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Landlords beware: Airbnb is booming in big cities, but many users run legal risks

Landlords beware: Airbnb is booming in big cities, but many users run legal risks


The company showed up at a hearing yesterday to support a NYC host against $7,000 in fines

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Airbnb iPhone
Airbnb iPhone

Airbnb's iPhone app.

Nigel Warren can get $105 a night for renting out his room in an East Village apartment on the vacation rentals site Airbnb, which is what he did for three nights during a trip to Colorado in September. When he returned, his landlord informed him that the building had been raided by officials from the Mayor’s Office of Special Enforcement, who alleged that the arrangement violated New York state’s illegal hotels law.

As a consequence, Warren is now facing $7,000 in fines from the City of New York. Warren had only rented his apartment twice in the two years before he got caught. "The amount of fines seems exorbitant based on what I did," he told a judge on Thursday.

Warren is now facing $7,000 in fines from the City of New York

On Thursday morning, Warren showed up at the New York City Environmental Control Board (ECB) in the financial district for his fourth or fifth hearing on the matter (he couldn’t remember which). In the room were three representatives from Airbnb, including a lawyer from the prestigious firm Gibson Dunn, which filed a brief on Warren’s behalf.

It’s the first time Airbnb, a Silicon Valley darling with a multi-billion dollar valuation, has intervened in such a case. The company makes it easy for anyone to convert property into an amateur hotel — a little too easy, officials in some cities say. Safety and fire code standards tend to be stricter for hotels than for residential dwellings, and hotels are often subject to extra taxes. Furthermore, the issue affects a ton of groups, including landlords, neighbors, tenant associations, and housing associations.

New York City has become the focus of Airbnb’s national fight against regulators. "What we’d like to do is figure out a way to make New York the model city," David Hantman, Airbnb’s public policy chief, told Skift in January.

Airbnb took 300,000 bookings in New York City last year and is growing fast. The company is on track to do $1 billion in bookings in the city this year, startup investor Fred Wilson told The Verge.

But based on amendments to a state law passed in 2011, at least half of the New York City listings on the site are illegal.

The New York law was amended in order to crack down on illegal hotels being run by companies such as Smart Apartments, which bought residential apartments and rented them out for short-term stays. The law seems to allow people to rent rooms under certain conditions, but forbids people from renting their entire apartments. The second category accounts for about half the listings based on sample searches conducted by The Verge.

It’s the first time Airbnb has intervened in such a case

The law apparently includes an exception for short-term rentals if the tenant is home, which would cover all the private and shared rooms that make up the rest of Airbnb’s inventory. That’s the exception that Warren argued, since his roommate was home while he was renting his room.

That interpretation goes against the spirit of the law, said Michael Burns, who argued on behalf of the Department of Buildings. "You don’t know these people? They’re not your friends?" he asked Warren, who affirmed it. "They should stay in a hotel," Burns said.

If the ECB rules against Warren, it could mean the city considers all the listings on Airbnb illegal.

State senator Liz Krueger, who co-sponsored the recent legislation, believes there is a discrepancy between what Airbnb advertises and how it’s being used.

"A quick glance at Airbnb's New York listings will show a ton of listings for the same or similar apartments, listed by the same users," she said in an email statement. "Airbnb is acting as middleman for large illegal businesses like Toshi and Smart Apartments, which are illegally converting residential apartments for full-time use by visitors to New York."

"Airbnb is acting as middleman for large illegal businesses."

Airbnb says 87 percent of its New York City hosts have only one listing, which acknowledges that 13 percent come from hosts with multiple listings but contradicts the idea that the site is overrun by massive illegal hoteliers.

The existence of large-scale listings doesn’t mean they’re being booked, however. While listings from bigger companies such as Smart Apartments frequently pop up on Craigslist, The Verge was unable to find search results on Airbnb that obviously belonged to a large-scale operation.

Warren’s case is bad press for Airbnb, which doesn’t make much of an effort to alert its users to the fact that they may be breaking the law. However, the company plans to push for an amendment or a new law that will unambiguously sanction Airbnb’s peer-to-peer model.

A judge will decide within a month whether to uphold the fines. In the meantime, Warren suggests New Yorkers avoid hosting on Airbnb.

Correction: An earlier version of this story said that the New York-based company Smart Apartments has had a profile since November 2011; that was incorrect. The profile belongs to an operation based in Austria.