AirBnB Locked in Battle with New York Attorney General

One of the big travel trends right now is a site called AirBnB.com. The company was founded in 2008, and the idea is pretty unique. Essentially, it allows people from cities all over the world to rent out rooms, apartments, houses, or even their couches to visitors. The relative costs are beneficial for both the travelers and the hosts, and AirBnB ensures that both sides involved in the transaction have been properly vetted and approved. Customers are also allowed to leave reviews at places they have stayed, creating a community of recommendations and verified great places to rent. This isn’t really even a new idea; in theory, it’s like hosting a friend of a friend in town for a few days in your home. The only difference is that instead of meeting your houseguest through a friend, you connected through the Internet.

Since 2008, AirBnB has hosted over 8.5 million guests, and this innovative online economy does not seem like it will slow down anytime soon. The business is fairly rewarding. According to an interview in the New York Times, a woman in Brooklyn made about $90,000 renting out two bedrooms in her house. AirBnB overall is very lucrative in the state of New York. Over the last three years, the top 100 hosts in New York have grossed a collective $54 million.

The state of New York is less enamored with the idea, and is instead pursuing legal action against the company. There are a few reasons why certain aspects of AirBnB may be illegal. One issue is that by using AirBnB, tourists are not booking hotel rooms. Included in the price of a hotel room is tax, part of which goes to the state. New York State Attorney General Eric Schneiderman is arguing that the AirBnB industry has cost New York millions in tax dollars. Last Friday, his office delivered a subpoena to AirBnB requiring that they disclose the names, locations, and revenue of all of the hosts in the state of New York. The AG’s office claim that they’re not going after the occasional renter, they’re going after those 100 or so hosts that grossed $54 million. A spokesperson for the office, stated, “we began this process in the hopes of collaborating with Airbnb to recover millions of dollars in unpaid taxes and to stop the abuse of Airbnb’s site by operators of illegal hotels. Airbnb isn’t standing up for average New Yorkers who rent out their apartments from time to time — Airbnb is standing up for highly profitable, illegal businesses that make up a huge chunk of its corporate revenue.”

AirBnB disagrees–they have filed a motion in the New York Supreme Court to challenge the subpoena. They claim that Schneiderman doesn’t have any actual evidence of wrongdoing on the site.

There’s also the question of the legality of AirBnB in regards to lease and zoning laws in New York. For example, it is usually legal to rent out your space for less than 30 days, but only if you are home. Some AirBnB hosts are home while their guests occupy an extra bedroom, but many others rent out extra apartments that they lease, or their own apartments while they are out of town for whatever reason. Rules about having guests are not generic—many are contingent on individual leases, bylaws, or building regulations. For example, some buildings may allow guests, but if they stay more than a few weeks, they need to be registered. Some buildings don’t allow the transfer or loaning of the key fobs that allow entrance into the lobby. There are a wide range of rules that govern housing in New York City and other major metro areas, but most do have some constraints on private short-term rentals of property. The chances are that most of the hosts on AirBnB aren’t breaking the law. But the AirBnB moguls in New York City might want to watch out, because this battle could get ugly.

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Anneliese Mahoney (@AMahoney8672) is Lead Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

Featured image courtesy of [Allen Skyy via Flickr]

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.