Is Airbnb hosting regarded as a commercial activity?

Answered!
David1747
Level 7
San Mateo, Philippines

Is Airbnb hosting regarded as a commercial activity?

I would be interested to learn from hosts in other countries what their experience has been in relation to Airbnb hosting being classified as a commercial or private activity.

 

Let me give you some background to the reason for my question. My wife and I are retired and we rent two rooms in our home in the Philippines. There is very little awareness of what Airbnb is here within regulatory authorities (they are still battling trying to understand apps like Uber) so there are no rules or regulations currently relating to Airbnb activities (or even conventional bed & breakfast for that matter).

 

Whether you can do Airbnb comes down to whether the barangay (the smallest local government entity) permits it (but most barangay officials have never heard of it) or if in a more upmarket gated community, whether the land developer and/or community association permits it. Most developers and community associations have a Deed of Restrictions which sets out what you can and cannot do within that community.

 

We fall into the second category. Our house is in a gated community. The community association hasn't been formed yet, so we are still governed by the land developer's Deed of Restrictions. That Deed doesn't mention anything about Airbnb or residents doing bed & breakfast.

 

Our developer knows we are doing Airbnb because we provide a letter to the security guards at the gate with the full names of all the guests and their vehicle model and registration number. We also don't accept guests unless they have verified their government-issued ID with Airbnb, so both we and our community's security force know the identity in advance of each guest. If a booking enquiry comes from someone who hasn't verified their ID with Airbnb, we ask for a copy of their ID and social media links before deciding whether to pre-approve them. None of our prospective guests have ever had a problem with that (we explain that we are in an isolated location and therefore have to be very strict in relation to security) and we've never had any problems with any guests who have stayed with us.

 

However, recently one of the other residents in our community complained to the developer about us doing Airbnb because they said they were concerned about being robbed by our guests. Of course, that's a paranoid view because if a guest wanted to rob anyone, it would be much easier for them to rob us than a neighbour's house. The complaining resident claims that Airbnb is a commercial activity, which under our Deed of Restrictions is a prohibited activity in our residential community.

 

At this stage the developer is only asking us to respond to the complaint. Whether or not they deem us to be in breach of the Deed of Restrictions will depend on how they interpret "commercial activity".  We have argued that renting two rooms in a private home in which we live is not a commercial activity, compared to someone renting out a condo or whole house in which they do not live.  As there does not appear to be any legal precedents or other documents which I can use as a guide in defining what is a commercial activity here in the Philippines, I am wondering whether any hosts in other countries have faced similar situations and how the issue was resolved.  That information could be helpful in formulating my response to the developer.

 

Thanks for your time in reading this.

1 Best Answer
David1747
Level 7
San Mateo, Philippines

We ended up getting legal advice on this issue and discovered that we needn't have worried about the Deed of Restrictions' prohibition on commercial activity because the lawyers said that the Deed's restrictions related to the use of the land not the use of the building. Our Deed restricts use of the land to residential and farming. The fact that we rent out a couple of rooms through Airbnb does not make the use of the land commercial because we live in the house and the primary use is still residential. We would only breach the Deed of Restrictions if we set up a business like a shop or a restaurant. They said that is very clear and straightforward under Philippines property law.

However, whether Airbnb is regarded as commercial for reasons other than interpreting the property developer's Deed of Restrictions is a grey area because the Philippines government has not yet recognised or even understood what Airbnb is all about. Therefore they were only able to examine existing leasing laws and regulations to give an opinion on whether Airbnb would be considered a commercial acitivity, and their opinion was that if you are only renting out a couple of rooms, but still living in the house, then it's not a commercial activity, but if you are renting out the whole house (or apartment) and not living there yourself, then it would be regarded as a commercial activity.

That legal opinion may be of value to other AIrbnb hosts in the Philippines, so that's why I'm sharing it here.

I stress that only applies to the Philippines (although it seems to be a similar situation in many other countries) and that may change in the future if legislation is introduced to specifically regulate Airbnb activity.

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36 Replies 36
Kathie21
Level 10
England, United Kingdom

Well I suppose effectively what you are doing is running a small guest house for money, so I'm struggling to see how it's not a 'commercial activity'.  However presumably the deed of restrictions is in the local language?  If so, so maybe it doesn't precisely translate to 'commercial activity'?  English is a more precise and nuanced language than most, so there may be another phrase that would serve just as well in a translation - 'running a business' or 'operating a company' perhaps?  Neither of which you are doing.

Thanks for your feedback, Kathie. The deed is in English, so the term 'commercial activity' is clear. I have always viewed commercial activity to mean running a business like a shop, or a hairdresser, or a cafe, etc. We don't regard ourselves as a guest house. This is our home and we are inviting people to stay with us in one of our two guestrooms and have breakfast on our deck. So I sway towards describing it as a private activity. But if the developer agrees with your view that it is a commercial activity, then we will have to stop doing Airbnb 😞

Hi David,

 

Any updates on your situation? I'm planning rent out my rooms  in my house. Similar situation as yours, gated community with not "commercial activity"

 

Best,

 

Francis

Bryan10
Level 10
Feltham, United Kingdom

If you recieve money for it, it's a commercial activity, even on a small scale like most Airbnb hosts. How this is interpreted in legal terms and what that translates to for tax purposes varies around the world. There's a long thread about Airbnbs having to close in Japan this month, for example. In the UK you can earn Airbnb money tax-free up to £7,500 GBP a year. If the rules are vague in the Philippines for the reasons you decribe, I'd take advantage of them until told to do otherwise! 

 

David1747
Level 7
San Mateo, Philippines

If the developer agrees with your first point, then our days as an Airbnb host may be numbered. On the tax issue, the rules are non-existent at present, but the Department of Tourism is considering a proposal to impose an occupancy tax on Airbnb hosts (I've already started a separate thread on that issue) because the hotel industry claims Airbnb is unfair competition. Thanks for the pointer about Airbnbs having to close in Japan. I will have a look at that thread. I stayed with an Airbnb host in Japan last year and she asked me not to not talk to anyone coming in or out of her apartment block because she didn't want anyone to know she was renting out her place on Airbnb. I guess she had already seen the writing on the wall there.

Kathie21
Level 10
England, United Kingdom

To be clear, in the UK you can earn money tax-free up to £7,500 IF you are sharing accommodation with your guests - that make it come under the Rent a Room scheme.  However anybody renting out a whole unit which is not their main residence doesn't qualify for this scheme.  I'm currently trying to work out if we qualify ot not - a'granny annexe' that is phyiscally separate from the main building but under planning restrictions cannot be rented out as a separate dwelling...

Paul154
Level 10
Seattle, WA

Renting through Airbnb does not deviate from the purpose that the developers built it - to house people.

Some people here are equating money = commercial, but it goes against common sense. 

Using this definition means that no one could sell their property for money or choose to rent out their house for money.

Many apartments are built on land not zoned as "commercial". Renting these apartments does not make the "commercial". 

Your best bet is to exentuate to the developer that Airbnb's interest aligns with the developer's, as it does. Developers love money and Airbnb increases the value of their future products. 

 

David1747
Level 7
San Mateo, Philippines

Yes I agree, Paul. In fact that's the argument I have already been using in preliminary discussions with the developer on this issue. Most of our guests have never been to our location, and they all love it here (because of the extensive views and clean air) so we are helping the land developer raise awareness of the development.

David1747
Level 7
San Mateo, Philippines

That point about apartment blocks being built on non-commercial land is a good one, Paul. I need to think how I can expand on that in my representations to the developer.

I don't believe the issue is as cut and dried as the other commenters are making it out to be.

This issue is entirely about interpretation, and the intepretation of what constitutes "commercial activity" will vary from country to country, and even from city to city at times.

 

In the United States, I have heard of places that

  1. Consider Airbnb to be definitely not commercial activity
  2. Consider Airbnb to definitely be commercial activity
  3. Consider Airbnb to only be commercial activity if you serve food as part of the stay
  4. Consider Airbnb to be commercial activity only if you have more than a certain number of guests
  5. Consider Airbnb to be commercial activity only if you have a large number of separate stays

So to say that you know with complete certainty what constitutes "commercial activity" in a entirely separate country and culture... that seems a bit presumptuous.

 

 

 

Willow3
Level 10
Coupeville, WA

Money exchanged - commerical activity.  Even as Paul mentioned, selling ones own house... money exchanged, income generated, taxes due.  It's a commercial transaction.  

My family visits - no money = private activity

 

Airbnb guests - pay money = commericial activity

David126
Level 10
Como, CO

Of course it is commercial ifit is renting short term, you are exchanging accomodation for money, maybe if you did couchsurfing you would be OK.

 

If you are talking about property zoning then certainly some commercial activities are allowed on property that is not zoned commercial.

 

Devil is in the details.

David
Paul154
Level 10
Seattle, WA

The issue here isn't the scholarly dissection of the word "commercial". 

It's about power. The neighbor wants power and will find any specious arguement to support his/her position. Airbnb = money = commercial = illegal = evil. 

It's an argument intended to cause stress. 

Calmly maintain your property rights.  Airbnb creates more opportunity for everyone - including the complaining neighbor.