Are Your Tenants Illegally Subleasing Your Apartments? Here’s Why You Really Need to Find Out
When you take on a new tenant, you will likely try to vet them at least a little. This might involve asking to meet them in person, or it might just mean collecting details from them. You may leave this in the hands of your property management service and take their advice.
Either way, if it transpires that the new tenants are a young professional couple with no intention of having children or pets, then you’ll be overjoyed. If it turns out that they’re a group of five male students, you might be less excited.
But whatever the case, there is going to be an element of trust here. You need to trust that the tenants are really who they say they are, that they will use the property you’re leasing them as they are supposed to and that they will look after they will respect the agreement laid out in the contract.
Unfortunately, there’s no way you can guarantee all these things and that’s where the element of trust comes in.
But here’s the thing: while most tenants will be perfectly well behaved, there will always be a few that don’t observe the rules that you’ve outlined and that potentially try to take advantage of your hospitality. In some cases, this can be more serious than others.
And now, thanks to AirBnB and similar ‘sharing’ sites, there are entirely new ways that your tenants can undermine your trust and put you and your property at risk.
The Problem With AirBnB
Unless you’ve been living under a rock, you’ll no doubt be aware of AirBnB. This is an example of the ‘sharing economy’ in action and it allows regular folk to circumvent the usual channels for finding accommodation and for making money from their own real estate. If you own a block of flats or a condominium, then there’s a good chance that you might have looked into it yourself!
The general concept is that anyone can let a room in their home, or even an entire apartment, and that way make some extra money from real estate that isn’t being used. This could be just for one night as a way to make a quick buck, or it can be for a relatively long-term stay – lasting several months in some cases.
That’s all good and well. The problem is that this now creates an easy and profitable way for your tenants to sublet your property that just didn’t exist before. If you have someone staying in your apartment and they want to make a little extra money, then they can simply advertise a room on the site and find a tenant. In fact, they might not even be living in your property at all – in some cases, they might have rented the property from you purely to sublet it on AirBnB at a higher price. In simple terms? You’re being taken for a ride.
Now, you might argue that this is nothing new. Subletting has always been a problem. Except that AirBnB makes it much more of a risk than ever before. In New York, it was recently discovered that 75% of the properties on AirBnB were illegal rentals. Some of these were illegal for reasons pertaining to tax but others were being illegally sublet. So you see the problem?
Why It’s Such an Issue
You might be wondering what all the fuss is about. As long as you’re getting money from the person who rented from you then there’s no harm in them turning a profit as well, right?
Wrong. Firstly, if a tenant is subletting your apartment then you have no control over or knowledge of who might be staying there. This means you could end up with a stag party staying in your property and trashing the space. They might meanwhile upset the other people living in the block and if you don’t own the entire condominium, you might even be fined or forced out.
Not only that, but you will be legally responsible for what goes on in your flat. Seeing as subletting itself is illegal, the assumption will be that you have giving permission to the tenants. That in turn means that you’ll be responsible for any other breaches of the law.
Did you know that areas like San Francisco, New York and Santa Monica actually have a limit on how long AirBnB properties can be leased out for? And did you know that the resident must also be actively living there? There’s a good chance that your tenants don’t know that and seeing as they’re perfectly happy to sublet without your permission, they probably don’t care either. After all, it’s you who will be forced to pay up!
Then there’s the matter of hotel tax. Depending on the location you’re in, you’ll likely need to pay tax on any property that you let. Again, if this is something that a tenant didn’t look into before they started advertising your property, you can end up responsible for paying the fine.
And what if a tenant injures themselves? You’ll need specific insurance to cover any claims or again, you can be put badly out of pocket.
What to do?
That’s all good and well, but how do you prevent your tenants from subletting when you never gave them permission in the first place?
The first thing to do is make sure that subletting is explicitly prohibited in the tenancy agreement and that the tenants’ attention is drawn to this point. Some tenants simply don’t realize that they are breaking the law by listing property!
Another tip is to try and be a landlord who is ‘known’. Make a habit to go around make repairs in person when they crop up and find occasional excuses to drop in. Your tenant can refuse you entry unless you give them 24 hours’ notice (check the law in your area) but if they know that you’re the kind of landlord who is ‘around’, then they’ll think twice before purposefully betraying your trust.
And if you’re suspicious? Do a quick search for your property on the site!