Opening LLC to Manage Someone Else’s Airbnb

[Brittany785]

Hello!

I need advice with the following scenario:

Future Airbnb is in a trust, owned by someone else. We are wanting to ensure all bases are covered for any liability. I’m assuming I would need to open my own LLC to manage the Airbnb, obtain liability insurance for my business, and then write up a leasing agreement with the trust, and from there, we can open?

If someone slips & falls, would they create a lawsuit with the LLC since that is the entity contracted through airbnb, or with the property owner? 

Any advice would be appreciated, as I cannot find the answers I need via any other forum. 

[Helen3]

I don't know how things work in the US but in the UK you don't need to set up a formal business structure to manage STRs. @Brittany785 

Check out Airbnbs liability insurance but the trust would also need to take out their own home insurance for STR and liability insurance too. 

it sounds from your post that you've never hosted on Airbnb before so without being rude I wonder if you feel you have the experience to help them manage their STR business .

and yes you will need a cohosting contract to outline services your are offering, pricing and payment terms. Liability etc. You can draft terms and take it to your lawyer to ensure it's legally compliant, 

[Marie8425]

@Brittany785 

If concerned about liability basically it is if your LLC or the Trust that owned the property is the entity making the legal agreement with the paying Guest.  In this type of situation where you want to be protected a STR property insurance binder for the property clearly making sure the insurer is included to determine how the Airbnb Profile should be set up the LLC or the Trust with the LLC has Co-Host.

[Helen3]

Doesn't the liability insurance have to be taken out by the owner @Marie8425  to be valid. 

I didn't think cohosts could insure a property they don't own? 

[Marie8425]

@Helen3 @Brittany785 

The property damage insurance is by the owner of the property.  The customer liability insurance is between the customer and the business  that made the agreement.  That is why you want to involve the insurer in who is making the agreement.

[Marie8425]

@Helen3 @Brittany785 

Think of it like this

I, am the Guest make a rental agreement.

I arrive at the rental trip on a branch in the way and need stitches.

I have a liability claim as the Guest. The owner of the property and I have no agreement of what I  am renting.

My agreement is with the Host.

[Joan2709]

@Brittany785 

Normally, as @Helen3 states, it is the property owner (the trust) that is responsible for obtaining insurance for the property. I normally suggest my Host clients obtain their own short term rental insurance for the property and not rely on Aircover. Typical homeowner's insurance will not cover operating a short term rental. 

I have heard of Co Hosts being held responsible in addition to the property owner, if a local governmental agency makes claims for taxes (along with late fees/fines) that should have been collected and paid for each reservation but were not. Airbnb does NOT always collect all the required taxes in any given jurisdiction. 

As to your Co Host business, you can purchase business insurance to cover you in that capacity. That typically includes:

1. Professional Liability insurance (AKA Errors & Omissions Insurance)
2. General Liability Insurance
3. Business Owner (LLC) insurance (mostly for home office situations)

You can contact a local, independent insurance agent and ask about these, what they cover and who offers them. I would do some research on this and determine if you really need the coverages for your business or not. I have heard some argue that an LLC doesn't entirely protect your personal assets and if not operated correctly, leave loopholes that could make your personal assets vulnerable. You would have to talk to a business attorney on that one.

[Brittany785]

Thank you everyone for your help! We have met with a business attorney and are deciding which option is best for us. 

New Scenario:

House is in a trust and the home owner opens an LLC to run the Airbnb out of. Trust is listed as the interested party in the LLC, but the deed remains unchanged and in the trust name. From there the trust leases the property to the LLC. LLC obtains liability insurance. Person acting as cohost will respond to guests via app, inspect house, schedule cleanings, etc as an independent contractor.

The big questions are: will this be enough to protect the property owner and their assets? Also, can the cohost, as an independent contractor, be held liable for anything they did not directly cause? For example, guest slipped, fell & broke a leg or something. 

[Marie8425]

@Brittany785 

Okay break it down this way.

Every party can be held responsible by another party they have a legal agreement with concerning the property. 

The Trust LLC has an agreement from the property owner, the Trust.

The Trust LLC makes an agreement with the Guest.

The Trust LLC makes a legal agreement with a Co-Host.

[Marie8425]

@Brittany785 

A Co-host in regards to the rental is an authorized agent representing the Host in an agreement between Host and Guest. 

The next step comes in the Agreement between the Cohost and Host.  Depending on what is agreed to normally if there is a liability claim that falls under the Cohosts control then the Host's insurer or the Host may pursue the Cohost

[Helen3]

This is something I would get advice from your business attorney on @Brittany785 

[Elisa]

Hi @Brittany785  ‌😊‌, 
Thank you so much for asking this question here, it's really interesting!

I'm happy you’ve found many hosts to discuss this with! 😍

Would you mind marking the 'Top Answer' if you found one particularly useful?

Warm regards ‌🌻‌,