San Diego, CA · Member since 2014 · 14 posts · 9 votes
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.
If you’re going to confront your tenant, create an AirBnb account with a fake name. Book yourself at your own property. Ask him to be there during check in because this is your first time doing AirBnB and you’re nervous. Get there early and let yourself in. Have a new lease agreement on the table ready for him to sign.
Might as well have some fun scaring the living day lights out of him. Video would be fun to share on BP.
Oh, sorry -- context. There has been a bunch of backlash against Airbnb in San Francisco, because it is reducing the available housing for the low-income residents. It's now worth fixing up the run-down residential hotels & scruffy apartments & renting them out on Airbnb vs to long-term low-income occupants. A significant majority of the current residential occupants are disabled, addicts, mentally ill and/or the borderline homeless. Some are employed part-time in low-wage job. If SF loses the hotel beds the poor will have to live on the streets or move out of SF.
Personally I would not want that kind of tenant turnover in my property unless it was me doing it.
Which begs the question....if you feel your tenant is making enough profit from his activities to raise his rent....why not just put him out and AirBnB it yourself?
This sounds kind of like being the middle man between two seller financing deals....except its not selling its renting.
He has placed himself between you and the AirBnB guests. He has no 'skin in the game' as they say.
Now that you are aware of it being rented out on Airbnb, the appropriate action would be to take action. They are in violation of the lease, and now that you are aware of it, it can be a huge liability. You need to know who is residing in your property. I would draft a letter soon to document the situation - a phone call first would be appropriate. This is not to say that you can't work something out in the future with the tenant - draft a new lease allowing subletting - but right now you need to take care of the violation.
I have zero problems with AirBnB. None, zilch.. < 1.. My problem is with the breaking of a lease that prohibits subleasing. Period. If you and me make a contract that says "Full use of my car but do not paint it red" we have an agreement. If you paint it red and people defend the fact you painted it red by arguing that..... red is a nice color and promotes happy thoughts, well then throw out all contracts and just decide when legal agreements matter on a whim. You can defend it, but it is moving goal posts,. and in my opinion that is not a way to run a business.
The OP is able to enforce the contracts he has entered into or decide to look the other way. If someone else decides to sublet (for whatever reason) the OP should expect to allow that or deal with Fair Housing and discrimination laws. In which case the OP should remove all references to subletting from any lease they have.
@Matthew Fullam Sounds like it should be changed to a short term rental. I would probably do that when the lease it up. If he is getting a huge amount of money, I would evict him and do it immediately.
@Matthew Fullam Personally if it were me I would go on AirBNB and try to determine from reviews how often he is renting it out and at what price. If the numbers are better than what you are getting for rent I'd kick him out of the lease and start renting it out on AirBNB yourself. Whatever you do, do not threaten to evict him if you are not prepared to actually do so. I personally would probably evict because AirBNB renters going in and out can be more wear and tear, and personally if he is the type to accept any AirBNB renter you could have an issue where the place gets trashed. It happened to us and AirBNB is not easy to work with to get repairs fixed let alone it's not his place. If you AirBNB it yourself, always put a camera onsite to avoid parties and bad guests.
I’ve heard there can be major insurance (and possibly liability) issues in situations like this. You should check with your insurance agent and if there is additional cost you should pass it on to your tenant. They are turning a profit (most likely), breaking the terms of their lease, and you have every right to kick them out, so they shouldn’t be too upset over covering the additional insurance cost (if any).
In addition, there may be issues for your lender if you have a mortgage.
Some people require the tenant to share profits with them, but that’s up to you.
Part of me says you should be mad and make them stop and part of me says respect that kid for playing the game just a little better than you are.
I’d at least make sure you have the proper insurance and immediately pass that cost on with a little extra on top of that.
If he doesn’t like it then let him know the alternative is eviction.
Then look forward to the end of the lease and start doing short term rentals for yourself.
As an Airbnb host your tenant is keeping your place in hotel level cleanliness. You should be happy about this!
That be said, you should be getting a cut of the profits. He is likely making 2-3x the rent. You should charge him enough to cover any additional insurance and to make it worth your while.
However Don’t do it if any of the below apply.
If the rental is in a multi unit building and you think Airbnb will cause a security risk to your other tenants, or make them complain about it- don’t allow the Airbnb to continue.
If your rental is the perfect “party house” -don’t allow Airbnb. (If it’s not a party house it is unlikely someone will try to throw a party there)
I would not recommend doing Airbnb yourself unless you have a lot of time on your hands. I’ve done Airbnb before and found it too much of a hassle. If I knew that someone could successfully run an Airbnb in one of my units and I could charge extra to let them do it, i would.
the real question is why is your tenant doing this and you're not? maybe bring him on your team?... seems like he has a leg up on the situation/market?
Also, regarding vetting guests:
I’m assuming that you rent the place unfurnished, so the tenant has provided the furnishings. So he doesn’t want the place trashed as much as you do. He will vet the potential guests accordingly.
As for people’s concerns about “instabook”:
Instabook allows guests to book your place instantly (otherwise they need final approval from the host). You can set this feature to only allow guests with authenticated ID and positive reviews to book. I was wary to use this at first, but I got over it. I realized that I wasn’t doing anything additional to checking their ID was authenticated and they had positive reviews anyways. The only additional thing I was really doing was looking at their profile photo. And if you think you can tell from a profile photo if someone will be a good guest... well I think that might tread into a discrimination gray area...
My point is, Instabook is not as scary as it sounds.
Matthew Fullam I think you have definitely received a lot of good advice and some questionable. First, you have to find out for sure if it’s even legal where the property is located. If Mindy Jensen is correct, as I suspect she is, then you have no choice but to send a cease and desist notice. This thread has destroyed any plausible deniability you may have had and you now carry full legal responsibility for continued violation of the law.
If, as his reviews show, he is a skilled STR operator, offer to renegotiate into some kind of partnership where he shares a larger percentage of his profits with you on a property where it is completely legal. It could be a great move long term for you.
If he tries to play you for dumb then I would start the eviction process immediately and notify the city of his violations. If the city sees that you are trying to remedy a violation that is not of your doing they will likely work with you to get him removed faster and shut down his operation. I would also notify AirBnB of the illegal listing which may be all it takes to get him to quit the property.
Thanks to everyone that has offered their opinion! There are obviously mixed views on how to handle this and I appreciate everyone taking the time to share. I think I know what I have to do next and will be sure to share the outcome! Just for the record, AirBnB is CURRENTLY allowed in my building (this may change February 12th, 2018), my neighbors have never complained, his reviews are great (clean/responsive), and he pays rent before the 1st of every month. Negatives; hes in breach of contract as my lease states no subletting, I have no idea if he has the proper insurance, he's outright lying to me, hes making more money on MY investment than I am (assumption). Stay tuned!
@Matthew Fullam - if anything, it sounds like your current tenant has verified there is an AirBnB market for your unit. Market tested and no loss revenue for you. Can you partner with your tenant to find another property to repeat the process (sounds like they have the experience)? If not open to partnership, once the current tenant’s lease is up, convert to an AirBnB for yourself! Sounds like opportunity opportunity!
One item I did not see is what sort of vetting did you do of your tenant? Why did you do that vetting? Why do you have no subletting in the lease?
I know why I vet the LTR tenants and have no subletting on my LTR units. It is so I know who is staying there and know the risk. We do not even allow regular “guests” in our LTR. If there is to be a regular guest they get added to the lease after a background check. All tenants/neighbors should feel comfortable with our vetting process as it includes criminal and credit check.
By the way I have been doing STR a long time (since the 1990s) and I do have some first hand stories. We had tenants turn a yard into a mud pit for female mud wrestling. We had a tenant physically start a fight with a neighbor (neighbor verbally incited the fight) and got KOed (tenant got KOed). You think this RE is in a cheap area? Our RE is the cheapest in the area and worth ~$1.5m. You STR long enough and you will likely have your own stories.
I would evict current tenant for their dishonesty, for the risk they put your property through, for them profiting at your risk, and because your screening process missed something.
If you want to continuing have someone manage your STR there are companies that do this professionally (we do not self manage our STR units). Their cut is well understood and they have not deceived you. In addition, they are professionals that likely have dealt with many items like a yard being turned into a mud pit or late night excessive noise. They know about taxes that need to be collected. They may charge a bit for their services but they are professional services with items like a business license, insurance, etc. Most important though is that they are not being deceptive.
If he's paying his rent you shouldn't care. Don't be that a-hole landlord. Just appreciate the fact that your tenant's trying to get into real estate investing as well and doing it the cheapest way possible to start. He probably dreams of owning multi-families, and is just doing what he can now to get started. If it's not costing you anything and he's paying his rent, why would you stop him?
@Matthew Fullam Let's not forget that this tenant has violated the tenancy agreement, so I think you shouldn't be coy but you should have that honest conversation with him. In addition, he's cash flowing from your property, so is he willing for a rent increase that is, of course, if you are willing to accept the liabilities that come with short-term rentals.
If he's paying his rent you shouldn't care. Don't be that a-hole landlord. Just appreciate the fact that your tenant's trying to get into real estate investing as well and doing it the cheapest way possible to start. He probably dreams of owning multi-families, and is just doing what he can now to get started. If it's not costing you anything and he's paying his rent, why would you stop him?
I care because the lease explicitly forbid it. If he is not following the lease in this matter then there is no way of knowing what other lease terms he is breaking. I care because I background check each tenant for my pease of mind, for the safety of my other tenants, and for the safety of my unit’s neighbors. I care because he is profiting at my risk. Mostly I care because he is being dishonest and deceitful.
I can find a new tenant that pays on time and is not being deceitful. I typically have very short vacancies but in this case the tenant turn over cost would come out of his deposit because he broke the lease.
I see no reason why the tenant should get into real estate at my risk by being dishonest to the landlord. In summary, I see no good reason to keep the tenant but many reasons to evict him. If you think that makes me an a-hole I do not care.
If he's paying his rent you shouldn't care. Don't be that a-hole landlord. Just appreciate the fact that your tenant's trying to get into real estate investing as well and doing it the cheapest way possible to start. He probably dreams of owning multi-families, and is just doing what he can now to get started. If it's not costing you anything and he's paying his rent, why would you stop him?
I care because the lease explicitly forbid it. If he is not following the lease in this matter then there is no way of knowing what other lease terms he is breaking. I care because I background check each tenant for my pease of mind, for the safety of my other tenants, and for the safety of my unit’s neighbors. I care because he is profiting at my risk. Mostly I care because he is being dishonest and deceitful.
I can find a new tenant that pays on time and is not being deceitful. I typically have very short vacancies but in this case the tenant turn over cost would come out of his deposit because he broke the lease.
I see no reason why the tenant should get into real estate at my risk by being dishonest to the landlord. In summary, I see no good reason to keep the tenant but many reasons to evict him. If you think that makes me an a-hole I do not care.