By Ellen Gregory
Are you thinking about being an Airbnb host? Not sure where to begin? You may be the hospitable type and like the idea of having new, interesting people coming and going from your home, or you may just need some extra income to pay your own mortgage or monthly rent. Regardless of your reason, there are a few issues you should be aware of before signing up as an Airbnb host. The six questions below are by no means an exhaustive list of the legal considerations of becoming an Airbnb host, but it should give you a taste of some of the things you should take into account when making the decision.
1. Am I allowed to rent out my place?
The first and most important issue is to determine whether or not you are legally permitted to list your home, or any portion of your home, for short term rentals. Even if you own your own home, there may be limitations on your ability to rent out your home. For example, if your home is part of a homeowners association (HOA), you will need to review the covenants, conditions and restrictions (“CC&R’s”). But beware—event if there is no express prohibition in the CC& Rs, other provisions may serve as practical limitations on your ability to rent out a room or your whole home. We have seen CC&R noise restrictions and parking limitations used to prevent owners from hosting. If neighbors don’t like the fact that you’re renting out your extra bedroom, they may try to argue that you are violating the prohibition on excess noise, especially in condominium associations where you may share walls, floors, and ceilings with your neighbors. You might be able to address this concern by restricting your occupancy to only one person at a time. We have also seen HOAs limit each household to one car parked on the street, which can have the practical effect of shutting down an Airbnb listing if the owner has no garage or only limited garage and driveway space.
If you rent your home from a landlord, your lease agreement may prohibit you from subletting or renting space to others. Again, as in the example above, even if the lease doesn’t expressly prohibit you from renting space, there may be other provisions that come into play that could result in the same practical effect; e.g., occupancy limits, vehicle parking, noise, to name just a few. If you rent, be sure and review your lease agreement and get permission from your landlord ahead of time.
2. What local laws apply?
Even if you have permission from the HOA or your landlord, be sure to next check the state and local laws and ordinances. Especially in California, many cities and towns have ordinances in place that apply to Airbnb hosts. For the most part, these rules are designed more to regulate hosting than to prohibit it altogether, but it’s important to know what they say. In San Francisco, for example, you cannot be an Airbnb host without first obtaining a Short-Term Residential Rental Certificate and Business Registrations Certificate. If you are a San Francisco resident, you can obtain these certificates online through the Airbnb website. Most other cities and towns that require business licenses or permits require that you apply directly with the city or town. The Airbnb website has a listing of, and links to, many local ordinances, but if you don’t see your city listed, don’t assume there is no ordinance. New ordinances are being passed practically daily, and Airbnb doesn’t update this page frequently. More importantly, Airbnb makes no representations about the accuracy of the information on its website and expressly puts the onus on the host for researching and complying with local laws.
3. What are the Airbnb Terms of Service ?
Another key document to review is Airbnb’s Terms of Service. This document is also available on Airbnb’s website; the latest version went into effect on March 27, 2019. It is quite lengthy but is written in relatively easy-to-understand language. It is important to read it through in its entirety, but some of the key provisions include:
- Hosts alone are responsible for identifying, understanding, and complying with all laws, rules and regulations that apply to their listings.
- Airbnb may, without prior notice, remove or disable access to any content that you have placed on the Airbnb website for your listing that Airbnb finds to be in violation of applicable law, the Terms of Service, or Airbnb’s then-current policies and standards.
- Airbnb can terminate your listing without stating a reason, as long as it provides thirty (30) days’ notice by email.
- When creating a listing, you must provide complete and accurate information (such as listing description, location, and calendar availability), and disclose any deficiencies, restrictions (such as house rules) and requirements that apply. We were involved in a case where the host provided inaccurate location information (at the beach), in an attempt to lure guests to their listing, when the property was, in fact, several miles away from the beach. Providing misleading information in a listing is grounds for Airbnb to withdraw the listing from the platform and to ban the individual from further use of the platform. In addition, the host could be required to reimburse the guest for alternate accommodations if the guest files a formal complaint.
- You may not discriminate against or harass anyone on the basis of race, national origin, religion, gender, gender identity, physical or mental disability, medical condition, marital status, age or sexual orientation. (Be aware that this is a much more stringent standard than most discrimination laws in the United States.). There have been several recent high-profile cases in which hosts discriminated against guests based on their race, and Airbnb is beefing up its anti-discrimination enforcement and has moved away from having guests share photographs of themselves in an effort to prevent such discrimination.
4. What are the Tax Implications ?
In general, hosts are responsible for determining their own tax obligations. In some areas of the country, Airbnb has made agreements with governments to collect and remit local taxes on behalf of hosts. Airbnb calculates these taxes and collects them from guests at the time of booking. Airbnb then remits collected taxes to the applicable tax authority on the hosts’ behalf. You will need to determine if your taxing authority has such an agreement with Airbnb, and, if not, do your own analysis of your tax liability. A full discussion of tax implications is beyond the scope of this article, but, in general the IRS requires US companies that process payments, including Airbnb, to report gross earnings for all US users who earn over $20,000 and have 200+ transactions in the calendar year. If you exceed both IRS thresholds in a calendar year, Airbnb will issue you a Form 1099-K. A helpful resource is an Ernst & Young guidance document which was prepared specifically for Airbnb in 2017. https://assets.airbnb.com/eyguidance/us.pdf. Consult an accountant or other tax professional to make sure you are properly addressing your tax liability.
5. What about Liability Insurance ?
Airbnb carries Host Protection Insurance on behalf of hosts listing through Airbnb. The insurance provides primary liability coverage of up to $1 million dollars per occurrence, in the event of third-party claims of bodily injury or property damage. The program also covers certain property damage in common areas of a property outside of the listing itself (for example: a building lobby). Landlords and homeowner associations are also covered in certain cases when claims are filed against them due to a guest suffering an injury during a stay or if a guest damages building property.
However, some limitations apply. Examples of what’s not covered by Airbnb’s host protection insurance include, but are not limited to:
- Property damage due to things like pollution or mold
- Damage or injury from something done intentionally (not an accident)
- Loss of earnings
Be sure and carefully review the limitations of Airbnb’s insurance program and evaluate whether or not you need to purchase additional coverage on your own.
6. What if I have an Issue with Airbnb ?
When you sign up to host on Airbnb’s platform, you agree to resolve disputes with Airbnb in accordance with the dispute resolution provisions in the Terms of Service. Disputes must initially be addressed through informal negotiation. If informal negotiation is unsuccessful, the party intending to pursue arbitration notifies the other party via email that s/he intends to initiate the arbitration process. In order to initiate arbitration, a claim must be filed with the American Arbitration Association (AAA) by submitting a formal written Demand for Arbitration (a form is available at www.adr.org) as specified in the AAA Rules. The initial filing fee for the consumer/host is capped at $200. The consumer/host gets to elect the hearing location and can elect to participate live, by phone, video conference, or, for claims under $25,000, by the submission of documents. The arbitrator can grant any remedy that the parties could have received in court to resolve the party’s individual claim. Arbitrators’ decisions are binding, meaning neither party may appeal the decision to the courts.
As stated above, the legal issues identified in this article are by no means exhaustive but will give you an idea of the types of questions you should be asking if you are interested in becoming a host. Please contact email@example.com if you have any questions.