March 2016

No Assignment, Sublease … or Airbnb?

By Ashley Peterson

Attorney at Law

Airbnb is an Internet hosting platform utilized by people worldwide to list their residential property or room to short term guests in exchange for payment. What many property landlords do not know is that Airbnb does not restrict the use of the site to title owners.  This could potentially create problems for both landlords and tenants when the tenants list the leased property for rent on Airbnb without the landlord’s knowledge or permission.   

Although many standard landlord/tenant form leases contain a “no assignment” and/or “no sublease” clause, these clauses may not contain language sufficient to clearly restrict Airbnb rentals or the use of other hosting platforms by tenants. An assignment requires that the entire remaining lease term be assumed by the assignee, while subleases only transfer a portion of the remaining lease term, with a right of re-entry retained by the sublessor. One argument is that Airbnb rentals could constitute a sublease because the tenant/sublessor is only transferring a portion of his or her remaining lease term to the Airbnb guest/sublessee. The majority of tenants, however, probably do not know what a sublease is, or that Airbnb rentals could qualify as such. 

A tenant’s use of Airbnb may cause even larger problems for the true landlord. Unless the Airbnb guest expressly assumes the tenant’s obligations under the master lease agreement, the landlord has no right to enforce the lease terms against the Airbnb guest for violations of the lease agreement because there is no privity of contract. The booking confirmation received by a guest on Airbnb does not contain any language regarding an assumption of lease obligations. Thus a landlord’s inability to enforce the lease terms against an Airbnb guest could cause major issues for the landlord in eviction proceedings and in seeking contract damages. In certain cases, the Airbnb guest may have a legitimate defense to an unlawful detainer action through a claim of right to possession, regardless of whether or not their occupancy was prohibited by the master lease. It is essential for landlords to ensure that tenants clearly understand that listing the property on hosting platforms is strictly prohibited through explicit language in the master lease.

On September 1, 2015, the California State Senate enacted Senate Bill No. 761 which added Sections 22590, 22592, and 22594 to the Business and Professions Code (“B&P”) in order to address issues created by the rise of Airbnb and similar sites. B&P Section 22950 created the term “hosting platform” to encompass Internet rental listings, like Airbnb, which are used for the primary purpose of renting a residential unit, for profit, to tourists or transients. The law now requires that all hosting platforms provide a warning notice to tenants who are listing a property or room on the site that tenants should review their lease agreement or contact their landlord prior to listing the property on the hosting platform to ensure their actions do not violate the lease agreement. Unsuspecting tenants who do not review their lease agreement or fail to obtain the landlord’s prior approval of the use of the hosting platform face the threat of legal eviction proceedings being brought against them for breach of the lease terms and conditions. 

As a result of the rise of Airbnb and potential legal issues, it is advisable that landlords and property managers review their current lease agreements and house rules with an attorney, paying special attention to assignment and subleasing clauses. Modifications to these clauses may be necessary to make it explicitly clear to tenants that they are not permitted to list the leased property on any hosting platform, and that any violation is a breach of the lease terms.