What do I do if I catch my tenants renting out their units on airbnb? Is it different if they rent out the whole unit rather than just individual rooms?
This is a very good and timely question, as subletting through airbnb.com is now rampant in the City and will inevitably increase with the New Year. Airnbnb.com is an internationally popular website boasting the availability of private apartments as less expensive vacation housing than hotels in sought after travel destinations such as Paris, New York, Berlin, and San Francisco. Users from around the world simply log on and purchase time slots to listed apartments in these world-class cities at a fraction for what they would pay at hotels. The lister (your tenant), meanwhile, reaps the profit when a visitor reserves time in your rental unit. Not surprisingly, inventory volume in desirable tourist destinations has exploded. To add insult to injury, tenants in rent-controlled places like Paris, New York and San Francisco enjoy subsidized rent yet are presently unrestrained to take in substantial profits for subletting their apartments through airbnb.com and similar portals. Ironically, as apartment house operators, we are precluded by law from renting units directly to tourists for short-term stays, but many tenants seemingly ignore this prohibition.
SFAA and other industry groups are expressing outrage at City Hall for what amounts to an egregious assault by tenants as well as the airbnb.com operators. The City is concerned because these vacation rentals are depriving the Tax Collector of hotel tax, while the hospitality industry is likewise enraged over this unfair infringement on their businesses. Legislation may be forthcoming, yet for now, you as the owner must, and can be, proactive.
Industry attorneys have outlined three strategies that can be employed to combat tenants who sublet your unit to tourists. The first is serving a rent increase notice under the Costa Hawkins Rental Housing Act. This tact is appropriate when the entire unit is sublet, and will probably be successful only in instances where the tenant has moved out and literally converted your apartment into a permanent vacation rental. Costa Hawkins allows you to impose an unlimited rent increase when the tenant no longer permanently resides in the unit. The industry attorneys contend that converting the entire unit to a destination hotel room means that the tenant is no longer living there and thereby justifies decontrolling it. The second option is serving a “Three-Day Notice to Perform Lease Covenant or Quit” provided there is a written rental agreement that restricts at-will subletting. By law, the tenant would have three days to eject the tourists, and often this occurs. More commonly, however, airbnb stays exceed three days, and therefore the concierge tenant is unable to eject her guests in time. Many local attorneys have successfully prosecuted evictions on this ground, and the entire unit need not be sublet in order to invoke the breach of lease covenant strategy. (However, as mentioned above, there must be clear language in the lease that either prohibits subletting or restricts it without the owner’s prior consent.) Lastly, some practitioners have served a “Three-Day Notice to Quit” based upon illegal usage of the unit, and based the illegal use off of provisions of the local Administrative Code and Planning Code that prohibits rentals for under 30 (or 32) days unless the lessor has a tourist license. In this scenario, the tenant cannot cure the breach, and the eviction action is thereafter filed if everyone, including the tenant, is not out in three days. This is a controversial proposition in that many tenant attorneys argue that these legal prohibitions apply to owners, not tenants.
Your attorney will guide you as to the most appropriate tactic. In sum, please check the airbnb.com website with frequency if you suspect that one or more of your units is being put to this type of use. If you discover that your building has been “hotelized,” contact experienced landlord-tenant counsel immediately.