A federal district court in Los Angeles has dismissed a lawsuit brought by major property manager Aimco against online vacation hosting site Airbnb alleging Airbnb illegally interfered with lease agreements by encouraging tenant hosts that Airbnb knew were violating their leases.
The dismissal was based on a razor-sharp analysis of the Communications Decency Act, a federal law that protects online platforms from breach of contract or personal injury claims in cases where the online platform is not responsible for the content provided by third parties. Aimco sought to enjoin Airbnb from publishing listings of its tenants who were violating an anti-subletting clause.
Relying on previous precedent out of San Francisco, specifically Airbnb’s failed challenge to a San Francisco ordinance that makes it a misdemeanor for Airbnb to collect a fee or profit off listings that are not registered with the city, Aimco argued that Airbnb’s knowledge of the illegal sublets made it complicit in the lease violations. However, the San Francisco ordinance is distinguishable from the Aimco claims because in San Francisco, Airbnb was expressly accountable for its own conduct — collecting fees illegally, where Aimco’s tenants are the ones committing the lease violations and Airbnb has no duty to monitor content on its online platform.
Aimco brought the lawsuit because it has experienced losses at its properties due to the increased popularity of short-term sublets. Aimco claims that many tenants have complained about the practice, requiring additional security and leasing employee resources, and that many tenants have moved out of Aimco properties as a result. In addition, the landlord says it also has suffered increased property damage, and injury to its reputation due to the behavior of Airbnb guests.
The Airbnb platform itself frustrates the efforts of landlords attempting to enforce anti-subletting provisions. For instance, host listings are anonymous and addresses are hidden, requiring a significant level of detective work to uncover a lease violation. Most often, the illegal sublets are exposed via complaints from other tenants. According to court documents, Airbnb initially had offered to monitor the Aimco listings after Aimco provided a list of property addresses that were covered by the anti-subletting lease provisions. However, Airbnb later withdrew its cooperation. Airbnb then added a feature to its business model that allows for the active participation by landlords, who, in turn for their cooperation with the sublets, will receive a commission on the overnight rentals. Only participating landlords are allowed access to information regarding listings of their properties as short-term vacation rentals. Airbnb does post a policy that requires host tenants to declare that they have the right to list the property.
Landlords face a number of concerns with Airbnb listings, including the level of tenant screening applied to overnight guests, the increased risk of property damage, and an uptick in complaints from other tenants. Occasionally, Airbnb guests have prompted police intervention, which impacts the reputation of the property.
When it comes to short-term sublets, landlords tend to fall into two camps:
Those who wish to prohibit the practice; and,
Those who are willing to cooperate and earn a commission.
For landlords who wish to continue to prohibit short-term sublets, it is imperative to include the restriction in the lease agreement, and inform tenants that violating this provision is grounds for eviction.
Aimco’s lease provides in part:
“Resident shall not sublet the Apartment or assign this Lease for any length of time, including, but not limited to, renting out the Apartment using a short term rental service such as Airbnb.com, VRBO.com or homaway.com.”
The AIMCO provision is contained in a paragraph entitled “Assignment.” Although there is a distinction between assignment and subletting, it was not relevant here. It is worth noting, however, that the judge in this case pointed out the discrepancy.
Also, the court noted that, with respect to the San Francisco ordinance prohibiting the collection of fees for unregistered properties, there was an express purpose for that ordinance, namely the concern over the loss of affordable housing for long-term residents. That notation could prompt a landlord attorney to include the reasons for the anti-subletting prohibition — risks of unvetted strangers and so forth — in the lease agreement. While that may not affect the legal issues, it could serve to educate tenants and prevent them from posting listings in the first place.
It may be helpful to include the consequences — possible eviction — in the same paragraph so tenants understand what is at stake. To the extent that the lease does its job, it won’t be necessary to go to court. Speak with an attorney before drafting or updating subletting or assignment provisions in the lease agreement.
For those landlords who wish to receive a commission from tenant’s Airbnb rentals and allow subletting as an amenity for tenants, Airbnb now offers its Friendly Buildings Program. Information is available on the Airbnb website.
This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).
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Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.