Tenant is subletting on AirBnb, what should I do?

67 Replies

I just found out my tenant is AirBnBing my house. What should I do? I somewhat like the fact that they are keeping the house clean and there is less wear and tear, kitchen use, etc. The host has been getting good reviews, but I don't think the neighbors like the idea of it being an AirBnb.
My first instinct was that it is a breach in contract, and to evict them (I have a property manager). But I also saw someone suggest a joint venture, how would that work out?

Thanks in advance,
Newbie in Sacramento

Hi, my girlfriend is going through a similar situation at the moment. She owns a duplex and lives in one unit. Her neighbor, long time tenant, has been subletting rooms for what seems like a long time now. I know your topic is about AirBnB but there's some similarities.

I'll tell you what I told her. There's a few things you should be concerned about. The main thing is liability. In case anything happens to the traveler during their stay in your home. Who is liable, you or the "host"? There needs to be something in writing at the very least that outlines that.

Any reputable property manager would want to screen all the tenants that would be living in the home. That's why they don't allow the tenant to sublease their property, and any additions must apply to be included in the lease. Same reasoning should be applied for AirBnB, in my opinion. That's a lot of additional wear and tear on your property with no monetary compensation. 

The joint venture does sound appealing though. If you don't mind them doing it at least make them give you a cut. Like I said, make everything official. 

Just my 2 cents.

Why would you JV? With your manager and them, that's like having two middle men.. Depending the terms of your lease, jack rents and shut it down. If you like the idea of AirBnB'ing it, then switch the property over and do that yourself.

Vacation rental traffic wear down properties faster than long term guest. More foot traffic, partying, etc.

@Levi T. - Putting myself in your shoes, I would not be a fan of tenants using my assets to their economic benefit. 

However, I would contact them and tell them this. You are aware of what they are doing and it is absolutely against the lease. You have the ability to evict them, but won't as long as they agree to the following:

Write up a "sub-leasing addendum" to your lease that includes something along the lines of:

1. The tenant is responsible for anyone that comes into "enter property address here." In the event an AirBnB guest damages your place, the tenant is 100% liable to fix everything. 

2. The tenant is to share 50% of anything made through AirBnb with you (the landlord). That way, you have some additional passive income while doing minimal work. 

Most AirBnbs work nicely. It's the bad apple that spoils the bunch. I'd suggest giving it a shot. 

Get rid of the tenant and do the AirBnbs business yourself. You do not need the tenant do operate that business. Or tell him he can continue to profit from your business but you will be doubling his rent. You should not partner with the tenant as you will never know if he can be trusted to report to you the  full income. Double his rent or get rid of him.

If you are going to take the risk of having revolving tenants, excessive ware and tear as well as upsetting your neighbours you should be making a guaranteed profit from the business.

No doubt he will give notice and move on to another clueless landlord.

Yeah you can do a joint venture by asking the renters to give you a cut of their profit. You can get a cut of about 20% or whatever you want to charge. You can also do what everyone else is suggesting by running the Airbnb yourself. 

"Putting myself in your shoes, I would not be a fan of tenants using my assets to their economic benefit." - Middle men are as American as apple pie. As long as you're tenant is paying rent, the only "harm" is that your tenant is doing it behind your back. To me, that is the real issue here.

Personally, I would call the tenant and let them know that I know what they are doing and, assuming I have a subtenant prohibition in my lease, that they are violating the lease. Then I'd either have them sign a new lease that allows them to continue the business and shift the maintenance and management burden onto them at no cost to me. Secondly, I would fire my property management company for not telling me or dealing with the situation. What are you paying them for? You might actually wind up increasing your net return by eliminating the middle man who is doing the least to maximize the value of your property.

I hate it when tenants go behind your back...What else might they be doing w/o telling you?  There are some suggestions about taking the AirBnB business over yourself.  The City has some regulations and expects operators to charge/pay occupancy taxes.  Make sure to educate yourself on them before committing to this business model.  

http://www.sacbee.com/news/business/article55560300.html

Also, there is corporate housing.  This would be closer in nature to your current model, but needs to be furnished.  Check out the link below to see what others are doing and the rents they charge.  I'm sure there are other sites as well.  If you find more info, please pass along.

https://www.corporatehousingbyowner.com/

I would drop the hammer and inform them they are in violation of the lease and to cease and desist or face eviction.  I know in the Bay Area there are professional renters that rent out multiple apartments and turning them into AirBnB rentals for profit, flaunting local ordinances and causing significant liability risk to the landlords as well as degrading the properties they operate in.  Don't risk it!

I have in my Lease Agreements that my tenants are not allowed to sublet the property.  I would take a look at your lease with them and see what it says. If they are in violation, I would evict them. 

Asking for a percentage of their profits or doing a JV sounds like a lot more work. Just raise the rent to get your slice of the pie and make sure they have the proper insurance.

I would throw their asses out. If I want to AirBnB one of my units, I will do it myself and keep all of the profit. Why should I give a tenant a vehicle for profit? Let them go buy their own unit. Daily/weekly rentals are extremely hard on a property. And your chances of getting damaging tenants expands exponentially in this kind of venture - let's assume that your chance of getting a negligent, damaging tenant is 10%. If you rented to a new person each year, in a decade you'd have the chance of one bad tenant. If you rented to 100 people every year, in ten years you would have had the chance of 100 bad tenants. Add to the fact that someone else is now screening that may not care 5 cents about your policies and it adds up to no dice. 

A lot of these kinds of people will not care about the damage and consider the deposit loss the cost of doing business, while they skip to a new town in a new state and repeat. 

I guess I am the lone dissent here.  If you have a tenant that pays on time and takes care of the property, and has the drive to improve himself, why be upset?  Normally you only have folks in the house for about half of the time.  The properties are usually kept in top shape.  I believe Air B&B has insurance.  Why not buy 5 more units and rent them all to this person?  Don't get mad because someone else makes a buck.  Would you do that to a wholesaler?  Make it a win win deal.  You both make more money and do things together.  Good business is finding a way for everyone to make more money.

I tend to agree with @Jerry W. Of course you need to add a clause in your contract for it and if you feel the need raise the rent a little but look at it this way, if that tenant had a home business making thinng-a-majigs that he then sold on craigslist would you be upset? There would still be a business opperating out of the unit, there might still be incresed foot traffic through the unit but the tenant would not be cutting into what you feel is your slice of the pie. I think I would just have a talk with them and make sure they understand that they are responsible for the property and that they must have insurance to cover libility. Then just sit back and appriciate that you seem to have a back door way to keep tabs on your property, just keep an eye on the reviews they will tell you if anything starts to get hinky.

I have a question about this. I realize that I am coming from the opposite position with my comment, but I really would like some insight on the landlord's perspective. I am not here to step on anyone's toes and this is only a concept - not something I am currently doing. 

I am currently a tenant in a rent-controlled 3be/2ba apartment unit for which I pay month-to-month. I had two housemates that both moved out, but my property manager is not allowing additional tenants - which means that I inherit the entire rent amount on my shoulders. The reason she did this is the attempt to vacate the unit so that she can raise the cost of the unit probably an additional $1k. This leaves me basically no choice but to put in a 30-day notice to move out, which is definitely in her interest - I completely understand this. 

How awful would it be if you found that I was renting out a single room on AirBnb? The lease agreement states that I can have guests over as long as it doesn't exceed 5 days. The 2 housemates before me were dirty, didn't clean, used the unit as a storage unit with cardboard boxes strewn about. Dust and soot accumulated like crazy. However, if I were to make the unit AirBnb friendly, the unit would be completely cleaned and taken care of on a daily basis. I could limit the number of guests to 2... which would make the number of occupants 3. This is no different from before my two housemates moved out. How big of an issue would this be for you?

Thanks all for the input! I notified my property manager and they sent in a warning notice right away, and the tenant agreed to stop and take down the posting and continue to finish out their lease as their primary residence. I saw on their listing that they have several other AirBnbs and have gotten great reviews, so this isn't their first rodeo. And to be honest, I've never seen my house look so good! They had 18 reviews just in the month of June alone, all 5 star ratings and majority of the reviews mentioned how clean it was. The house is not in a vacation area, but probably used for work conferences or to visit family... it was tempting to do an addendum to the contract for 25% of the profit and have the tenant take all the risk, but at the same time, I work 10+ hour days, and really don't have the bandwidth to keep track. But looking at the numbers, it would have been nice. This is the first property I bought and house hacked, and its kind of nice to see all the great input from the people that stayed there. They made it really nice, so I was a bit torn. If they were upfront and honest the first go round, it probably would have been a different story.

@Esther L. I think if you just ask your landlord and be upfront about it, they can choose how much they want to be involved. It would be a win since you're basically looking for tenants for them to pay the rent amount. The only thing that would rub me the wrong way is the secrecy about it.

Most leases have a clause that doesn't allow them to sublease without written permission from the owner, so they are in a breach of contract. But I would say two things: 1) Ask yourself if you care? If they are taking care of it (big if) and paying rent, does it matter to you? I don't think there's a wrong answer here. And 2) If it does, you should send them a letter demanding they cease and desist before evicting them. 

Also, you might want to consider telling them that in order to accept the added risk of subleasing, you will have to charge a higher rent. (You should check with your lawyer about how to do this without violating your lease or any laws). But you may be able to get them to pay an extra $100-300/month or something like that. 

@Victoria C. This is a very interesting discussion! I love the variety of opinions, which gave me a lot of thoughts, so I apologize but this is a long one.

I sense that you are not completely of the mind of throwing the tenant out or you probably would have done it and we would have missed the chance to have this important discussion. However, the most important and pressing thing here is to make sure you and your property are protected and not in violation of any of your local regulations. If all is well with the law, I would not be too concerned with the neighbors who are probably not pleased with the home being a rental to begin with. As @Patrick Senas said, ,make everything official.” I like the suggestion offered by @Embert Madison jr  Nobody likes the behind the back issue at hand, however, now that you know, having a calm and rational discussion with this entrepreneurial individual could very well result on a win, win. @Jake Weir said, "Make sure to educate yourself". Thank you for sharing resources to help educate us all, Jake. @Matthew Paul , I love this suggestion for several reasons: When you show up for your reserved stay… (I would love to be a fly on the wall!)  

  • There is no denying that she’s doing it. Whichever way you decide to go, this is certainly a great start to your discussion. If you get rid of her, please come back and let us know how your visit went.
  • Since you have educated yourself, you are armed with the knowledge of what your jurisdiction requires, and because you’re well prepared, you know how you want this thing to go.
  • If you are of the mind of allowing it to continue, this is a great opportunity to get a tour of the operation that she’s set up for you. Because of the element of surprise and finding the hand clearly in the cookie jar, I believe the discussion can be very much open and you remain in control, as you should be.
  • If all terms are agreeable to you, meaning you are protecting yourself by enforcing the following of your city’s rules, this becomes your new property manager with maintenance shifted to her as suggested by @Craig Curelop, (If I could get a tenant to set up one of my properties as an AirBnB and run it appropriately, I would be happy with the supervision and upkeep my home is receiving. Think of what you would have to pay someone to run something like it for you and take it into consideration when deciding what percentage of the revenue earned you want to get. It will keep geed in check).
  • I don’t have first-hand knowledge, but I do not believe the wear and tear is higher on an Airbnb property. As @Jerry W. said, the property is primarily used as home base for visiting the city, sleeping, showering for the most part. Few people will engage in a lot of cooking or spending extended periods of time in the home. During the reservation process, identity and credit cards are captured, The same way the host gets reviews, so do prospective guests which helps with screening, so although not impossible, I don’t see it as highly likely for the AirBnB to be used as a party house. It can happen, but the “house rules can help discourage it. Educate yourself on the AirBnB rules, insurance and best practices, get access to the booking portal so you can see what revenue your property is generating as well as the reviews it is receiving. I chuckled at first but I think Jerry W. is onto something by suggesting you buy additional properties and partner with this creative individual, as long as it is okay with your city to begin with.
  • Airbnb requires the place to be in good working and sanitary condition as. We all know not all tenants will maintain the home at that standard Esther L. says of her roommates, it requires a lot of work and attention to detail if it’s to be done right.
  • I don’t agree with the suggestions to take over the Airbnb business because that would be creating a labor-intensive job for yourself, which this tenant is already doing. Please keep us posted and thanks for sharing.
Originally posted by @Levi T. :

Why would you JV? With your manager and them, that's like having two middle men.. Depending the terms of your lease, jack rents and shut it down. If you like the idea of AirBnB'ing it, then switch the property over and do that yourself.

Vacation rental traffic wear down properties faster than long term guest. More foot traffic, partying, etc.

 Brutally honest and "Nothing personal. It's just business." Great advice!

@Esther L. Good question. There is a difference between you having guests and you subleasing. Subleasing allows you to profit while leasing a unit you don't own. The biggest problem with this is that you the tenant shoulder absolutely no responsibility for things such as insurance or liability. The other issue is that you could put anybody in the unit without knowing how to properly vet and when/if it doesn't work out the owner still has to go through a costly eviction.

If it were me I would let you try to find roommates to finish out your lease with (properly screened of course). Hope that helps explain the difference!