Airbnb Fiascos and Other Tales of Short-Term Rental Woe

Proceed with caution before turning your property over to strangers

We’ve all thought about becoming an Airbnb host and renting out an empty room or underutilized vacation home. It seems like a fantastic way to bring in some extra income. And to be sure, many have capitalized on the opportunity. But the arrangement is not without risk.

Offering your property as a short-term rental on Airbnb, HomeAway or through a Craigslist ad have several i’s to dot and t’s to cross before you turn over the keys. It’s easy to assume the odds are in your favor and nothing will go wrong. But you are so much better off having anticipated and prepared than responding after the fact.

First, check with your local zoning ordinances and homeowners association to verify accepted and prohibited uses. Some municipalities, like Seattle and Kirkland, have limits on the number of days per year you may have unrelated guests in your home, or even prohibitions on short-term rentals altogether. You will also need to comply with registration and tax requirements, and obtain insurance.

Seattle real estate lawyer Evan Loeffler has seen the dark side of the short-term rental industry. “We only hear about the horror stories,” he says.

He notes, too, the legal-protection grey area that short-term rentals fall into—especially because this is a new, largely unregulated industry. For example, Loeffler says that Washington’s landlord-tenant law contains exclusions for “a hotel or other transient lodging, defined as you have to have a hotelier’s license. So, none of these places qualify as a hotel.” Meaning, if you have a problem with a renter and need to get them out, you probably have to follow regular eviction laws.

Loeffler offers a “horror story” to illustrate: “My client rented his place through Airbnb for a week. After a week, the woman called and asked if she could stay longer, and they agreed she could stay for another week. That second week became a separate agreement outside Airbnb—a side deal. Now, nothing was covered by any Airbnb rules, and this technically became a month-to-month tenancy, which was not what my client had in mind. The second week’s check bounced, and we had to start an eviction action. It turned out she was a professional at this: The name she gave wasn’t her real name. The police detained her during this same time because she was driving a car she test drove and never returned, under a false name. She didn’t show up to the hearing. And still, with all that, it took about a month before we were able to get her out.”

If you do list your property through a broker like Airbnb or HomeAway, keep in mind that a contractual arrangement protects the companies. So what will happen if there is damage to your property caused by a renter? If you’re renting through a short-term rental broker, you will have entered into an agreement addressing how such damage is handled. But some hosts have found that this agreement doesn’t cover what they thought it did. Loeffler’s experience bears this out. “My understanding is that, if a deposit isn’t enough to cover damages, if the renters burned the place to the ground, Airbnb is just going to wash their hands of it,” he says. “There may be an arbitration provision. But there really are no protections, for owners or renters.”

Of course, not every short term rental arrangement goes bad. If you’re still thinking you want to get into the game, be sure to talk to an experienced real estate attorney beforehand, so that you know what you’re getting into and how you will be protected. For more information on this area, check out our overview of real estate laws.

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