If switching to long term tenants- educate yourselves 1st!

[Sally221]

Many hosts are switching to longer term rentals to keep an income flow during the pandemic.. Airbnb is is advising hosts to do this, it will improve their bottom line if you do this through their platform, and maybe yours as well. Before you make the switch though, for cat's sake, make sure you understand your local rental ordinances. A tenant, legally speaking, is a very different person compared to a guest. A tenant who doesn't pay rent or is otherwise in violation of your rental agreement will have to go through an eviction process before you can get them to leave.

I have never heard of a landlord who would consider renting to a prospective tenant without doing some sort of background check for prior evictions  & making sure the possible tenant has sufficient income. Landlord are expected to require a security deposit & there are laws that can govern how much they may charge. Property management companies do all of this for the landlord & often take on the issue of dealing with a problem tenant in return to the fees they charge.

In my city we have rent control which adds a layer of protection for tenants but can make it very difficult to evict a tenant without major cause. Anecdotally, it's the reason that many folks chose to do airbnb instead of renting out a second unit on their property. Rents here are sky high anyway and the prospect of spending months getting an unpleasant deadbeat tenant to leave is a good reason to stick with short term lets to guests rather than risking an unfortunate situation. Every locality will have a different set of laws & is a different market- make sure you have a thorough understanding of your rights and responsibilities as a landlord.

[Nanxing0]

I think in most part of US it's difficult to evict a bad tenant. In Philadelphia the average eviction time is 2-4 months, with some extreme cases take 6-12 months. That means if you get in a bad tenant, you will need to shell out 3-6 months time with no rent payment, and you need to pay the court fee, plus most of time those bad tenants will make your apartment unit not relistable so you will also have to pay some cost to renew it. I be very honest, even if you have a nice tenant, you'll still have to do some repair work (like painting) after the tenant moves out. It's completely different from the STR setup where you can manage to clean and maintain the apartment every few days.

We have long term rental apartments and we have to set the bar pretty high when screening tenants. And from our experience majority of people applying for apartment cannot meet even a below average standard of screening. For example the FICO score we are seeing are mostly below 600 while the national average is around 650-700.  Seldom see rental applicant meet even the average FICO score.

[Anonymous]

@Sally221   You make a very good point.

I will add to that, there are many reasons I would strongly discourage using Airbnb as the platform of choice for long term stays.  The guest pays an exorbitant amount of extra money in Airbnb fees despite neither party receiving any useful services from Airbnb. The host is not able to collect a security deposit via the platform, and the tenant is not vetted in any meaningful way prior to their request. This platform is just not designed for long-term rentals - it just makes them more risky and expensive.

[Nanxing0]

@Anonymous That's not 100% true. Right now our practice is that we only sign one year lease to long term tenants and for anything shorter than 1 year we use Airbnb. The reason resides in the local law regarding the lease agreements. In Philadelphia we have a "good cause eviction" law that mandates the landlord to have a "good cause" reason to terminate the lease if it's less than 1 year in length, or month-to-month. In other words, if we signed a lease less than a year, then landlord cannot reject the renewal application from tenant unless the tenant misbehaves. Different regions have different laws so better check your local law regarding rental lease agreements and make the appropriate strategy. Another reason is that Airbnb provides a good insurance to the reservation (at least they claim they do). I'd trust more on this rather than begging the tenant to have renter's insurance.

[Anonymous]

@Nanxing0   Could you elaborate on what you perceive to be "good insurance to the reservation"?  Neither the Host Guarantee nor the Host Protection scheme comes anywhere near the scope of a reasonably affordable STR and liability insurance package, and Airbnb certainly doesn't offer any insurance against loss of income in the event of cancellations. So what is this "insurance" that you refer to? I've been with Airbnb for 9 years, and it's news to me.

[Nanxing0]

@Anonymous The insurance I'm referring to is the Airbnb's coverage against damage caused by disgraceful guests. I don't know what it's called but should be the Host Protection. I was not too much worried about the loss of income before the pandemic since I had almost full occupation most of the year and if one cancels, most of time I have another guest taking the slot. I usually offer refund if cancellation done 2 weeks ahead, or the cancelled nights get rebooked. But I agree with you that there should be an insurance against the loss of income in the event of cancellation. The most common issue I had was that guests cause damage to my property or linens by some sort, like staining/coloring the bed linens and/or towels, smoke/weed inside, one guest destroyed my TV, etc. I got almost all of them covered by the host protection. I can't imagine this with long term tenants. My experience with long term tenants is that even with the best tenant I can find, I have to at least repaint the walls after the tenant moves out. 

[Huma0]

@Anonymous 

I've been hosting long-term guests (anything up to six months) on Airbnb for some time now and it's mostly gone swimmingly until this current COVID-19 crisis.

I was happy to pay the 3% fee to be able to find these long-term guests via Airbnb. It is certainly a lot less than a letting agency here would charge, which is between 10-20% before you take into account all the extras they charge for like the tenancy agreement, reference checks, inventories etc. etc.

I agree with you though that it is much more expensive for the guest than a regular LTR.  However, the guests that book with me cannot get a LTR because they are staying for less than six months and also because a lot of them are coming from overseas and do not have the UK references required (one guest had to pay six months rent upfront for his new apartment simply because he did not have UK references). Short-lets via agencies are exorbitantly expensive - way more than my reasonably priced Airbnb.

If I was renting the rooms for six months or more, that would be another matter and sure, it would be better to have a regular lodger with a proper deposit, references etc.

No, I would also not rely on the Airbnb deposit nor Host Guarantee. I have only claimed on these once and that was successful, but you do hear so many horror stories... I also once needed to remove a long-term guest and Airbnb handled this swiftly and competently. This was straightforward because I offered to refund the remaining nights as long as the guest left ASAP.

What I believed was guaranteed was the 30 days rent under the long-term cancellation policy. However, after recent events, I know that Airbnb can overturn this at any time. They have issued refunds to guests who fall outside of the COVID-19 EC policy, without consulting with me. That is the reason I am reluctant to continue hosting either long-term or short-term on Airbnb and am looking into my options.

[Sam163]

I agree - they moved the contractual goalposts there. I do feel for people losing out on their holidays but we're losing our whole incomes. Some of these travelers would've been covered on their travel insurance. I wonder if what they've done with changing the cancellation policy was legal?

[Cat5718]

Huma0

Thank you for the above article.  Very useful.  Was wondering if you pay council tax for long lets or are you able to stay on business rates? 

[Huma0]

@Sally221  Good topic and sage advice. I have some experience of renting to long-term tenants and also long-term lodgers in my home. Here in the UK, there is a difference between the two. 

Long-term tenants, i.e. those renting out a whole property, have a lot of legal rights and protection, e.g. you must be sure to place their deposit in the official deposit scheme and you cannot charge them any fees for things like reference checks. You can evict them, but it is a lengthy legal process and you are likely to lose a lot of money. If you try to evict them outside of the proper process, e.g. change the locks, put their stuff outside, you are the one breaking the law and can be arrested. It is so important to verse yourself with all of this and more.

With long-term lodgers, i.e. the ones that live with you in your primary home, the law is much more on the landlord's side. This would be my current situation if I took in long-term lodgers again (I was doing that before Airbnb), but it is still worth making sure you fully understand the law and protect yourself. Do every kind of reference check that you can.

In this case, I am not obligated to provide a rental agreement, but I would anyway. It just makes it clear to both parties what is expected (you can find examples of standard agreements online). You need to spell out everything. So, I would also do a set of house rules that they have to agree to. Plus I did a lot of screening. I have always insisted on meeting the prospective lodger twice before offering them the place. I do a thorough reference check (employer, minimum two landlords, two character references). I do not normally ask for a deposit to secure the room, but both the deposit and first month's rent must be paid before keys are handed over.

Apart from anything else, it lets the lodger know that I know what I am doing, know the law and am serious about following it. Since I started doing this, I only had one lodger try to challenge me about moving out (funnily enough he had a law degree, but was clueless about all of this). I just quoted back his rental agreement and the law and that was the end of that.

[Sean433]

Couple of things to add here. Every city has different laws however I think many cities that have a landlord and tenant board who make the calls on evictions are now shut down.

If I try to take someone to this board, there will be a huge delay. Just like if a tenant tried to take me to this board for locking them out, they will have a long wait. Unfortunately you are pretty much on your own in this time if you are forced to evict. Locking someone out is a good way to get yourself into trouble in the short and long term. So you may have to find a creative way to get them out ... e.g structural issues that need a renovation or family moving in.

Another workaround is to get them to book just shy of 1 month or 28 days. Move them to another location (maybe a host who is a friend) for a few days and then have them come back. Since they have not stayed 28 or 30 days consecutively, they are not considered long-term tenants. I have done this once as I feared a tenant that may be a problem.

[Sally221]

And I would reiterate - Check your local laws; the law in Berkeley is slightly different than Oakland, be well, stay kind, Sally

[Bradley125]

Beware of Airbnb's rental collection policy for long term rentals (i.e. anything duration over 1 month).  

They only collect the rent for the 2nd month (and subsequent months) at the end of the first month. If the guest defaults, the first you'll hear about it is an automated message from Airbnb 1-2 days into the '2nd period'. By the time you know that there's an issue, your guest has already stayed 1-2 days rent-free and remains in residence with your calendar blocked for the remainder of the reservation.

This has happened to me twice now. The first time was a technical issue with payment that we were able to resolve but the second time (yesterday), the guest just decided that she wasn't going to pay. 

Airbnb automatically applies their long stay cancellation policy for all stays of more than 30 days. 

The policy seems to protect hosts to the extent that guests have to give 30 days notice to cancel once the stay has started. However, the guest's payment schedule (invisible to hosts) does not support this policy and Airbnb refuses to take liability for collecting the rent due.  They are explicit about this in the message they send to hosts when they can't process payment. Here's the message I received yesterday: 

"The attempt to charge your guest, XXXX, for the amount due for reservation XXXX from 21 April 2020 - 16 June 2020 was unsuccessful. The reservation is still active at this time, and we've sent XXXX an email alert with a direct way to pay the balance.
If your guest successfully submits payment, we'll send you a confirmation email right away. If you have questions about the payment problem, you can contact your guest.

If your guest doesn't successfully submit payment or if they cancel the reservation before making the payment, Airbnb isn't liable for issuing your host payout. 

If you prefer to cancel the reservation, you can cancel penalty-free at any time before the trip begins. If the reservation has started and you'd like to cancel, please send us a note."

Airbnb is actively encouraging long term bookings but their rent collection is not fit for purpose and does not match the cancellation policy. When something goes wrong, they inform hosts that Airbnb isn’t liable for paying what’s owed. This leaves hosts extremely vulnerable.

In my case, I have a tenant in residence who's been staying rent-free for 2 days, has blocked my calendar for the coming month and says that they have changed their mind about the 2nd month.

Until Airbnb adopt a rent collection policy for long stays that's fit for purpose, hosts are carrying all the risks for these stays. 

 Hosts be warned; Airbnb do not have our back!

[Nikki4]

Yes, this is a major issue with booking long term on Airbnb.  Hosts get no protections.  Airbnb prohibits LTR hosts from collecting ID's, doing background check, or collecting a security deposit as we would with any other long term tenant.  We get zero protection if something goes wrong, and are flying blind until it does.  All because Airbnb believes its platform is a place of "Trust and Safety" and how dare we question a guest or do any vetting whatsoever.

[Huma0]

@Bradley125 

A simple solution for this would be for Airbnb to collect the first month's payment + the second month's (or for the remainder of the stay if this is shorter) upfront, thereby always having one month in reserve to support the long-term cancellation policy.

It really is a no-brainer, and the only reason I can think of for Airbnb not doing this (they would make extra interest after all) is that they don't want to put off guests. However, if I was a guest signing up for a booking under the long-term cancellation policy, I would EXPECT to pay that upfront as it's just logical. In any other situation, one would have to pay the equivalent of one month at least as a deposit anyway.

@Catherine-Powell  the current payment collection process for long-term stays does not support the long-term cancellation policy - in fact, it contradicts it - leaving hosts vulnerable. Is there any reason why Airbnb can't make the simple change of collecting payment for the first two months upfront? They could still issue it monthly to the host as before.