A Beginner's Legal Guide to Listing an Airbnb

With student debt on the rise and a growing desire to free up more time, a new era of gig-economiers can look to places other than Uber for extra income.

It's Now Easier to Become a Landlord

The garish stories of long-term tenants destroying properties and overstaying their leases is no longer the price you have to pay to be a "landlord". True, any sort of renting comes with routine risks such as property damage, needy tenants demands and late payments. However, with the advent of short term rental platforms and BnBs, it's now not so scary to be "a landlord".

Do you have an early retirement in mind? Why not try building an investment that uses every days skills like simple customer service and mild carpentry- when done right, property management can be for anyone.

Legal Considerations When Getting Started

Investing your money anywhere can be scary. If after considering your alternatives being a landlord is still enticing, then here are some legal considerations.

First, locate a property that meets your financial requirements. Some have the cash to buy and other have to lease their BnB spaces. There are literally tons of YouTube videos on getting started with make money as an Air BnB host or "space landlord" (a landlord who leases their space on a part time basis) to guide you. One super attractive model is to lease a ritzy space, such as a trendy downtown condo, and then sublease it as a BnB or rent it by the hour for baby showers or to production companies. I get questions concerning subleasing a space for Air BnB almost daily so this is definitely worth a mention due the low start up costs needed to lease a property.

Second, design the business concept of your property. Properties which have "themes" are generally the most successful. Say for instance, your space was recently upgraded with solar and energy efficient appliances, try naming it An Eco Friendly Loft in the City. Make sure that your description is pretty accurate as you don't want to risk a payment dispute from an unsatisfied customer who believes you misrepresented your listing. To get some ideas, try cruising the community and local amenities to learn the communities culture and determine what you could offer potential guests. Then figure out what the best use of the property would be. Think short term vacation rental vs. venue for yoga classes. Could the property have a theme? Something that makes it stand out amongst the masses?

Third, look at the cost of getting the property ready for business. This includes checking out the zoning (discussed below), assessing costs for renovations, business licenses and costs for accommodations. If you have a busy 9-5, then think about hiring a property management company. The property management company can handle bookings, cleaning and guest services and generally charge 20-30% of the rental fee.

There are plenty of other ratios and factors to consider before making a purchase but these are just the basics to get you thinking like a property investor. Next up, learn how to close your knowledge gap.

Level Up Your Knowledge

Having access to a lawyer is preferable when making a real estate purchase but it's not practical for everyone. So if you are a digital age self-doer, here are a few commonly overlooked threats to your bottom line which a lawyer might discuss with you.

Restrictions on leasing or subletting.

Many condominiums, town home communities and other planned communities (typically properties subject to an HOA) have restrictions on leasing property. So if you are purchasing property to use as a rental, then you have to first determine if any restrictions against leasing exist. These restrictions are usually in the form of a contract, sometimes referred to as a covenant or declaration, and can be found for free at the county real estate record office. Sometimes, these restrictions will be attached as an exhibit to the latest deed on the property. (For help on both these topics see my article Title 101.) Sometimes, the seller of the property may have them on hand. In any case, do your research and make sure there are no restrictions which will prevent you from leasing your property.

If you are leasing your property then it may be easier to determine whether or not there are any restrictions on leasing. If you are not yet under contract to lease the space, ask the landlord for a copy of the lease to review it prior to signing. Check to see if there is a clause in the lease that prohibits subleasing. Generally, if your lease doesn't mention subleasing, then you are good to go. However, if subleasing is prohibited, then your landlord may be able to evict you simply for listing your property for rent on a BnB, space rental or other site. Here are a couple examples of sublease restrictions:

Example 1: Tenant may not enter into a sublease without Landlord's consent.

This means that subleasing is possible but that you need permission from your landlord in advance. If this is your situation, here's my negotiation tip- you may be able to convince the landlord to allow a sublease as long as you agree to uphold the lease and cover the landlord for any cost and expense the landlord could face as a result of the subtenant's use of the property. Try negotiating in a clause that states something like the following:

"Tenant may not enter into a sublease without Landlord's consent unless Tenant adheres to all other provisions of the Lease and complies with applicable laws. Further, Tenant agrees to indemnify Landlord for any and all claims arising out of any subtenants occupancy of the premises/property."

Example 2: Tenant may not enter into a sublease without Landlord's consent which Landlord has the right to withhold in its sole and exclusive discretion.

This means that subleasing is possible but that Landlord is under no obligation to grant any permission to sublease. This is risky if you want to sublet the property. If this is your situation, here's my negotiation tip- you may be able to convince the landlord to allow a sublease by using the language from example 1 with a bit of modification. Try negotiating in a clause that states something like the following:

"Tenant may not enter into a sublease without Landlord's consent, which such consent shall not be unreasonably withheld so long as Tenant adheres to all other provisions of the Lease and complies with applicable laws. Further, Tenant agrees to indemnify Landlord for any and all claims arising out of any subtenants occupancy of the premises/property."

Local zoning and ordinance restrictions?

Some local governments required short term rentals like BnBs to obtain special permitting and pay high fines if guests throw disruptive parties or cause other nuisances. Check with your city's zoning and planning department to determine if there are any local laws affecting your right to use a property as a short term rental or BnB.

Another possible complication can arise if the property is not classified for residential use by the zoning department. This is generally not an issue in apartments, condominiums, neighborhoods and other obvious residential areas. However, this could be a problem if you are say looking at property in close proximity to businesses or retail developments. If zoning is uncertain, work with your local zoning department to (i) determine the zoning classification, and (ii) obtain a certification of zoning prior to making a purchase. Sometimes you may be able to pull a record of the property's zoning online, but if you are unsure, make a call and get a certification of zoning prior to making a sizable purchase. This is not as difficult, time consuming or expensive as it sounds. More often than not, a person can call their local planning department and obtain a written statement concerning a zoning within days or weeks. Zoning ordinances are typically handled by the city so first check your city government's website to learn more about the process.

Restrictions that might affect your guest's comfort level.

As a final tip, accommodations are an absolute must have for vacation and other types of rental arrangements. Some commonly overlooked items which could which could affect your guest's comfort level include (i) lack of parking spaces, (ii) occupancy restrictions, (iii) restrictions on deliveries or usage of common areas, and lastly (iv) lack of adequate access or disability access. Similar to restrictions on leasing and subletting, the provision or restrictions on these items will be contained in a contract. When conceptualizing your plan for the property (and yes, every property should have its own concept and plan) determine what your guests will need and then make sure you have the ability to carry out your plans.

Note from us: Empowering the market through the availability of information is our passion. If there are any topics in the areas of business or property law you would like to learn more about, email admin@TRECLaw.com with your suggestions. Leave out any personal information and we will add your topics and questions to our next post.

*We post new and informative articles every week!! Stay tuned for our upcoming podcast On the House and tutorials that can help you with some of your legal questions