenda. Do the Rent Board's actions make more sense to you if you view them as a Renters' advocacy group?
"If you're a landlord, you probably don't want to ... [end] up with a tenant that ... pays half of what you could get if you could legally rent the apartment to someone else."
Is this the meat of the "legal risk" that you were talking about earlier? If so, you're not talking about legal risk; you're talking about limiting earning potential.
For something like forty years it's been the position of the SF Rent Board that the renters of San Francisco should be able to find, secure, and retain affordable housing whose rental rates more-or-less track the -actual- increases of costs to the landlords who rent out the space. If you do even the smallest bit of research before you decide to become a landlord, you'll discover that the city will make it hard for you to throw people out of their homes simply because they aren't making enough money for you. What's more, you'll discover that things have been this way for decades.
I suppose "political risk" would be a better term than "legal risk" per se. Subtle differences in the lease and established law increase the risk that the landlord has an unfavorable outcome (possibly including earning potential loss). As a consequence, they are unwilling to consider any changes to the lease, even a minor one, not simply because they may be screwed, but also because there are hundreds of other prospective tenants who would jump at the apartment who won't present them with any such risk.
The lessee is still responsible for those damages whether or not he was renting the room, so the landlord has a path for recompense in the event that any portions of the place are damaged to the point of requiring rumuneration.
And that's the key. I have never met a landlord who demanded compensation from regular wear and tear. Not for the appliances, floors, walls, etc.
I wasn't talking about holes in walls. I was talking about the general wear and tear that the landlord would never be compensated for. In the end, he would have to replace appliances out of his own pocket at a faster rate, etc.
Because, at the risk of repeating myself, $20,000 isn't "little ways".
It is $20,000. We are talking about something important here. Yes, we all make a few holes in the wall or unsanctioned little repairs or something, but we're talking $20,000. It's not "little things". I'm not saying it's automatically "damage" or harm of any kind. In fact it pretty clearly isn't since it's hard to miss $20,000 in damages. But we're not talking about a couple holes in the wall, we're talking about $20,000.
I've got a very simple four-word point, and I was not trying to imply any further argument.
The lease likely mentions guests generally, not charging for them. Which would mean CouchSurfing.org is just as problematic - and that the amount of profit is immaterial.
It is possible that the actuarial value (i.e., risk-adjusted value) of those potential liabilities exceeds $20,000, but we would need more information to know.
Does anyone have any insight to cast on this whole arbitration system?
The important thing for you, as a landlord, should be to make this clear on the contract. Whether it's increasing the deposit or rent if the renter wants to open up the property to Airbnb-like usage or just not allowing it period, it should be clear in the contract.
EDIT: Airbnb actually does state this in their terms of service:
>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 rules 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
I am in a fairly rare position where I'm feeling that I would actually be receptive to advocacy (and I'm a very stubborn person), but nobody's advocating anything to me yet. I feel like a music publisher in the year 2000 saying "Great idea! What would you like to see in a downloadable music service?"
You're a landlord. You mentioned in another thread here that you have a strict "no subletting" clause in your contracts with your renters. What could Airbnb do to change your mind? Nothing, I would wager. They don't offer insurance to their client hosts, so they're definitely not going to assist with your insurance.
I'm totally willing to change my mind. In fact, I'll probably take that step on my own when I rewrite my lease. I would just like to know other people's opinions on best practices instead of taking a shot in the dark, and Airbnb seems uniquely positioned to come up with something.
What would be bad is for stories like this to create a backlash from landlords against Airbnb and reduce the usefulness of the concept.
Sometimes capitalism gets in the way of distributing goods and services. Usually when people try to decide what other people shouldn't and shouldn't do with things they sell to them.
It sucks to get the government involved with these disputes, but he opened the door.
Also, petty retaliation against someone exercising their legal right to enforce contract is morally suspect. Bordering on sociopathic.
The point is there are no clean actors here. A landlord running an illegal hotel and a renter that broke their lease. But thanks for calling me a sociopath. ;)
http://www.crainsnewyork.com/article/20120427/HOSPITALITY_TO...
Now why did the landlord decide to list rooms him/herself? That's interesting. Could Airbnb become a way for small-business hotels to book rooms? Generally landlords don't want short-term tenants for various reasons. I wonder if the Airbnb idea, which plays on the social aspect of borrowing an individual's house vs. dealing with an dispassionate corporate entity, enables leasing of smaller properties to work. If that's the case, then a landlord seeking to run Airbnb listings to turn a few rooms in an apartment complex into a hotel might eventually run into trouble if this kind of arrangement becomes common on Airbnb, since then you lose the social aspect that was making the tenants well-behaved. With tenants who might abuse the property a small apartment landlord probably would not want to deal with them.
Maybe an enterprising landlord could put in a clause claiming 50% (or more) of the revenues from Airbnb if any tenant chooses to use it. In fact, maybe the OP should offer such an arrangement to the landlord as a settlement and thus be able to remove the restraining order and continue making some profit.
I have no sympathy for this guy, and I have the greatest sympathy for his landlord. I'd be annoyed if anyone started using my rental property as a hotel due to the greater wear and tear; in fact, this is semi-common in the area where I own rental property so I keep an eye out for the possibility when selecting tenants.
You charge $1200 to rent a dwelling out. It's $1200 flat. Whether 1 person @ 1200 or 3 people at @ 400 each.
How do you somehow accrue more nebulous "wear and tear" from a temporary visitor than you would from a second lessee? It's still no more than two people at once.
There are very good reasons for this. I did a background check on my tenant, not every possible person my tenant may randomly hand the keys over to, unsupervised. It's really not the same thing as having guests over.
That said, I'm not opposed to including some kind of pro-Airbnb language in my next lease. This is new territory so I don't know what it should be. A larger security deposit? A cut of the proceeds?
That being said, running a BnB is different from subletting. With subletting, you enter into a long-term (i.e. a month or more) lease agreement with your tenant. With a BnB, you have more people coming and going for much shorter stays. Here's why that distinction can matter.
In probably every US jurisdiction, the law distinguishes between apartment buildings and hotels. If I own an apartment building, I can't just let my leases expire, hire some maids, and starting renting rooms out by the night.
For starters, there's zoning. Hotels generally require a different zoning code than apartment buildings. If the local government catches you in flagrant violation of zoning laws, expect trouble.
Next, there's permits. You need a different set of permits for a hotel vs an apartment building. Again, this would usually be enforced by the local government, and they will come after scofflaws. (Permits are a source of revenue for them, so they have a strong incentive.)
Then, there is the building's mortgage, if any. It's not unusual for mortgages to have restrictions on how the building is used. Will the bank foreclose on you if you start running your apartment building as a hotel? Possibly not, since they make more money collecting their monthly payments than foreclosing. But it's still a risk.
Those are three big reasons why a sublet is different from running a BnB out of your apartment. Will any of those things come into play if you, a landlord, look the other way about one of your tenants who's on AirBnB? Hopefully not. But the problem is that if you show you're willing to tolerate it, and it gets out of hand, then you might have to share the blame. Which is why it might be prudent for landlords to crack down as soon as they find out about this type of activity.
Thankfully, my social skills calmed her down, but now the apartment leasee (lessee?) is knee deep in legal matters. Clearly the lessee broke the lease, however I'm sure she didn't really understand so at the time.
AirBNB needs to be much clearer in the listing process of the possibility and legal ramifications of violating one's lease. Especially since it ends up hurting not just the people listing apartments, and apartment owners, but also AirBNB customers who trust the listings on the service to be legitimate and lawful.
I imagine most people do not declare the income, and $20k a year is significant revenue.
Running a hostel in your apt for extra cash doesn't help that situation. You're just contributing to driving rent up even further.
https://twitter.com/chrisdannen/status/209798659473285121/ph...
Not surprising landlords have caught on either, a good warning to anyone else selling their spare rooms.