Given these rules, it is probably unlawful to immediately rent dwelling units through Airbnb or similar Internet service providers upon removing them from the rental market under the Ellis Act. You may be in violation of a city’s local ordinances, including rent control laws and possibly California’s Business and Professions Codes regulating unfair business practices. In fact, the City of San Francisco recently brought a civil suit against two different property owners for violating these very ordinances and statues (See City and County of San Francisco and People of the State of California v. Darren Lee et al., San Francisco Superior Court No. 538857; and City and County of San Francisco and People of the State of California v. Tamara Yurovsky et al., San Francisco Superior Court No. 538854.)
“UNDER MOST RENT CONTROL LAWS, LANDLORDS MUST REASONABLY ACCOMMODATE THEIR TENANTS’ REQUEST TO SUBLET THEIR UNITS. A TENANT, HOWEVER, MAY NOT CHARGE A SUBTENANT MORE RENT THAN THE ORIGINAL TENANT IS CURRENTLY PAYING.” get a conditional use permit through the City’s time consuming and costly permitting process. Non-residential use includes using your property like a hotel, renting to overnight or short term transient guests for compensation. A violation of most planning and zoning codes are illegal and considered a public nuisance. Often times, penalties include a $250 per day administrative penalty for each day the violation continues unabated. There’s also a $200 per day civil penalty that may be enforced. Finally, a city can charge you with a misdemeanor, fine you $200 and send you to jail for up to six months. If that isn’t enough, under San Francisco’s Administrative Code, which also regulates unlawful conversion of residential property, it is illegal for a property owner to rent out a residential rental unit for less than 30 days. Violators can be sued for injunctive and monetary damages by any interested party, and may be liable for civil penalties of up to $1,000 per day for the period of the unlawful rental. Like the Planning Code, you can also be found guilty of a misdemeanor, imprisoned for up to year and fined another $1,000. Business license and transient occupancy taxes must also be paid. Anyone running a hotel must pay the cities transient occupancy tax. Airbnb recently stated they would begin collecting these hotel taxes from property owners using their services. Ellis Act If you were thinking of terminating leases or evicting tenants in order to rent your unit out at a higher rate through Airbnb, you should probably get some legal advice. Because San Francisco, Oakland and Berkeley are rent control jurisdictions, Ellis Act laws must be followed. Under the Ellis Act, landlords may take their rental units off the market, but cities retain authority over whether to approve the conversion of the property from residential to non-residential use after its been removed from the rental market. Moreover, when a unit is taken off the rental market through the Ellis Act, that unit may not be rented for at least five years, unless it is rented at the rent controlled rate, and the former tenants are given a chance to move back in. 22 RENTAL HOUSING
| JUNE 2014 |
ebrha.com
Tenant Restrictions Tenants are also bound by local ordinances including the Planning and Administrative codes as described above. Additionally, they must follow rules and regulations established by the local government requirements and the terms of their lease contracts. Under most rent control laws, rental property owners must reasonably accommodate their tenants’ request to sublet their units. A tenant, however, may not charge a subtenant more rent than the original tenant is currently paying. That means a tenant who sublets via Airbnb seeking to make a profit could be violating both the Administrative and Planning Codes, but also rent control laws. This requirement, in and of itself, is a matter to take quite seriously. But that’s not all. Rent control laws and rental agreements allow owners the right to evict tenants who use the property for illegal purposes. Illegal purposes include violations of the Administrative and Planning Codes, and rent control laws. According to recent reports, San Francisco owners have been successfully evicting tenants who have used Airbnb to sublet their rental units. Tenants attorneys are claiming this is an illegal eviction, because among other things, an owner must give a tenant the ability to cure the breach in the lease. Tenant attorneys claim that by the time an owner serves a notice to cure the breach, the tourists have long since left, thus the breach no longer exists. Potential Changes to the Law There is much debate in many cities where it is claimed that thousands of apartment units are converted into de facto hotel rooms. Some property owners and tenants argue that using sites like Airbnb help provide much needed supplemental income. Others argue that transient occupancy in residential neighborhoods is a nuisance, and contribute to the shortage and high cost of housing San Francisco Board of Supervisor David Chiu recently introduced an ordinance that would legalize but also regulate