The rise of Airbnb: What property managers need to know

Howard Goldman, Goldman & Pease LLC

I. Introduction Instances of home-sharing or short term rentals have skyrocketed in recent years due to the rise in popularity of websites such as Airbnb.com, homeaway.com and vrbo.com. For a small fee, these websites connect homeowners with potential renters who are interested in finding a place to stay for as little as one night at a time. Homeowners can make a significant profit by allowing renters nightly use of their entire home or even a single bedroom therein, especially in major cities like Boston where nightly rates of hotel rooms are expensive and heavily taxed. But conflicts arise when the homeowner is the landlord of an apartment or condominium unit because the unit owner’s decision to rent impacts all of the residents of the building.

II. Property Managers Should Be Wary of Short-Term Rentals The rise in use of Airbnb.com and similar websites raises significant concerns for property managers. First, there is the issue of safety within a shared living space. When an apartment or condominium units rented, the renter gains access to the entire building including hallways, gymnasiums, rooftops and lobbies. The Airbnb.com renters may misuse shared equipment or otherwise take advantage of amenities reserved for homeowners. These communally accessible areas of the building then lose their exclusivity and other residents may even feel threatened by the presence of strangers in their space who most often are uninformed of the specific rules surrounding the use thereof.

Rebecca Erlichman, Goldman & Pease LLC

There are also the issues of noise and pollution. Residential apartment buildings located in urban areas are likely to be rented to tourists who are on vacation and may stay up late, play loud music and engage in illicit activities, such as smoking. These activities are generally subject to fines, but transient renters will be gone by the time the fine is issued and, therefore, be more likely to engage in disruptive activities.

Another concern is whether a transient renter is covered under the building’s  master insurance policy. If a transient renter damages a portion of the building, such as a hallway or communal shared space, it raises complicated questions as to who is responsible for paying for the damage. Similarly, if a transient renter gets hurt – such as in a slip and fall – within the building, it could expose the building to liability if short term renters are not covered under the insurance policy. In addition, the practice raises questions of whether the building is being used as a commercial rental use, which may not be covered under the applicable insurance policy. The practice also raises concerns with local and state government officials regarding how home-sharing impacts local zoning laws and whether the practice can be taxed.

III. A Boston area Condominium’s Struggle To Stop Unit Owner From Renting Out Unit Through Airbnb.com Our firm recently was retained by a small exclusive condominium building located in South Boston after residents noticed that one unit was being rented out on a nightly basis to tenants via Airbnb.com. The website depicted the apartment as being located in “an historic South End brownstone building with two bedrooms and a queen size bed in each, a gorgeous dining room, living room, fully stocked kitchen and 1.5 bathrooms” and stated that renters may smoke on the balcony. The owner was providing the renters the keys to the building and to the apartment by leaving them in a lock box outside the building. The building key allowed the renters access to all the common areas of the building including the hallways, basement, lobby and roof. The renters were never accompanied by the unit owner, so they could not be categorized as guests. The renters were in violation of the rule that all rentals must be in writing, with a copy of the lease provided to the condominium association, and must be for a minimum duration of six months.

There were several concerns about the unit owner’s continued rental of the unit. First, the renters would cause increased liability exposure because building’s insurance coverage was meant for a building occupied by owners and lawful tenants under leases of more than six months. If one of the renters had an accident in the building and sued , the insurance company would likely deny the claim due to converting the character of the residential building into a commercial rental property. Second, management had been informed by several female residents that some of the renters were rowdy and intoxicated men, who had made the residents uncomfortable and they no longer felt safe in the building. Third, the renters were smoking on the rooftop near the dryer vents, which exposed the residents and their lawful guests to toxic fumes and potentially put the building at risk of catching on fire.

Our firm sent several communications to the owner asking him to stop renting his unit, but he failed to respond and continued to rent out his unit. Ultimately, we filed an injunction to stop the owner from continuing to illegally rent out his unit. The court agreed that short term rentals were not allowed in the building and enjoined the unit owner from continuing to rent his unit for such short term purpose. The court also awarded that the homeowner pay all of the legal fees and significant fines based on a provision in the condominium bylaws providing for legal fees to be awarded to the trust in cases where unit owners were found to be in violation of the rules. Ultimately, the unit owner was forced to stop all future rentals of his unit and remove all advertisements showcasing the unit and condominium building from Airbnb.com and similar websites.

IV. Steps Property Managers Should Take To Manage Ability of Residents To Rent Units Via Airbnb.com We expect to see more conflicts between landlords using their units as income sources via use ofAirbnb.com and property managers as short term rental websites continue to rise in popularity. Property managers of buildings located in Boston, Brookline, Cambridge and other densely populated areas should consider taking a proactive approach to control the practice of short term rentals by suggesting that the condominium association add protective language to their condominium bylaws. For example, associations should consider adding a rule that unit owners may rent out their units but all rentals must have a minimum rental period of not less than 30 or 60 days. Another rule is that each unit must be rented as a whole, which would limit a unit owner’s ability to rent out individual rooms therein. Finally, property managers may want to suggest that properties they are managing add an amendment requiring that all rental leases must be in writing, must include a copy of the condominiums rules and regulations and/or bylaws and must be submitted to the property manager.

We strongly recommend that property managers advise that all buildings they manage vote in place an amendment allowing fines to be levied on unit owners who violate the condominium rules and for those fines to be collectable as a lien on the unit pursuant to M.G.L. c. 183A, Sec. 6. This language should provide that costs of collection of the fines, including all reasonable attorney’s fees, are assessed as a common area expense against the violating unit. As a practical matter, this provision allows condominium associations to proceed to court in order to obtain an order to stop the home-sharing practice and place the burden of the costs and legal expenses on the offending unit owner. Our firm can assist in amending the condominium documents to ensure that these new provisions are effective. The prospect of paying legal fees and significant fines may dissuade these certain unit owners from engaging in home sharing.

Even if the bylaws already contain these protective provisions, property managers still may find that one of the landlords in their buildings is ignoring the rules and renting out the apartment (or one of the bedrooms therein). These landlords may decide that the risk of being “caught” by the condominium association is worth the thousands of dollars they will recoup violating the rules and renting out their units. Property managers should advise that the building immediately obtain legal counsel. An attorney can draft a Cease and Desist letter which puts the offending landlord on notice that they are violating the rules of the condominium. If, after thirty (30) days, the rental continues, the attorney can file a civil action and motion for a temporary restraining order.

Some communities may determine that the risks associated with short term rentals may be outweighed by the potential of considerable financial benefits to the landlords that come from renting out their units. If your apartment informs you after holding an open discussion with residents that it would like to allow owners to list properties on Airbnb.com, property managers should advise that the building hirecounsel to draft rules amendments governing short term rentals. These amendments may include a rule containing conditions the unit owners must follow when renting out their units, such as limited the number of days a unit could be rented out, requiring the prospective landlord to meet the renters in person and creating a list of rules about use of common areas that must be distributed to each renter. Property managers should also review the building’s insurance policy to ensure short term renters are covered. Having tools in place to regulate and control the short term rentals will minimize liability and create a fair process for all unit owners.

V. Conclusion Property managers have a duty to enforce the building rules on behalf of the all of the residents. While short term rentals do create cash flow for certain individuals, the risks of liability exposure, damage to common areas, and safety to all residents are real concerns that must be addressed. The rise in popularity of websites like Airbnb.com demonstrates a trend in short term rentals that is here to stay and steps must be take into control the ability of unit owners to rent out units in a way that is beneficial to all of the residents.

Rebecca Erlichman is a senior associate and Howard Goldman is an attorney and the founding partner of the law firm of Goldman & Pease LLC, Needham, Mass.