Stranger Danger v Love Thy Neighbour — The Risks Associated with Airbnb

Written by Raj Patel Non-practising lawyer and CEO of My Property Host

My Property Host is a host management company handling all aspects of letting properties on short-term rental sites, such as Airbnb. My Property Host’s CEO, Raj Patel, describes in this blog the risks associated with Airbnb’ing and how My Property Host’s procedures have been specifically designed with advice from lawyers to mitigate these risks – ensuring hosts ‘Airbnb-ing’ do so safely and securely.

Trust in the Sharing Economy

Nick Shapiro, Airbnb’s Global Head of Trust and Risk Management, recently wrote about trust in the sharing economy. He referred to the social experiment conducted by Airbnb co-founder, Joe Gebbia, during a TED talk in 2016 where Mr Gebbia asked the audience to unlock their phone and pass it to the person on their left. He went on to ask if it would have been easier if their neighbour had introduced themselves first. The common consensus was that it would. This is the foundation of trust which underlies Airbnb and the wider sharing economy: join the community, get to know each other and build trust (thereby mitigating risk).

So Who is in the Airbnb Community?

Guy Westlake, founder of Lavanda, another London based property manager, also wrote about a survey they had conducted of around 1,000 UK Airbnb hosts. The majority were tenants (presumably of an assured shorthold tenancy), rather than landlords or owners of properties. He suggests that, moving forward, landlords should permit tenants to Airbnb for part of the year, provided the tenant shares some of the revenue. Given that most landlords invest in residential real estate for safe, predictable income returns with minimal risk to their capital (the property), financial incentive alone is unlikely to work. Security of the property is usually the primary concern and this needs to be adequately addressed first.

Potential Risks of Airbnb’ing

So, what are the security concerns with Airbnb’ing? As Mr Shapiro mentions, trust between community members is generally strong, so incidents of damage during legitimate bookings are limited.

But what about the significant risks from outside the community? These include lease restrictions, insurance restrictions, lending restrictions and threats from those outside the community. Taking each in turn…

Lease Restrictions

Most flats in London are leasehold and the terms of these long leases usually prohibit short letting and/or use other than as a private residence. The only case on Airbnb and head leases, the Nemcova case, was decided in favour of the landlord: the leaseholder had breached her lease by short letting. The judge said each case needs to be considered on its own merits but this has leaseholders worried, for good reason.

Insurance Restrictions

Airbnb’ing also breaches the terms of most conventional landlords and home and contents insurance policies. Airbnb’s Host Guarantee is not insurance and Airbnb themselves suggest insurance policies are reviewed and additional cover taken out if necessary, yet the majority of hosts do not; thereby jeopardising the safety of their homes.

Lending Restrictions

Lenders also generally place restrictions on short lets and hosts should be aware of this. Lenders could, in theory, call in loans or apply pressure to change the loan into a commercial mortgage.

Threats from Those Outside the Community

While those inside the community may represent limited risk, those outside do not necessarily abide by the same rules. Hosts should remain alert to potential threats.

For example, information about when a host’s property is vacant is available on Airbnb for anyone to see (through the calendar). Some hosts (and managers) use lock boxes, which are attached to the property and hold the keys to it. Together, the calendar and lock box represent significant risk, for obvious reasons. Airbnb itself insists on the availability of self check in for a host’s listing to be “Business Travel Ready”. Clearly, from a guest’s perspective this is ideal but to a homeowner it is high risk. Airbnb make 6-12% from guests and only 3% from hosts, so it is not altogether unsurprising that they focus on guest experience. Good managers, however, should alert hosts to such risks.

Cyber crime is also on the up, with fake Airbnb sites in circulation and incidents of account hackings increasing, and hosts need to remain vigilant to this.

Professional Managers

At My Property Host we have identified these risks and designed our business to mitigate them. We have taken detailed legal advice around our procedures to ensure that Airbnb’ing when managed by us complies with the terms of many of the long leases in London. We also include comprehensive insurance within our fee to cover any period of short letting and are able to recommend short let friendly mortgage providers. Finally, our procedures are among the securest in the industry with in person check ins (for guests named on the booking only) and passport checks on arrival on all bookings.

A number of Airbnb managers have sprung up across London and services and procedures vary significantly from provider to provider. Some bill themselves as hospitality companies, others as tech companies and some, like My Property Host, as host management services. We focus entirely on the host to ensure their property is safe and secure while short letting. Hosts should choose their manager carefully. See here for our tips on hosting safely and the procedures you should look for in a management service.

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