Of Tourists and Tenants
by Marina Franco
You just found out that your tenant put your unit on Airbnb. Now, what do you do about it?
Perhaps your suspicions start with a tenant who constantly asks for replacement keys. Or maybe it begins with other tenants complaining about an influx of strangers with luggage constantly coming in and out of your building. Welcome to the latest landlord problem: the “hotelization” of your apartment building.
Though it started off a few years ago as a way to encourage people to open their homes to couch-surfing travelers, short-term apartment rentals have quickly developed into a way for tenants to profit off of their rent-controlled unit at the expense of their neighbors’ safety and their landlords’ pockets. Websites facilitating these short-term rentals have become an easy and lucrative resource for tenants who now have a low-cost and international platform to advertise “their” units at prime rates. For example, a downtown one-bedroom apartment where a landlord is collecting a price-choked, rent controlled $1,100 a month could be easily offered by their tenant to tourists for upwards of $200 per night.
In today’s “sharing economy,” where traditional taxis are being replaced by ride-sharing companies like Lyft, many tenants don’t see a problem with renting out their apartments for short-term or weekend rentals for profit. Short-term rental website Airbnb encourages the behavior, and proclaims on its site, “Live a richer life. You could be making money with what you already have. Rent your extra space on Airbnb.”
Tenants are agreeing wholeheartedly, temporarily moving in with friends or significant others for the weekend in order to have their units available for rental. Any hassle encountered by the tenant temporarily “moving out” for a few days is made up by the fact that their minor inconvenience has paid for their entire monthly rent! As a result of short-term rental activity, residential apartment building owners are getting inundated with complaints from other tenants about building safety, security concerns, additional wear and tear on the building, parking congestion, and more.
So why can tenants rerent their units to tourists at a higher rent than what they pay their landlords? Actually, they can’t. These tenants are violating a multitude of San Francisco ordinances, starting with rent control itself, which affords their own low rent protections. If the “host” tenant is renting out their room or unit at a daily rate that exceeds their own daily rental value, that tenant is violating the San Francisco Rent Ordinance, which states that a tenant cannot charge more rent to a subtenant than what the tenant is paying their landlord.
Moreover, by offering their entire unit or room as a short-term rental (defined as a rental for less than 30 days), the tenant is also violating the San Francisco “Apartment Unit Conversion Ordinance.” That particular ordinance prohibits the rental of residential units to tourists or short-term transients without obtaining a special permit first. Violations of this ordinance has penalties, including fines of not more than $1,000 or by imprisonment in the county jail for a period of not more than six months, or by both.
Depending on the neighborhood zoning designation, it is also likely the tenant is breaking zoning laws, which require that hotels in residentially zoned districts obtain a conditional use permit. It is also probable that your tenant or his “guests” are afoul of tax laws because, in 2012, the San Francisco City Treasurer office stated that short-term rentals were subject to the city’s transient occupancy tax (also known as the “hotel tax”). Lastly, assuming the tenant has signed an SFAA lease, they are in breach of the “no subletting” clause of their lease agreement. The most recent version of the SFAA lease is even more explicit, and specifically states in the section entitled “Use” that “No hotel use, such as daily rentals, shall be made.”
What to Do
So what do you do to avoid having a tenant who fancies himself a budding hotel tycoon with your property? At the time of signing the lease with your tenant, it should be pointed out to the tenant that “vacation rentals” or short-term rentals are a violation of the subletting provision and is a prohibited use of the unit. Next, even if a landlord has not received any suspicious complaints that would alert them that they have a tenant renting out their unit, they should be proactive. For example, landlords should bookmark the various short-term rental websites and periodically perform an address search for their building. (Note that while Airbnb is perhaps the most prominent short-term rental website, many more are burgeoning, including Roomarama, Tripping and Wimdu.)
When the search provides results, scan the listings to see if you recognize your building, unit or tenant. Even if the actual apartment address is not listed, a quick glance at the listing’s photos of the unit or of the “host” will help establish whether it is your tenant or your unit being offered for short-term rentals. If your suspicions are verified, the landlord should immediately print out screenshots of the listing for documentation purposes, as it is very likely tenants will delete the listing if they believe the landlord has caught wind of their scheme. The landlord should then contact their attorney on how to proceed.
Landlord attorneys take different approaches in dealing with the “Airbnb” tenant. Some practioners treat it as a “curable” offense, meaning the tenant is served with a “Three-Day Notice to Cure or Quit,” demanding that the tenant cease the subletting of the unit within three days, or move out. Other practioners take a hardline approach, serving the tenant a “Three-Day Notice to Quit,” taking the position that an illegal act has already been committed (i.e., the violation of multiple ordinances), and since the illegal act cannot be “undone,” they must quit and vacate their unit within three days.
Tenants are often shocked and surprised when they receive these notices to quit. Some cannot believe that their little “side business” has violated so many laws. Others cannot wrap their heads around the fact that renting out their unit to tourists is considered subletting. Most tenants will immediately cease their short-term rentals.
But there are also tenants who will deny their activity, even in the face of clear evidence, or claim that while they “may” have rented out their unit in the past, they no longer do so. Should the tenant fail to “cure” their violation, or vacate the apartment as the case may be, the next step would be to file an unlawful detainer lawsuit.
The success of an unlawful detainer case based upon a tenant who rents out their unit to tourists is dependent on the facts specific to each situation. Subpoenaing records from the website where the listing was placed is commonplace in order to show how often the tenant rented their unit, for how long, and at what price. Neighbor testimony, as well as supporting surveillance footage of common areas, can corroborate the pattern of strangers with luggage going in and out of a particular unit. More often than not, the case will settle before trial, either with the offending tenant moving out, or perhaps signing a settlement agreement promising they will never offer their unit for short-term rentals again, with the penalty being immediate eviction should they breach.
Airbnb in Court
City leaders in San Francisco have been made aware of SFAA’s concerns about the proliferation and problems related with short-term vacation rentals in residential apartment buildings. The mayor’s office, the city attorney, the San Francisco Board of Supervisors, the planning department, the rent board, and the San Francisco Department of Building Inspection have all been notified by SFAA of the laws being broken by tenants who rent their units for profit as hotel rooms. To date, there has been no clear denunciation of the “hotelization” of residential apartment units. City officials appear to be torn between catering to the agenda of the new “sharing economy” versus enforcing the current laws.
Hopefully a decision from New York City will help convince San Francisco officials to take a formal stance against short-term vacation rentals. New York City’s Environmental Control Board is an administrative tribunal that hears cases on quality of life violations. Different New York City departments can issue people “violations” for various infractions, and then those cases are centrally heard before the ECB to determine whether fines or other penalties should be paid. In a recent case, a landlord received multiple violations as a result of his tenant renting out a room in his unit for a few nights to tourists through Airbnb. The ECB declared that Airbnb-type rentals to transients for less than 30 days violated its version of the Apartment Conversion Ordinance.
Not surprisingly, Airbnb intervened in the case, arguing that the “tourists” should have been considered lawful lodgers or temporary roommates, and thus protected as household members and not transients. The ECB found that argument untenable, especially as the tourists did not have any previous relationship with the “host” tenant, nor did the tourists have complete access to the household the way a traditional roommate would. As a result, the fines against the landlord were upheld.
Recent reports indicate that Airbnb will be providing legal support to the landlord and the tenant to appeal the decision by the ECB. It is unclear why the landlord in the New York case is simply not evicting the “host” tenant, as would be recommended in San Francisco. However, what is certain is that short-term rental websites like Airbnb will be pressuring and lobbying popular tourist destinations like San Francisco so that their business models can succeed. Unfortunately, their success appears to be at the expense and detriment to landlord’s finances, building wear and tear, and tenants who consider their units their home, not a way to make extra cash.
The information contained in this article is general in nature. Consult the advice of an attorney for any specific problem. Marina Franco was born in San Francisco a few decades ago. Thus she still says things like, “Take a left on Army Street.” She is also an attorney with the Law Offices of Wasserman-Stern and can be reached at 415-567-9600.