Airbnb Faces Legal Challenges as Peer-to-Peer Model Shakes Things Up

  • Feb 28, 2014
  • Louis Marlin
  • Labor & Employment

Airbnb, which describes itself as a community marketplace for “unique accommodations” around the world, has grown tremendously since it was founded in San Francisco in 2008. The idea, like all peer-to-peer (P2P) services, is simple: rather than booking a hotel when you travel, why not stay in a local’s apartment? The benefits of the service vary, but generally include lower costs, access to a more localized experience, increased freedom to self-cater, and more privacy. Airbnb properties are residential by nature, and so it becomes much easier to stay in areas of major cities where hotels have never sprung up.

It’s been a huge success, to say the very least.

The company now boasts more than 11 million satisfied guests, more than 34,000 cities where properties are listed, and more than 192 countries where rooms are available. There are even 600 odd castles you can stay in around the world. However, the success has not come without criticism – and the hotel industry itself has often led the charge.

In New York City, regulators have begun to crack down on temporary rentals that are illegal under the city’s laws. Early successes – an East Village apartment owner was fined $2400 by a court for renting out his home, while another resident faced eviction after his landowner found he had made more than $50,000 by leasing out his apartment to visitors – have led to an ongoing fight. A 2010 law that makes it illegal to rent out a property for less than thirty days has become the focus of the city’s attempts to bring Airbnb to task. Officials have met with the company and asked them to work alongside regulators; Airbnb continues to lobby for updated legislation that would allow individuals to rent their own properties if hotel occupancy taxes are paid and adequate safety modifications are made.

At the time of Nigel Warren’s $2400 fine, Airbnb supplied legal support and argued in a blog post that even under current laws, short-term renting is legal if the property owner doesn’t leave. As the company said:        

“In 2010, New York rightly set out to crack down on illegal hotel operators. Many of these operators were converting large numbers of affordable housing units into unsafe hotels—putting lives in danger, and clearly circumventing regulations governing hotels.

But as so often happens, a regulatory initiative that began with a noble goal ended up capturing more than just the bad guys. When the 2010 law was drafted, few people were aware that Airbnb even existed. As a result, the growing community of Airbnb hosts in New York—regular people using the income from Airbnb to pay the bills—simply had no voice in the legislative process until it was too late. Legislators really only heard one side of the story.”

Authorities have plenty of other concerns, though. The biggest issue for many New York officials is that apartment owners who use Airbnb often fail to pay the correct taxes. The company itself has now placed warnings on its website for those who list their homes, advising them to follow local tax laws, though it doesn’t submit tax information on the income of property owners. City officials have also raised concerns over fire regulations. While hotels are inspected and regulated to ensure they meet safety requirements, Airbnb properties are notoriously difficult to monitor.

In October last year, in an audacious move, New York State attorney general Eric Schneiderman subpoenaed more than 225,000 Airbnb users’ records as part of an investigation into the legality of New York Airbnb listings. It’s clear that authorities are not messing around, and Airbnb is treading carefully, encouraging users to follow the law while still pushing for changes that would benefit P2P startups.

Still, the company has good reason to hope for the best. Less than two weeks ago officials in Amsterdam approved new laws that would allow P2P rentals of residential properties in the Dutch city. The Amsterdam City Council went so far as to create a new rental category, “private rental,” or “private vacation rental,” that allows residents to rent out their homes for short periods of time. The category allows income and tourist taxes to remain the same while permitting rentals of up to two months per year, with a maximum of four people staying at the residence at one time. Homes will need to meet fire and safety regulations and, in Airbnb’s elated response to the decision, the company published Dutch-language guidelines for being a responsible host.

So, Amsterdam’s opening up as New York City seeks more control. While 66% of Airbnb listings may currently break New York City rules, it’s unlikely that legal action against the company would have much success. (Airbnb continues to tout, by the way, the company’s economic benefits to the city.) What’s the future for P2P companies, then? The answer, it seems, depends entirely on where you live.

About the Author

Louis Marlin, an experienced class action lawyer practicing since 1972, is one of the leading class action attorneys in California, and has been named a member of the Bar Register of Preeminent Attorneys.” With more than 40 years experience, Mr. Marlin is known for his work on behalf of employees who have been wrongfully classified as independent contractors, as well as his mass tort work involving defective medical devices. Mr. Marlin now works at Marlin and Saltman LLP.

comments powered by Disqus