I’m a small landlord in North Florida, and I recently found out that my tenant in a 3-bedroom home has been renting out at least one spare bedroom via Airbnb. I haven’t had any neighbors complain, and I haven’t heard about any other problems. But I’m worried about future tenants and possible liability. Should I be concerned? What are my options?
–Alex, St. Augustine, Florida
You’re right to be concerned! The unauthorized subletting of your property does expose you to some hazards that you probably didn’t bargain for when you leased your rental home to your current tenant. They’re relatively simple to address–depending on your tolerance for risk and your relationship with your tenant–but you should first familiarize yourself with the issues involved so you can make an informed decision.
But first, a bit of background about Airbnb.
The Basics on Airbnb Liabilities for Landlords
Airbnb is just one of several emerging home-sharing applications. Sometimes called peer-to-peer renting applications, these platforms allow people to rent out spare bedrooms or other living spaces to travelers on a short-term basis. Anyone can create an account and post an ad to find a renter for anywhere from a week to 5 months. You agree on a rental price, and then voila! There’s a new tenant in the dwelling. Except in your case, as the unit’s landlord, you didn’t consent to the arrangement!
From your perspective, there are several issues you should be concerned with. First, you didn’t screen these individuals. You had no opportunity to run a criminal background check or a credit check. You didn’t get to call the renters’ previous landlords to sniff out any problems. You don’t know their intentions: A middle-aged couple staying overnight on their way to visit their grandchildren is one thing–a traveling rock band of 22-year-olds touring the region in their beat-up van with thousands of dollars of equipment, plus the traditional lifestyle choices of 22-year-olds in rock bands… that’s another thing. And you have no way of knowing which of these two scenarios is playing out in your rental.
These temporary tenants could cause severe problems with the neighbors. They could damage your property, either maliciously or negligently. They could throw a crazy party or bring drugs onto the property. They could rob or otherwise harm your tenant or a neighbor, exposing you to a ton of potential liability.
Under this arrangement, your lessee gets all the benefit–the extra rental income–while you get all the risk!
Meanwhile, your standard landlord insurance policy can’t adequately protect you. These policies are designed to protect you against liabilities that may arise from a long-term tenant with a vested interest in staying on good terms with you, who has filled out a complete rental application, and whom you’ve had the opportunity to screen.
None of this applies to the Airbnb crowd. If they cause a problem, and you wind up with liability or funding a defense in court, your landlord insurance policy may well deny the claim.
Additionally, if you’re a member of a homeowners association, your tenant may have placed you in violation of your CC&R. Restrictions on subletting are very common, especially in popular vacation areas. Some condominium and homeowners associations forbid it altogether, so your tenant could be exposing you to fines and other sanctions from your HOA.
Now, it could be worse. Unlike a general classified ad platform like Craigslist, Airbnb offers $1 million in liability insurance protection to hosts under its Host Protection Insurance Program–so you aren’t completely exposed.
But even so, there are significant problems from your point of view as an absent landlord: The Host Protection Insurance Program from Airbnb specifically excludes coverage for damages arising from assault, battery, sexual abuse, or molestation by the host–your primary tenant. So you’re still exposed to certain risks, and your landlord insurance policy may well exclude coverage, because your home is not supposed to be used for anything other than residential leasing.
In addition, if the guest says that they got sick from mold in the unit, the Airbnb insurance policy also excludes that. The Host Protection Insurance Program policy also does not provide accommodation or coverage for damage or loss to the Host’s property.
It also excludes liquor liability. If your tenant provides booze to the guests, and they hurt someone or cause damage as a result, you could potentially be liable–and the Host Protection Insurance Program will exclude you.
All of these are good reasons to discourage or prohibit any kind of subletting arrangement. But there’s more: In Florida, landlords and hotel operators are supposed to collect and remit a transient tax of 6% on short-term rentals, for example. Now, Airbnb generally collects and forwards this tax on your behalf, so in many ways, Airbnb is a cut above the rest–and certainly much better than a Craigslist posting. But who’s to say that your tenant is only using Airbnb to book guests? This is another way in which you could be exposed to problems from the unauthorized use of your property for short-term rentals.
Can You Evict?
If you have a properly worded lease and it prohibits or restricts subletting, you can file to evict your tenant. However, you can’t evict if your tenant is not in violation of the lease.
You can probably make a good deal of progress by appealing to common sense. I’m not sure I’d trust your tenants’ goodwill and sense of ethics if they didn’t level with you about the subletting to begin with, but you could explain to them that the arrangement actually exposes both of you to substantial liability. Your tenant should immediately stop subletting via Airbnb or any other platform (insist on cancelling future reservations and refunding deposits), and you both go on as landlord and tenant. Your tenant keeps his or her place to live, and you keep collecting rent and don’t wind up with an expensive vacancy.
There is one other option: You could arrange for additional insurance coverage–a short-term rental rider on your landlord insurance policy may work. (Speak with your property & casualty insurance agent.) Then, work out a revenue-sharing agreement with your tenant. This is the best case scenario if your tenant is mature, responsible, and trustworthy–but if that were the case, you probably wouldn’t have gotten blindsided by the Airbnb clients in the first place.
Writing about personal finance and investments since 1999, Jason Van Steenwyk started as a reporter with Mutual Funds Magazine and served as editor of Investors’ Digest. He now publishes feature articles in many publications including Annuity Selling Guide, Bankrate.com, and more.