Tenant Using Rental Property as Full Time AirBnB

85 Replies

BP,

I was just informed through a neighbor that my tenant has been renting out my property on AirBnB without my knowledge since the first day of his lease.  My lease clearly states there is no subletting allowed, however, he does pay rent on time (early actually) every month.  Should I be mad? Should I kick him out? Can any landlords provide their input on how I should handle this? I would also be interested in hearing any attorney's opinions on what to do. Thanks in advance.

-Matt

I’m a landlord and I have thought about doing just this... renting and putting on Air BnB. I would have asked prior to doing this, but so long as rent is on time, let it be. Also, every time someone stays there... your place is getting cleaned. I say let them continue

@Kevin Branin thanks for your input. That is true that the place is well maintained. I still wish he would have asked first.

@Matthew Fullam

You've discovered what I'm sure a lot of landlords just don't yet know about their tenants. Not sure anyone can answer for you whether you should be mad. The fact that you're asking says to me that you're not that upset about it. 

My wife and I did this for a few years at a number of different Denver apartment buildings simultaneously. I wouldn't advocate breaking a lease, but I'll say that like @Kevin Branin  said, we kept the places cleaner than any other tenant ever would have. 

Now that we're landlords in Denver, our leases specifically outlaw Airbnb without our permission. If a tenant asked, we may allow it, but we'd charge them more in rent and require regular checks by us to ensure the condition of the property is being maintained.

So ... how do you feel about it? Are you open to Airbnb? If you're open to it, then you've got an opportunity. I'd get over there and check out the condition of the place. If it's in great condition, then maybe you let him do it, but you charge more rent. I know a lot of people here in Denver are talking openly to landlords about renting their apartments for a little over market value and then Airbnbing it. 

If you don't like the idea, then tell him to stop. As you said, he has never lived there and probably didn't intend to, so if he has to stop, he'll probably have to pull out of the lease, and I imagine you get a nice early termination fee for that. 

Good luck and let us know how it goes.

Tax them... they are profiting off your liability. Why shouldn’t you get more?

While I can understand your concern that your tenant went behind your back and violated terms of the lease agreement, this is a fork in the road where you can really review your priorities. Being paid on time or early is important, but knowing who is in your building is as well. I would confront the tenant and have an honest conversation to determine how to move forward. STR Insurance needs to be in place. Airbnb has a program that can help you better oversee who is in your building as well as even negotiate a percentage of booking revenue.

https://www.airbnb.com/help/article/1195/what-s-the-airbnb-friendly-buildings-program

@James Carlson you and Kevin are definitely right, the place seems to be well kept.  Well, that is based on the airbnb reviews, I have not been there myself as I am out of state. I am not opposed to airbnb, its more the point that he went behind my back. as you and @Max Tanenbaum mentioned maybe I can request more rent or a fee per night it is rented out?

@Michael Melendez thanks for this information i will have to take a look!

Couldn’t this potentially add massive liability if someone was hurt on the property? I would have a serious chat with the tenant...

I agree about the liability issues and would have concerns about insurance. Also, you should be getting some portion of the profit. I would definitely talk to an attorney or an expert about what other contractual agreements need to be put in place to keep the arrangement going forward worth current renter;  if they are taking care of the place and there are no other issues and rent is coming in on time, I’d take care of the items noted above and that other posters noted and keep tabs on things going forward.  Good luck!

@Matthew Fullam you have to think about your liability. You probably are not insured for short-term rentals so this could put you at risk if something goes wrong.

You also have to consider that your tenant is willing to be dishonest and essentially steal from you. If they're willing to violate this contractual requirement, what else are they willing to do?

Does the zoning support short-term rentals? Is your tenant complying with the law and paying the appropriate taxes? Is it having a negative affect on the neighbors or the community?

Personally, I would notify them of the violation and demand they stop immediately. Then I would sit down with the tenant and ensure it can be done legally and safely. Adjust insurance. Check zoning compliance. Talk to the neighbors. Then I would require a cut from the tenant since he is essentially using your property to produce a profit.

@Todd Romero @Megan Moody @Nathan G. All bring up a vital point: Insurance. If you decide to allow your tenant to continue (but now paying a premium), be sure to get insurance from a company that specializes in short-term rental coverage. I'd look at something like CBIZ or Proper Insurance. Their coverage areas are strong and they specialize in this kind of liability coverage. Good luck!

If your lease states no subletting, then the tenant has violated. You don’t need to evict, b/c they have already abandoned the property (it sounds like they never actually took possession of it), so you can reclaim it any time (change the locks).

Alternatively, you can confront them, renegotiate the lease terms, and raise the rent accordingly. This seems like a win-win strategy.

@Nathan G. @James Carlson @Ryan D. Thanks so much for your input on this.  I think my next step is to confront my tenant and renegotiate the lease terms.  As I mentioned, he pays on time and doesnt really give me any issues.  I will look into my insurance options.  Thanks again. 

Matt

Have you thought of evicting him on the legality of the lease, and then renting (on Airbnb) the place out yourself. I’m sure you can find someone to clean the place every turnover. They are probable making 3 times what he is paying you, if not more. Any idea what he is renting the place out for a night. Just a thought.

@Matthew Fullam I agree with your plan to confront him and renegotiate the lease (raise the rent).

I would look at at his VRBO and/or Airbnb listing and see how much he is charging and how full he is. Then you could get an idea how much he is making and if he can afford a higher rent amount.

You could also use this information to decide if you might in the future want to just make this an VRBO/AIRBNB yourself.

Also as other have said make sure he has proper STR insurance and that you are listed as a loss payee on his policy. CBIZ and Proper are two insurance companies that provide STR insurance. There was a long thread on STR insurance and I believe that Proper was favored by most.

If your going to let them keep this up I would definitely reach out to my insurance agent and make sure they know whats going on and are ok with it. I have no idea if they would allow your normal policy to cover a short term rental unit but I'd be really interested in finding out.

@Matt P.

If you have a traditional landlord policy on your rental, you are NOT covered for liability arising from short-term rental incidents. We do a bunch of Airbnb classes here in Denver, and I always tell people to never rely on your homeowner's policy or any policy that's not specifically for short-term or vacation rentals. 

Even if you call your normal carrier, and they tell you they can cover you, I'd ask more questions and be sure they understand what you're doing with your property. Airbnb is still relatively new, and it's crazy how much most insurance carriers don't know about short-term rentals. (Or worse, how much they think they know about them but tell you the wrong information.) I hear that from the people at our classes, too, that they call their carrier, the carrier tells them they're covered and then once the carrier really understands the situation, they say "Oh, no, we don't cover that."

The other issue is how legal is Airbnb in your city? In our area, less than 30 days rentals are not allowed. Recently an Airbnb operator was fined $25,000.  If you are taking a risk you should be compensated.  

My personal opinion is that I would end it now (his tenancy). If someone throws a party and trashes the place you get to keep his security deposit when he walks away. If someone brings in under age prostitutes who OD and fall out of the second story window guess who gets added to the suit? If someone rents out the place because they want to rebuild an engine and it's better to do that in your warm living room than their cold garage, guess who gets stuck with the cleanup (Yes I know a guy who had a short term rental used for that very purpose). You have all the risk and he gets all the reward.

More importantly what value is your lease if you are going to ignore what is in it? 

Just my 2 cents, good luck in whatever you decide!

Why not make it work for both of you? Obviously you have a in demand property, this person has the skill set to actively manage it (and well according to the reviews?). Why not offer up a partnership, but at new rates to reflect that actual use of the property. 

Market rate rent (or maybe even above) to cover the cost of the new insurance and then say 10% of the profits? I'd suggest starting higher and let them "negotiate" down to the number you actually wanted so they feel they got a "deal". 

You're in control, it's your property.... but seems like the tenant has the time to run it.

@Matthew Fullam , do NOT change the locks on this property without going through a full eviction and winning legal "custody" back from a court. This is called a constructive eviction and is illegal is all 50 states.

That said, I would proceed with the eviction process as detailed by your state's landlord tenant laws. You probably need to present this person with an X-day cure or quit notice before you can proceed with the eviction. I hope your lease has an lease break fee, because he's going to be breaking your lease.

I'd also give him notice (again, in compliance with your state's landlord tenant laws) that you plan to do an inspection of the premises. 

Thanks @Mike Cumbie @Jana Hristova @Matt K. and @Mindy Jensen for your input on my situation.  @Mindy Jensen I will not be changing the locks, dont worry! I also am under the impression that AirBnB is legal in the properties location, Denver - if I am wrong can someone correct me? Either way, its time to have a chat with my tenant and get things straightened out before something bad happens and I am held accountable.

Originally posted by @Matthew Fullam :

BP,

I was just informed through a neighbor that my tenant has been renting out my property on AirBnB without my knowledge since the first day of his lease.  My lease clearly states there is no subletting allowed, however, he does pay rent on time (early actually) every month.  Should I be mad? Should I kick him out? Can any landlords provide their input on how I should handle this? I would also be interested in hearing any attorney's opinions on what to do. Thanks in advance.

-Matt

 I would be furious. Immediately send a cease and desist and 3 day notice to perform Or quit.  He’s not only violating  the lease he’s placing YOU and your property at risk. Your insurance is not going to cover you if there are issues.  And if younger think a insurance company won’t try to weasel their way out of paying ... think again. 

Most cities have regulations against short term rentals. I'm happy most of my rentals are in HOA properties because they don't even allow them.

I specifically tell and have written in my leases there is absolutely NO subleasing or AirBnB or any sort of temporary hotelier rental allowed. Any of you guys who think this is a good idea is dead wrong.  It’s gonna take one wild party to leave you with a big bill a a small deposit that won’t cover the damages and a tenant who you can’t get money from and posting on here how you got screwed. There is no way you could get me to do such scenario. If I wanted to do airBNB I would do it myself. 

You do realize you’re subsidising his rental business right.  Let him go buy his own place and take risks. You’re. It gonna do it off my propertyes and leave me with all the risk.  Yet another reason I only do month to month leases.

Out of curiosity, when the neighbor informed you was their attitude "just think you ought to know" or "we really don't like this"?  I've found that staying on good terms with the neighbors in an out of area rental is really, really important.

I have to push back against the hysteria in some of these posts. I think people are watching too much local news. "Local Airbnb Turns Drug Den Sex Party!!"

Bad stories exist, but Airbnb hosts more than half a million stays every night, so if a few here and there are bad, that doesn't sound that crazy to me. Imagine if the local news wrote a story every time a regular tenant trashed a place. They'd fill up the daily paper. 

The nearly 200 guests my wife and I have hosted and the thousands of guests that everyone I know from our classes have hosted have been on the whole, amazing. Some guests are weird, sure. And some leave you wondering what that smell is. But the bias I see toward short-term rental guests always has a whiff of, "Damn kids, get off my lawn!"

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