Airbnb while popular with the public, has elicited a negative view from the traditional hospitality industry and is making an attempt to reverse this stigma with multi-family housing providers by teaming up to create a solution that works for “everyone.” This partnership will first need to address several initial issues before any kind of arrangement can sensibly be made. How will short-term tenants be screened? Who will be responsible for the legal liability of short-term tenants getting injured in a unit or causing damage themselves or to the property? How will revenue sharing be split between Airbnb, the host (resident), the owner/management company? What actions will Airbnb take to prevent investors from purchasing apartment buildings with the potential for long-term leasing to tenants who use their apartment like a hotel through Airbnb to generate revenue for themselves?
So far, Airbnb has attempted to address concerns by showing that they provide protection insurance and a $1 million host guarantee to protect the properties and their keeper. The company also stated that hosts keep 97% of the revenue. However, in the case of multi-family housing, the host is the tenant. According to their website, Airbnb mentions that their $1 million host guarantee does not protect: cash and securities, pets, personal liability, shared or common areas, and that certain types of property, such as jewelry, collectibles, and artwork have limited protections. If your property allows for residents to rent their unit on Airbnb, it is important to make sure that they are aware of the risks and limited protections of the Airbnb policy and the benefits of having a good renter’s insurance policy to fill in the coverage gaps.
Additionally, how can owners and property managers guarantee that they will see any money from these damage/liability agreements? The unit doesn’t belong to the tenant and it is your job as an owner or management company staff member to keep the property in good shape. So in reality, a lot of the real risk falls on you, not the tenant. Therefore, it makes sense that you would want to be paid directly as a result of an Airbnb rental agreement. Airbnb must provide a revenue collection process for the multi-family industry before many owners/management companies will be willing to even consider the risks associated with allowing short-term rental of their units.
However, if you as an owner or manager currently prioritize your tenant paying rent on time to support your revenue stream, then you may be completely comfortable just allowing your tenants to rent their space for extra cash. While you don’t get paid directly, you may be presumably saving money because you won’t have to evict that tenant for failure to pay rent because of his/her additional income. Not having to evict your tenant for non-payment alleviates your property from the additional associated costs to clean and re-rent the unit, if you can count on your tenant utilizing Airbnb rental income to cover on-time rental payments.
Another very important concern for housing providers is how the safety of your property’s residents can be affected by short-term rentals. You screen prospective tenants and monitor resident actions to make sure that your communities are safe. However, Airbnb’s short-term subletting model doesn’t really address screening. The renter signs up with personal information which may or may not be truthful, and Airbnb doesn’t require a background check; meaning someone could let a sex offender or convicted felon spend a couple nights at your property without anyone knowing about it. Without regulating who may be staying in one of your units, allowing tenants to rent their leased apartments through Airbnb can be a VERY risky practice.
Finally, there is not only a lot of risk to the host housing provider, but to the multi-family communities in which they operate if a deal is struck before all of the risk factors associated with Airbnb are successfully addressed and resolved by the industry. And, if Airbnb does expand into multi-family housing, expect to see a lot of legislative action aimed at correcting the concerns mentioned in this article as well as any other additional unforeseeable consequences that yet may be identified. If you are concerned that your community has tenants who are renting their units on Airbnb, you should do a little research. Check the Airbnb website and see if you can find any rentals that are listed as available on your property. You may want to routinely do this prior to major events in the area like Broncos games, Great American Beer Festival, and the National Western Stock Show & Rodeo. This is when hotels may be in short supply and visitors are desperate for rooms. It is not unlikely that an opportunistic resident will try to and make a spare few hundred bucks for little inconvenience and almost no work. If you discover one of your tenants renting out their unit and want to deal with this issue, give the Firm a call and have one of our attorneys provide you with advice and options on handling this with your tenant.