Landlording & Rental Properties

Landlords Beware: The Potential Problem With Airbnb No One Talks About

Expertise: Landlording & Rental Properties, Real Estate Investing Basics, Flipping Houses, Business Management, Personal Development, Mortgages & Creative Financing, Real Estate News & Commentary
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problem_with_airbnb

The internet is a truly wonderful thing. It has made almost all of us more productive, brought the world’s knowledge to our fingertips and made so many things so much easier. Just think about what the internet has done for us landlords in terms of advertising, researching properties and screening tenants. It is amazing to think how different things were just 10 to 15 years ago.

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The internet has also made it much easier to interact and connect with people. Most of the time this is a good thing, but this ease of connection can also present some interesting problems for us landlords. It is now quite easy, for example, for tenants to reach out to others and attempt to sublet your properties. Tenants can potentially turn your property into a hotel or youth hostel, and this is something that should be on every landlord’s mind.

Related: AirBnB vs. Traditional Rental Income: A Creative Way for Investors to Cash Flow in Expensive Cities

If you are not familiar with sites like Airbnb.com or Couchsurfing.com, I encourage you to check them out. They are actually pretty cool sites, and I applaud the entrepreneurial spirit that brought them to us. I actually use Airbnb when I am planning a trip to search for potential places to stay. These sites, along with others like Uber and Lyft, are for me what make the internet a truly revolutionary thing and I enjoy the fact that they are breaking long standing hotel and taxi monopolies.

Potential Problems

Despite providing wonderful properties, these sites do present potential problems to landlords. If you have an entrepreneurial tenant (don’t get me wrong, as I am all for tenants finding ways to pay me!) using these sites to sublet your property, you should be concerned. Why? How do you know who is staying at your property? Have they been properly screened like your tenant was? The potential now exists for dozens of people to be passing through your property at almost any time. I have experienced this myself when a former tenant used Couchsurfing at one of my properties. There were sometimes two or three people staying there every night!

In legal terms, this action is called subletting. Subletting (or subleasing) is defined as your tenant conveying the same rights that you conveyed to some third party for a shorter period of time. In essence, they re-rent your property out for a few days or weeks for a specified fee.

As you can begin to imagine, subleasing can give rise to all sorts of issues. Who is coming and going? Are they convicted felons? Axe murders? What liability will you have? Who has the keys to the property? Has everyone returned the keys or are their numerous sets out there floating around? What if they do not leave? What about the extra wear and tear? Who pays for the increased utility usage? Where do they park? The list could go on and on.

Clause Forbidding Subletting

Smarter landlords do not allow subletting. They put a clause in their lease which specifically forbids it. Here is the language taken directly from my lease:

No Subletting: Tenant has no right to sublease or assign Tenant’s rights under the Lease without the written consent of Manager.

Make sure that you have some sort of similar language in your lease to protect you.

Even smarter landlords will be sure to mention sites like Airbnb or Couchsurfing in their leases or house rules and strongly forbid their use on their property. After all, not every tenant will know or understand what subletting is and may innocently think there is nothing wrong with doing this on your property. I can just hear my tenants now: “I did not know that was subletting.”

Related: How To Use Vacation Rental Sites To Make Money Off Residential Income Properties

Conclusion

Even with these clauses and house rules, every landlord should be vigilant as some tenants will still try to do it, especially if your property is located in or near a major city or tourist area. You should surf these websites every once in a while. See if any of the listings match your properties. You might be surprised what you find.

Also, let your other tenants be your eyes and ears. They often know what is going on and will have the same concerns about strangers on the property that you do. If you get complaints of numerous people coming and going, take some time and investigate it. Yes, your tenant may just be really popular and have a lot of friends, but there may be other things going on as well. Perhaps a stern warning and the knowledge that you are aware will solve the problem.

Ever had any experience with tenants using these websites on your property?

Please share with your comments.

Kevin Perk is co-founder of Kevron Properties, LLC with his wife Terron and has been involved in real estate investing for 10 years. Kevin invests in ...
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    Jay C. from Seattle, Washington
    Replied about 5 years ago
    You bring up a good point about having a clause about subletting. At the end of the day you have a lease and any damage done is against the tenant who signed the lease. You as well hold a deposit and can certainly sue for above and beyond for damages so in the end I think your concerns are mute.
    Greg
    Replied about 2 years ago
    Hi guys, maybe I can get some feedback here from the conservative landlords and/ or investor. I’ve been running Airbnb’s for several years now using sub-renting. (I rent out long-term and ask for permission to Airbnb, in exchange for paying for all routine maintenance and upkeep of the property as well as abiding to specific requests of the landlord. (For example A/C goes out and it’s $3k, I offer to pay half. If it’s something wear and tear related, I pay for the full amount.) I also, agree to screen guests according to their restrictions. For example, if they require no smoking, only 2 guests/ night, or a minimum age of 25, I follow that. I’m always looking to expand and typically speak to landlords directly or a realtor and am upfront about how I earn a living, but I do regularly get met with a lot of push back and only get an occasional yes. What I mentioned above is typically very close to how I present my case and even though we have not had any bad experiences due to the nature of the business which we’ve been successfully running for 3 years now, we still get turned away and I can’t understand why as we follow all county and city ordinances as well as the agreement with the landlord to a T. We also increase revenue by covering the maintenance expenses and paying a higher rent. General Liability is covered by the website policy and we also purchase our own if requested. So, is there any real reason why a landlord with an investment property would be against it?
    Kevin Dickson SFR Investor from Denver, Colorado
    Replied about 2 years ago
    Greg, I think your concept deserves its own forum thread. This is an old article and this is a rapidly changing topic.
    Ron
    Replied about 5 years ago
    I think that going after your tenants are lost cause. The problem is when the new tenant who doesn’t know you or your manager decide to not to leave or not to pay his new landlord (your original tenant) your original tenant can’t do anything about it. he is not the landlord. True story: my tenant brought her boyfriend to live with her few nights a week. they had a fight she asks him to leave he says no. she called the cops, the cops entered the apartment, they saw his clothing and tooth brush and they left, saying that he has the right to stay as he legally lives there. my tenant didn’t want to stay there no more, left to her parents and I got stuck with the boyfriend who I never met, have him checked or had him sign a lease. going after her, my original tenants is useless. she lives paycheck to paycheck .. That boyfriend was okay and left after a month but that story could have ended badly for me. bottom line: subletting is bad as you lost control over the situation. have your tenant sign the contract hoping he actually understands what it means.
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Jay C. Point well taken. But I think I would rather be a bit more proactive on the front end. I would much rather be looking for the next deal instead of suing a tenant for damages. Thanks for reading and for commenting, Kevin
    Bryan Otteson
    Replied about 5 years ago
    That’s ridiculous. You are saying that you would prefer to try and sue a former tenant that likely has no real value and probably will not pay than put a line in your lease that tells them they cannot do that? Never mind that the judge may well say that because the tenant didn’t cause the damage and you didn’t prohibit subletting it is your liability. Is it worth your time and money to chase them down? If so, you have too much time and money.
    Kevin Dickson SFR Investor from Denver, Colorado
    Replied about 5 years ago
    A much bigger problem is the fact that it is illegal in most cities. In Denver, for example, it breaks an old zoning law and the fine can be up to $52,000/year. Many of us (including Airbnb) think that is ridiculous and have begun talks with City Council.
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Kevin, Just give the government a cut of the profits and your troubles will likely be over. Good luck, Kevin
    Les Jean-Pierre Investor from New York City, New York
    Replied about 5 years ago
    I actually would consider liability from a slip and fall as a concern too. Would an insurance company cover the landlord if a tenant’s airbnb guest got hurt? Anyone have experience with that?
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Les, Good question. Insurance companies look for ways to not pay claims. Let’s hope an insurance person chimes in here. Thanks for reading and commenting, Kevin
    Kevin Dickson SFR Investor from Denver, Colorado
    Replied about 5 years ago
    Airbnb provides $1M in coverage for hosts: http://techcrunch.com/2014/11/20/airbnb-rolls-out-million-dollar-liability-insurance-program-for-hosts/
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Interesting. Seems they are really trying to cover all the bases.
    Eric D
    Replied about 5 years ago
    I would worry about having an un-screened tenant in the place and cause issues. If AirBnb can get screened applicants/tenants, it would help them quite a bit. Of course, AirBnb is no worse than the move-in psycho boy/girl friend.
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Eric, Been there done that with the boy/girl friend. But there is a difference I think due to the subleasing. I think also that couchsurfing is the bigger concern with regards to who is comng and going. Thanks as always for reading and commenting, Kevin
    Ann Bellamy Lender from Tyngsboro, MA
    Replied about 5 years ago
    Good point about the lease. My lease incorporates my Resident Handbook, and I have just added the clause to my Resident Handbook. I have each tenant initial each page of the resident handbook at signing. Thanks for the heads up.
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Thank you Ann! Gland I could help. Kevin
    Michael S. New to Real Estate from Tucson, AZ
    Replied about 5 years ago
    This is interesting. After reading this article I was reminded of reading something similar whilst perusing through the NY L/T Law. While not explicitly forbidden, it states that “Any lease provision restricting a tenant’s right to sublease is void as a matter of public policy.” Now, tenants are still required to get the landlord’s written consent before subletting and are still subject to all obligations of the lease to include future rent. However, “If the landlord denies the sublet on unreasonable grounds, the tenant may sublet anyway. If a lawsuit results, the tenant may recover court costs and attorney’s fees if a judge rules that the landlord denied the sublet in bad faith. Real Property Law § 226-b(2).” I don’t see this as being expressly for, or against, the landlord or the tenant but it is something that should be considered in your own local markets before adding a lease provision. Obviously, each state will have its own laws and your mileage may vary. I would be interested to know if anyone else has noticed this in their neck of the woods?
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Michael, Thanks for bringing up a great point. Be sure to understand your local landlord/tenant law before putting anything in your lease. Every state is going to be slightly different. Thanks for reading and commenting, Kevin
    john Casper
    Replied about 5 years ago
    Would you be able to require, at minimum, that if the premises are subletted they purchase renter’s insurance? Especially if they frequently sub-let via AirBnB, VRBO, etc…
    duncan herbert
    Replied about 5 years ago
    Tenants insurance is not worth the powder to blow it to hell in Canada. Besides they can cancel it a week after they start the policy. Duncan
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    John, A good question for local counsel. Thanks for the comment, Kevin
    john Casper
    Replied about 5 years ago
    Would you be able to require, at minimum, that if the premises are subletted they purchase renter’s insurance? Especially if they frequently sub-let via AirBnB, VRBO, etc…
    Les Jean-Pierre Investor from New York City, New York
    Replied about 5 years ago
    Thanks for that info. Still, this assumes the tenant is diligent enough to get this insurance.
    Sharon Tzib Real Estate Broker from Cypress, TX
    Replied about 5 years ago
    Geiko car insurance forbids you from using your car to be an Uber driver. No reason why landlords shouldn’t take the same steps to make sure their properties aren’t being used as hotels.
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Sharon, Good point, but it might depend on local laws. Laws that have not caught up with the times. Thanks for reading and commenting, Kevin
    Jerry Kaidor
    Replied about 5 years ago
    Once upon a time, I was wandering through the laundromat across the street from my building. There I saw – written in Spanish – an ad for a room in one of my apartments. It listed the telephone number of my tenant. I sent her a 30-day Notice to Quit for Breach. Even an *attempted* subleasing can be viewed as an irremediable breach of my particular rental agreement. She left.
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Jerry, Good thing you speak Spanish 🙂 Thanks for sharing, Kevin
    Jerry Kaidor
    Replied about 5 years ago
    Once upon a time, I was wandering through the laundromat across the street from my building. There I saw – written in Spanish – an ad for a room in one of my apartments. It listed the telephone number of my tenant. I sent her a 30-day Notice to Quit for Breach. Even an *attempted* subleasing can be viewed as an irremediable breach of my particular rental agreement. She left.
    Kevin Dickson
    Replied about 5 years ago
    At this point it’s worth mentioning that a fellow bigger pockets member as started a business that specializes in finding tenants that are doing short-term subletting. http://www.subletbuster.com/ @Ariel O. Reply Report comment
    Kevin Dickson
    Replied about 5 years ago
    At this point it’s worth mentioning that a fellow bigger pockets member as started a business that specializes in finding tenants that are doing short-term subletting. http://www.subletbuster.com/ @Ariel O.
    Ariel O. Vendor from NY, NY
    Replied about 5 years ago
    Kevin – Thanks for the mention – feel free to stick it in the blog post itself 😉 Ariel
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Kevin, It is sties like this that make me love the internet and the entrepreneurial spirit it facilitates. Thanks for sharing, Kevin
    Kevin Dickson
    Replied about 5 years ago
    At this point it’s worth mentioning that a fellow bigger pockets member as started a business that specializes in finding tenants that are doing short-term subletting. http://www.subletbuster.com/ @Ariel O. Reply Report comment
    Al Williamson Rental Property Investor from Sacramento, CA
    Replied about 5 years ago
    Nice work Kevin. There are predications that major hotel chains will soon create their own Airbnb offering to help people rent out their guest rooms. That’s just around the corner in our free market capitalistic society. It might be time for landlords to licensing subletting privileges as well. Everything is figureoutable.
    Al Williamson Rental Property Investor from Sacramento, CA
    Replied about 5 years ago
    Nice work Kevin. There are predications that major hotel chains will soon create their own Airbnb offering to help people rent out their guest rooms. That’s just around the corner in our free market capitalistic society. It might be time for landlords to licensing subletting privileges as well. Everything is figureoutable.
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Al, Gotta love the creativity of the market. Thanks for reading and commenting, Kevin
    Bryan Williamson Investor from Columbus, Ohio
    Replied about 5 years ago
    I had an associate who wanted to start doing short term rentals and came to us for advice on how to get started. After a date with over coffee they embarked on their venture. The only problem was the unit they intended on renting was not their own (as in ownership). They had leased the property and didn’t convey their true intentions. After friction arose in the partnership one partner asked the landlord to release the other partner from the lease. It was during that time the owner found out the true nature of the situation. The owner forcefully evicted them and their guests.
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Bryan, As I would have. Thanks for sharing, Kevin
    Deanna Opgenort Rental Property Investor from San Diego, CA
    Replied about 5 years ago
    If one of my tenants were to rent a bedroom via Airbnb I don’t think I’d have an issue with it — they’ll have put their OWN well-being on the line AND keep the house looking spic and span, right?
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Deanna, Except that you are likely liable if anything goes wrong. After all, everyone is going to go after the “deep pocketed” landlord not the poor little tenant who made a mistake :/ Thanks for reading and commenting, Kevin
    Deanna Opgenort Rental Property Investor from San Diego, CA
    Replied almost 5 years ago
    $1mil Airbnb insurance covering my backside, & guest at least has a functioning credit card, vs the “winners” my past tenants have come up with on their own. My place is rural though, so unlikely to ever be an issue.
    Account Closed from East Lansing, MI
    Replied about 5 years ago
    Just a note on Couchsurfing – I don’t think this would be considered subletting, as there is no fee associated with Couchsurfing. It is designed for short-term traveling and cultural exchange. Members stay with other members for free, and leave public references. So, if you’re trying to prevent tenants from using Couchsurfing, I don’t think a sublet clause will do it.
    Kevin Perk Rental Property Investor from Memphis, TN
    Replied about 5 years ago
    Good point Caitlin. Thanks for bringing it up. I also think, in addition to Kevin Dickson’s comment, that you can just ban Couchsurfing on your properties in your house rules. I do not think any judge (at least here) would have a problem with you enforcing the rule. Thanks again, Kevin
    Kevin Dickson SFR Investor from Denver, Colorado
    Replied about 5 years ago
    Caitlin, you’re right. Having houseguests stay for free is absolutely legal. My lease limits houseguests to seven days though. Then they become a tenant whether they are paying or not.
    Jilly
    Replied almost 5 years ago
    I LOVE both sites and use both a LOT as a host AND as a traveler, and am also a property owner of over 100 properties. Never had anything but a PHENOMENAL experience w/ both. Just wanted to clarify that the correct website for Couchsurfing is Coubchsurfing.org NOT .com. I use these sites for personal joy vs. as any kind of money making activities (though am amazed how many people come stay through airBNB). Meeting new people is enriching beyond words.
    Karl
    Replied over 4 years ago
    Hi Kevin, I live in Canada and I own and rent out a condo in Chicago, Il. I recently found out through a $3200 fine from my building board of governors that my tenant was having people stay in my condo and using the airbnb website. In my Lease agreement with her it says she can’t do any subleasing or anything without my written consent. She definitely did not have my permission or written consent and is refusing to pay the $3200 fine. I am at a loss for what to do. Do you have any insight? Please! Thanks, Karl
    Daryl
    Replied over 2 years ago
    Get an attorney and stay out of small claims. You are entitled to the proceeds that your tenant recd from the short term rentals. An attorney will take the eviction, the restitution as well as the suit regarding conversion of property for personal gain as one litigation…..and win on all counts. Once you file the judgement for monies owed plus attorney fees…then you file a lien and a garnishment against all named defendants. This prevents the other party(s) from obtaining loans to buy cars, rent a home, get a mortgage etc. until the judgement is paid in full….including interest. It is public and reported on all credit bureau reports. They must answer the suit or lose by default. An attorney will cost them to show up and poorly represent what can’t be defended. They will try to settle out of court. Your call on that one. You’d be surprised how fast people come up with the cash when confronted with that. The judgement/lien will live in most states for 10 years if they drag their feet on paying up. Or go to small claims and get nothing. If you are a business, most small claim courts within the US prohibit self representation.
    Teresia S.
    Replied over 2 years ago
    I am not familiar with Illinois law, but here I’d evict for breach of lease contract, then small claims court for your damages of $3,200.
    Daryl
    Replied over 2 years ago
    Get an attorney and stay out of small claims. You are entitled to the proceeds that your tenant recd from the short term rentals. An attorney will take the eviction, the restitution as well as the suit regarding conversion of property for personal gain as one litigation…..and win on all counts. Once you file the judgement for monies owed plus attorney fees…then you file a lien and a garnishment against all named defendants. This prevents the other party(s) from obtaining loans to buy cars, rent a home, get a mortgage etc. until the judgement is paid in full….including interest. It is public and reported on all credit bureau reports. They must answer the suit or lose by default. An attorney will cost them to show up and poorly represent what can’t be defended. They will try to settle out of court. Your call on that one. You’d be surprised how fast people come up with the cash when confronted with that. The judgement/lien will live in most states for 10 years if they drag their feet on paying up. Or go to small claims and get nothing. If you are a business, most small claim courts within the US prohibit self representation. Reply Report comment
    Carlos Gonzalez
    Replied over 3 years ago
    Can someone help me ? I actually rented out my property in amsterdam (I live in Madrid), and my tenants moved to Germany where they actually live, and from there rented out my place on airbnb since January 2016. I requested Airbnb to provide me the full list of guest that have been in my place, and Airbnb refuses because of the confidentiality policy that they have with their clients. I already explained that their client was not allowed to use airbnb to rent my property, and I provided full proof with the rental contract and all the data that shows that my tenant was committing a crime. Airbnb still says that I need a court order to disclose the details of the activity on my property. I am totally amazed that Airbnb protects my criminal tenant, and not me the owner of the property. I am reluctant to hire a lawyer, and go agains airbnb because I assume it would be a lot of stress, but I think is unacceptable that they do not disclose the activity that my tenant has made on my expense.
    Daryl
    Replied about 3 years ago
    Airbnb isn’t your problem, you are. Go there, change the locks. Who has been there isn’t important, they’re gone now. Smarten up or you will end up with a useless investment. Sell the Amsterdam property or move there to be more of a custodian of your investment. Do not think for one minute that the world is filled with nice people who wouldn’t take advantage of you if given the chance…. An old saying: Hope for the best, but plan for the worst.
    Mark
    Replied over 2 years ago
    So what if the tenant is required to have renters insurance? how is the liability different then if the tenant does have friends that come by and occasional spend the night? arent there the same liabilities if a guest gets hurt, etc?
    Daryl
    Replied over 2 years ago
    No. Talk to an insurance agent regarding the rules of subrogation. In essence, if a tenant is in a state of breach, your (landlord) policy is of no use…they will deny.
    Danielle
    Replied over 2 years ago
    I have the opposite problem – my landlord is listing several units on airbnb, thus turning half of the building into a lodging house. We’ve had some problems with vandalism lately, that included someone lighting a fire on our front porch. I worry about my safety and wonder if something more serious were to happen, would my renter’s insurance be void since there is lodging activity in the building. Cities need to do more to regulate airbnb to protect residential tenants. I rented my unit in what I believed to be a secure residential building, my landlord required an in-person interview and assured me that all tenants were screened similarly, which isn’t the case… Just adding my comments, because I think this is a “real” issue that isn’t being discussed – what rights to tenants have to be informed of airbnb units that their landlords operate in their building…
    Daryl
    Replied over 2 years ago
    What many of the landlords here are missing in their perspective on the issue of the short term rentals and sub status residencies is that many local officials are being urged to take notice of them and either outright ban them, or more importantly…create new or enforce standing tax structures that tax the income in the same way that they already have in place for hotel/motel. Now, if you’re OK with submitting statements for audit to your city or county for tax review…good luck with that. You know….it’s the old ‘careful what you wish for’ routine. I would, and do recommend that investors and property managers do as much as possible to stay off of local government radar. They are all starving for tax revenue and in most states, so far, residential and a good bit of commercial leasing has been exempt. Think it can’t happen? Auto leases are taxed. Commercial truck leases are taxed. All hotel/motel stays, no matter how long, are taxed, and in some cases get a multi-layer tax….sales, resort, stadium renewal and so forth. A transaction is a transaction whether for money or not….and AirBnb types of transactions are ripe for the taking.
    David Dachtera Rental Property Investor from Yorkville, IL
    Replied 10 months ago
    Good to know. Note that catastrophizing may not be the best approach, however. No one vets “tenants” in motel / hotel rooms, either. Yet, the hospitality industry is alive and well. My $0.02 …