The growing shared economy may involve your property (sometimes even without you being aware). Be sure you’re on your game when it comes to property management liability and safety if occupants are using Airbnb to rent your space online.
Airbnb and other hosting sites are more than just a trendy fad. They’ve become a way of life and a revenue stream for millions of people, and not just for homeowners. For property owners and managers, this means increased liability and safety risks.
Most leases do not allow sublets without the owner’s approval, but that often doesn’t stop ambitious, enterprising renters from advertising their (your) space. You may be unaware that your tenants — even if they are dream tenants — are not just renting, but monetizing.
The situation may become painfully clear only if something bad were to happen, with the news reaching you too late. If a “guest” were to become injured during their stay, they (and their lawyers) may be looking for the deepest pockets if they decide to sue, or at the very least, multiple defendants.
An unauthorized sublet will almost certainly not be covered by your existing property insurance. As well, renters’ insurance will more than likely not cover business pursuits or sublets.
Airbnb itself warns hosts to carry an adequate amount of insurance before venturing into the process. The company offers a host guarantee, which basically covers property damage, but it is not comprehensive. That policy does not take the place of homeowners’ or renters insurance. Its website cannot make it any clearer, as stated here:
“Please note that Airbnb has no control over the conduct of Hosts and disclaims all liability. Failure of Hosts to satisfy their responsibilities may result in suspension of activity or removal from the Airbnb website.”
Knowing this, of course, that policy won’t help you if something unfortunate were to happen, and it could even affect your own policy renewal or future premiums. In fact, the insurance industry is taking a cold, hard look at hosting situations, and is reconfiguring its policies to reflect the growing sharing economy.
Here’s what Airbnb’s host guarantee does cover:
- Up to $1 million in property damages (not too shabby, but that’s it. Nothing more.).
What’s not protected:
- Cash and securities
- Personal liability
- Shared or common areas
As a property owner or manager, here’s what to keep in mind:
Be an expert on your property insurance liability exclusions.
As hosting becomes more of a reality, your insurer’s contract verbiage may be amended, clarified or totally changed. Make sure you are aware of any updates; read through it with a fine-tooth comb. Don’t be afraid to ask for clear explanations if something doesn’t make sense.
Be aware of other community marketplaces.
Airbnb is the Uber of shared hosting, but there are other sites and upstarts as well. This will certainly complicate risks and legal obligations. You will want to do your due diligence to see what all is out there so that you don’t run in to any surprises.
Monitor shared hosting sites.
You may find your very apartment being marketed without your knowledge.
Be aware of short-term rental housing taxes.
This varies from city and county, so ask your tax preparer how to play it — before April 15. If your property is going to become a hotel, it’s going to affect how you pay taxes.
People get hurt on vacation.
Local governments are cracking down on building codes (including health codes) and safety violations. The hotel industry is jealous — they are insisting that hosts be required to follow the same regulations that they do (it’s only fair). Be sure you are up to standards, and beyond.
Keep detailed records.
If you are asked to comply with the IRS or government bureaus or courts, be prepared with meticulous backup.
Use Airbnb to fill your vacant units.
Some multifamily operators are actually looking to Airbnb as a savior, to make use of unused apartments. You become the “host,” and Airbnb gives you a cut of the rental fee. Sounds good, but make sure you know what to do if the “guest” refuses to leave, or gets injured on the premises.
Here’s an idea: Give that guest an option to sign a long-term lease, or a referral fee for recommending a permanent tenant.
If you can’t beat ‘em, join ‘em.
Forbidding Airbnb hosting may also shrink your potential occupant pool. Find out how you can include Airbnb on your lease with all of your protections clearly stated. This way, every liability — and who is liable — are on the table, ahead of time. As well, your tenant should be as transparent as you are.
Something to think about: We’ve mentioned throughout this article that accidents can occur during Airbnb rental periods and safety remains an important issue (arguably even more so). Temporary guests utilizing Airbnb are likely from out of town, and therefore, less familiar with their surroundings and location. As we’ve mentioned in the past, 911 centers cannot always get accurate or detailed enough location data from an emergency call placed from a cell phone. This can become a problem when the caller does not know how to tell you where they are. You’ll want to be aware of these and other safety issues like this that Airbnb rentals may present and do what you can to counteract them, perhaps by providing emergency help phones throughout your property with fixed, known locations easily identified by the emergency operator with no aid from the caller. Click here to become aware of some unusual property emergencies that you may not expect.
For more information on how Kings III can reduce the property management liabilities associated with property safety, visit www.kingsiii.com.