Saturday, 2 January 2016

Oakland incident highlights risks for absentee landlords

A couple who rented their Oakland home on Airbnb while they were out of town over New Year's Eve were called home early by neighbors alarmed at the large wild party going on in the house. Police arrived before the homeowners, who found garbage, blood, and damaged furniture and other items inside and outside the house. "Sofas were outside. The TV was in my bathroom. Objects... photos, memorabilia ...", they told one reporter. "We found out later that it was [the renter's] 18th birthday, so another issue is that he was an underage user."

The renter had claimed to be from Chicago and to be over 18, but it's unclear whether the renters ever met him, even when he checked in, and whether he had created a fake Airbnb user profile or had stolen some other real user's profile.

As I told Lisa Amin Gulezian of KGO-TV (Channel 7 in San Francisco) in an interview excerpted on the 11 p.m. news tonight, I think things could easily have gone much, much worse for the homeowners: Nobody got hurt, their house is still intact, and Airbnb is likely to pay for most of the damage.

This should be a wake-up call, however, to absentee landlords who think that renting their entire home through Airbnb or similar services, when they aren't present, is "easy" money, or that Airbnb's so-called "Host Guarantee" will cover any costs they incur as a result of tenants' misconduct. That's simply not true.

Airbnb -- like similar brokerages for real estate, transportation, and other travel services -- is extremely profitable for Airbnb precisely because it has so successfully offloaded almost all the risk, liability, and regulatory burdens onto landlords ("hosts") and away from itself. I've been pointing out these risks to landlords since I first heard about Airbnb.

My experience is that most travellers do very poorly at assessing risks. They worry about terrorism, for example, much more than about the more serious risk of car crashes. And travellers buy or rely on all sorts of insurance without reading the fine print or understanding what it covers. "Coverage" is meaningless if you don't know what is covered, and what isn't.

What are the most significant risks of Airbnb rentals? Who bears those risks, and are they covered by Airbnb's insurance or guarantees?

Airbnb rentals of entire homes from absentee landlords ("hosts") who never meet their tenants ("guests"), or who check them in but then leave, are perfectly suited as temporary, anonymous venues for all sorts of illegal activities that perpetrators don't want linked to their own homes. Hotels and motels are typically closely watched by police, and almost always have some sort of staff on the premises 24/7 to notice suspicious or disruptive activity. Airbnb rentals of nondescript homes in middle-class residential neighborhoods are much less likely to attract police notice.

Some of these illegal activities are victimless and unlikely to cause damage or complaints (although they could still cost the homeowners their property, as discussed below), such as drug dealing, illegal gambling, or vanilla adult prostitution.

Other uses could cause greater damage to the property and/or liability to third parties, such as meth labs or other drug processing activities, underage drinking, violent sexual exploitation, child prostitution, or human trafficking.

Airbnb's guarantee is designed to provide "peace of mind" -- that is, to look reassuring so that people will be willing to rent their homes on Airbnb. But nobody should rent out their house, typically their most valuable possession, without reading and understanding the fine print -- even if many homeowners undoubtedly do. A close reading of Airbnb's terms reveals that Airbnb won't cover any of the two largest potential categories of costs, either of which could equal or exceed the value of your house and its contents.

First, Airbnb explicitly excludes any liability for "confiscation by order of any governmental or public authority". Any illegal use of your home, even while you aren't present, could be used as the pretext for seizure of your home under draconian "civil forfeiture" laws. Homes are seized from their owners every day because police allege that they have been used for drug dealing or prostitution. Asset forfeitures are a major source of revenue for many police departments and local governments.

It's theoretically possible for an "innocent owner" to get their seized house back -- but only if they go to court, at their own expense, and prove their innocence. Yes, that's unfair, and makes a mockery of the presumption of innocence and the burden of proof. But for now, it's the law, and not a risk to assume lightly. When I shoo drug dealers off my front steps, I tell them, "I don't mind what you are doing, but I don't want to lose my house like the folks who used to own that building next door that got seized in a drug raid and is now owned by the people who bought it at the forfeiture auction."

Second, Airbnb's guarantee does not cover any personal liability to third parties -- only damage to the rental property and its contents.

If your Airbnb tenants' meth lab contaminates or burns down your neighbors' property (the other condo units in the same building, for example, or the house next door) along with your own, Airbnb will reimburse only the damage to your own home. You're still liable in full for the damage to your neighbors' homes. Ditto if damage to the plumbing, or firefighting in your unit, causes flooding and water and/or smoke damage to other units in the building or other nearby properties.

Or if one of the underage drinkers at the New Year's Eve party in Oakland had died of alcohol poisoning or gotten in a drunken car crash on the way home, the homeowners and not Airbnb could have been held liable for failing to supervise the premises adequately to prevent underage drinking. That could easily have meant multiple millions of dollars in liability for a fatal crash or one causing permanent disabilities, especially if several people are killed or seriously injured. It's not uncommon for homeowners who are determined not to have exercised adequate supervision to be held liable for consequences like this of underage drinking in their homes. If you turn over the keys to your home to a complete stranger -- on New Year's Eve or any night -- and walk away, are you prepared to take responsibility for whatever happens while you are gone?

I've used Airbnb as a renter ("guest"), but I wouldn't think of using it as a landlord ("host") to rent my home while I wasn't present. I belong to a noncommercial hospitality exchange, and there are often strangers sleeping in my living room. But I meet them at the door in person, and they are only in my house when I'm home. It's real sharing, not the so-called "sharing economy".

Airbnb's lobbying for changes in zoning and other laws to legalize its routinely illegal business practices has been based on the image of "hosts" who are only able to make ends meet or afford to stay in their homes by renting out spare beds or space on couches or floors. But most of the risks of using Airbnb as a homeowner are specific to rentals of entire houses or condo units. Most of these issues don't arise when the "hosts" are renting out rooms or beds in a home where they live and are present. (As for apartment rentals, most rental agreements forbid subleasing without consent of the landlord, so virtually all Airbnb sub-lets of rental apartments are plainly illegal, rendering both the Airbnb "guests" and the "hosts" subject to eviction.)

Airbnb rooming houses operated by resident "hosts" who actually share their homes with guests are also much less likely to cause problems for neighbors (or generate complaints that cause problems for hosts) than houses or units operated as unlicensed hotels by absentee landlords. If there were a problem with the people renting the in-law apartment of the house across the street from me through Airbnb, I could talk to the landlords upstairs -- good neighbors, with whom I have a long-term relationship. If there were a problem I couldn't resolve with a tenant in one of the other nearby Airbnb rentals of entire condos or houses where I don't know who the absentee landlord is, I wouldn't have much choice but to call the police, with potentially much more serious consequences for the absent "host".

Airbnb tries to claim that it's a community based on trust. That's a seductive idea. I agree with Airbnb that most people deserve more trust than most travellers are wiling to give them. Indeed, that's one of the most important lessons of independent travel in strange places, which requires that we place our trust in strangers -- and rewards us for doing so. But there's a limit to how much trust or genuine "community" can be created through structured online "profiles". By their very nature, these are vulnerable to both spoofing (fake profiles) and identity theft (hijacking of real profiles).

In th incident in Oakland, the renter was reportedly a first-time Airbnb user. But there's a first time for every Airbnb user. Sites like this could never grow or if nobody would rent to first-time users.

To address these fears of strangers and newbies, Airbnb allows (but does not require) users to "verify" their identity by uploading an (easily Photoshopped) image of a government-issued ID card or by linking their Airbnb profile to (easily faked) profiles on other social media sites. Fake reviews on travel Web sites -- mostly posted from fake but often carefully constructed virtual personae -- have been a problem for many years. There's an entire (mostly offshore) industry devoted to constructing "sleeper cells" of fake social media profiles available for sale or rent to the highest bidder. You can buy fake Facebook friends or Twitter followers a hundred or a thousand at a time, and it's easy for a circle of scammers-for-hire to construct a credible-seeming circle of favorable reviews for each other. In this virtual context, Airbnb "ID verification" based on links between Airbnb profiles and other social media profiles is self-referential and built on a foundation of sand.

Link | Posted by Edward on Saturday, 2 January 2016, 22:32 (10:32 PM) | TrackBack (0)
Comments

"Nightmare Airbnb renter a cautionary tale for landlords"
by Tammerlin Drummond, Oakland Tribune Columnist (6 January 2016):

http://www.insidebayarea.com/breaking-news/ci_29351484/drummond-nightmare-airbnb-renter-cautionary-tale-landlords

Posted by: Edward Hasbrouck, 6 January 2016, 23:28 (11:28 PM)

This incident went viral! What a shame to see a couple leave their house unattended on airbnb and come back to it in disarray. Airbnb needs to have stricter standards for new users so they can prevent problems like this happening again in the future!

Posted by: Jesse Richheimer @ Green Global Travel, 5 March 2016, 19:29 ( 7:29 PM)
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