Over the last few years, the “sharing economy” seems to have taken the world by storm. Starting as a way to share software and ideas through the open source community, it has since transformed into a way for people to share cars, bicycles, and even their homes. While “couch surfing” was the first big movement in people opening their homes to others, it wasn’t until Airbnb launched that people started realizing they could make money off their extra bedrooms. Of course, this is also where things start to get a little more complicated.
With couch surfing, the “sharing” aspect of the sharing economy is the great highlight, with people opening up their homes to wary travelers with no expectation of compensation. However, with Airbnb, and the similar online platforms like Tripping.com, FlipKey, and HomeAway, the rental of homes and extra bedrooms for money highlighted more of the “economy” aspect. Yet as homeowners and renters have started to embrace the idea of collaborative consumption, new considerations have started to come to light.
If you are considering the possibility of becoming an Airbnb host, there are a few things you should be made aware of.
- Subletting may be a violation of your lease.
While a number of renters have started to offer their second or third bedrooms to Airbnb users, it does qualify as “subletting.” For most property management companies, leases include clauses that forbid renters from renting their space to third parties. In some instances, the property management companies or property owners will allow the practice with permission, but if that permission is not granted in writing, the property owner does have the right to have you evicted. If you rent your residence and want to be an Airbnb host, be sure you are not in violation of your lease and get the proper permission.
- Your residence may not be zoned as a rental property.
Depending on which city you live in, there are different rules about what properties can be rented out. Some view the Airbnb practice as running an illegal hotel, and fines for such violations can be quite hefty. An incident in New York City in 2012 almost had a five figure fine. If you’re part of a condominium association, you may be subject to their fines as well.
- An actual lessee on the premises can make a big difference.
In the case of the incident above, it was ruled that Airbnb rentals could be allowed as long as they were not renting out an empty residence. As long as a permanent resident whose name was on the lease was present, the transaction was still legal.
- Homeowners Insurance and Rental Insurance do not cover business transactions.
Once your property becomes a rental, and you accept money for people to use it, it becomes a business. Homeowners insurance and renters insurance are designed to cover permanent residents, but they do not cover short-term renters. Airbnb has started to offer a Host Protection Insurance program which provides liability coverage of up to one-million-dollar policy for hosts and property owners. However, some communities see this as insufficient, requiring hosts to get an extra business insurance policy and a business license.
- Who’s paying the taxes?
In requiring Airbnb hosts to file for a business license, several cities and municipalities are requiring that the hosts also pay the same tax rates as area hotels. In addition, the IRS is working to ensure that any money made through hosting is included on the hosts’ tax returns as additional income.
While platforms like Airbnb become more popular, they also face more restrictions as more people put them to use. Before you list your own residence as a short-term vacation rental, be sure you’re fully protected.