Hello everybody.  This month let’s discuss AIRBNBs and how they may relate to the coronavirus (“CV”).  

Some 40 years ago, cities in California began passing rent control ordinances regulating rents in older apartment buildings, but they exempted all new construction (so that contractors would not be deterred from building new multifamily housing units).  

Last year, the State of California itself enacted rent control legislation to limit rent increases on all apartment buildings which are more than 15 years old.

Adding salt to the wound, this year (in March 2020), cities, counties and the State essentially gave a free pass to tenants not to pay any rent if the CV adversely impacted their financial ability to pay it. 

Of course, our municipalities and the State explain that those rent payments are not forgiven, but merely deferred until at least June 1, 2020 under California law, but deferred 12 months after the emergency orders are lifted under Los Angeles law, etc.  Moreover, those deferral periods might be extended at the government’s discretion.

With the CV now affecting thousands of Californians, landlords are more interested in retaining tenants who can afford to pay their rent rather than raising rents on existing tenants and then risking the possibility that the tenants will cease paying any rent knowing that they cannot be evicted for being insolvent.

In my decades of experience as a real estate attorney, I would opine that the great majority of tenants in California truly desire to timely pay their rent.  But now that so many renters have lost their jobs due to the CV and their probable lack of a savings account nest egg to rely on, many will choose to vacate so as to live with other family members or move out for other reasons.  When that happens, chances are that landlords will be reducing rents as an incentive to attract new tenants having the financial ability to pay their rent and who will not rely on the governmental moratoriums to defer rent payments.  

So what does all that have to do with tenants who sublease their units to Airbnb transients?  Just this:  When existing tenants vacate, new unscrupulous applicants may see this as an excellent opportunity to earn money at their landlord’s expense.  Here’s how: They lease the apartment from the owner and pay the first month’s rent up front.  

Then, starting with the second month, they don’t pay any rent to their landlord because they know they probably can’t be evicted.  Then, for many additional months they rent out their unit to successive short term transient Airbnb occupants and pocket all of the transients’ money.  

Meanwhile, the landlord has to pay his/her mortgage, property taxes, building insurance, water bills, on-site managers, etc.  So what can be done to stop new tenants from Airbnb-ing a unit? 

The Trouble with Evicting a Tenant For Having Airbnb Occupants

Unless there is a provision in the lease which expressly or implicitly prohibits a tenant from “renting” the apartment unit to transient occupants, or a local municipality has passed an ordinance prohibiting such lodging, tenants may lawfully rent out their units with impunity.

The CV laws preventing landlord evictions are limited just to tenants who stop paying their rent due to the impact of the coronavirus.  In the real world, it is likely that at least75% of California tenants would fall under the protection of the CV laws.  

But those laws do not prevent a landlord from evicting a renter for other breaches of the terms in a lease.  So if a landlord learns that the new tenant is engaged in an Airbnb “business,” the landlord can evict if that business is a breach of the lease.  So how can such an eviction be accomplished?  It is not so easy.

The landlord’s initial step is to review the rental agreement to see if it includes a provision, express or implied, that prohibits Airbnbs.  By way of example, AOA’s lease agreement (Form 101) contains two such provisions: 

The first is set forth in paragraph 1 which provides that the tenant agrees to use the premises “SOLELY AS A PRIVATE RESIDENCE…”  Obviously, allowing members of the general public to use a unit for sleeping purposes in exchange for payment of money to the tenant (which is the hallmark of Airbnb occupancy) violates the restriction that the apartment be used solely as a private residence.

The second provision is included in paragraph 21 where it bars the tenant from subletting the unit or any part thereof.  The act of a tenant permitting a third person to sleep in an apartment in exchange for payment of money is subletting. 

If a prohibition against transient occupants is in the lease, termination of the rental agreement and subsequent eviction of the tenant is simple in theory, but problematic in court.  

If the landlord approaches the transients and asks the basis for their sleeping in the unit, lodgers are likely to say (because the tenant would have coached the occupants in advance of what to say) that they are “guests” of the tenant.  Most leases allow tenants to have guests sleep over for short durations, as does paragraph 6 of AOA’s form lease.  If the landlord asks the occupants if they paid the tenant any money, the answer is likely to be “No,” because the tenant coached the occupants about that as well.

Further, even if the occupants admit to the landlord that they paid money for the sleeping arrangement, that statement, as related by the landlord to the unlawful detainer trial judge, will not be admissible evidence in court because it is hearsay.  

Moreover, by the time the tenant is served with a 3-Day Notice to Perform Covenant or Quit and an unlawful detainer action is filed, the transient occupants are probably long gone and, therefore, cannot be subpoenaed to testify.

Additionally, if the landlord confronts the tenant to ask about the occupants, the tenant is likely to claim that they were his/her guests who are allowed under the lease.  

That is not to say that the landlord could not win an eviction suit if he serves the tenant with a Notice to Perform or Quit, then deposes the tenant, deposes Airbnb personnel at their headquarters in San Francisco, and subpoenas the tenant’s bank account records to prove Airbnb payments were deposited directly into the tenant’s account, etc.  But those procedures are expensive and the end result of eviction is not assured.

A Better Way to Handle the Problem

Proving in court with admissible evidence that the tenant allowed his unit to be used for lodging of short term transient occupants is easier said than done, and will likely include costly attorneys’ fees.

But there is a direct, less expensive, and more certain way of establishing a violation of the lease agreement than trying to prove that the tenant did in fact sublet the premises to Airbnb or other similar types of occupants.

Landlords can include a provision in their new leases, or attach an addendum thereto, that not only prohibits the use of the premises by transient occupants who are not otherwise permissible guests, but also prohibits tenants from even advertising the premises for temporary lodging.

In other words, with such a provision, merely advertising the unit would be a violation of the lease and subject the tenant to eviction.  Here is an example of the type of provision that AOA members may consider, subject to their own lawyers’ analysis, modification and approval:  

No Airbnb Occupants, etc.:  Tenant shall not at any time advertise the Premises or allow the Premises or any portion therein to be advertised, whether in print, on-line, on the Internet, in social media, by word of mouth, or otherwise, for the use or occupancy thereof by any person, including without limitation, any advertisement for its use or occupancy through Airbnb, VRBO, Craigslist, OnRadPad, HomeAway, Apartments.com, newspapers, or any other source (collectively “Sources”), nor solicit anyone by any of the Sources for any use or occupancy of the Premises or any portion therein, in exchange for compensation.  Nor shall Tenant allow any such person to at any time use or occupy the Premises or any portion therein.  In no event shall Tenant at any time place, hang, affix, or allow to be placed, hung or affixed, a lock box or other type of potential key holder to the exterior of the Premises nor to any portion of the property of which the Premises are a part.  Without limiting the generality of the foregoing, Tenant shall immediately pay and disgorge to Landlord all money and other consideration that Tenant receives arising out of any act that violates this paragraph.”

Then, if during the term of the tenant’s new lease the landlord suspects that the tenant is using the premises for transient occupancy, in violation of the rental agreement, finding the solicitations on-line will probably not be difficult.  Most tenants will favor Airbnb.com as their principal advertising website.  Photos of the building and the interior of the apartment will likely be included in the ads along with the address or approximate location.  A photo of the tenant as well as the tenant’s first name may also be provided in the postings.  

The landlord should frequently check the Airbnb postings covering the building’s geographic area.  If the tenant is advertising the unit for temporary lodging, the landlord should be able to find the ad and show it to the judge during the eviction trial.

Some Final Thoughts

Tenant subletting to transient occupants is a growing problem for lessors, and indeed, it may be exacerbated by the CV pandemic.  Testimony in court by a landlord that various transient occupants admitted to the landlord that they had an Airbnb relationship with the tenant will be excluded as inadmissible hearsay.  

On the other hand, if Internet advertisements themselves are prohibited by the lease, then proof of actual transient lodging is unnecessary. The landlord should prevail merely by showing the ads to the court.

Finally, for AOA readers who desire to include the example “No Airbnb” lease provision I have written above, please have your personal attorney review it. What I have composed is intended to present the concept only.  Its verbiage should be evaluated by the reader’s counsel before including it in any particular lease.

 

Dale Alberstone is a prominent real estate attorney who has specialized in real property and resident manager law for the past 40+ years.  He also serves as a mediator of real estate disputes and is a former arbitrator for the American Arbitration Association.  

Mr. Alberstone has been awarded an AV rating from Martindale-Hubbell.  An AV rating reflects an attorney who has reached the heights of professional excellence and is recognized for the highest levels of skill and integrity.

The foregoing article was authored April 2020.  It is intended as a general overview of California law only and may not apply to the reader’s particular case.  Readers are cautioned to consult a lawyer of their own selection with respect to any particular situation.

Questions of a general nature are warmly invited.  Address correspondence to Dale S. Alberstone, Esq., ALBERSTONE & ALBERSTONE, 269 S. Beverly Drive, Suite 1670; Beverly Hills, California 90212.  Phone:  (310) 277-7300.