Is Airbnb hosting regarded as a commercial activity?

[David1747]

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.

[Willow3]

Can we disect "property rights" then?  Mostly kidding, but seriously though, if you want complete control over your property, you shouldn't buy into a location with covenents.  Once you sign on the dotted line, you agree to abide by the rules of the community.  It's that simple.  

I own an historic home.  It was disclosed to me at time of purchase what my limitations were...  I bought the house anyway.  I don't get to assert my "rights of ownership" after the fact and do willy nilly what I please.  I can petition the board of the historical society to make allowances  - which I have done and won.  

[Gillian19]

 Hi David. Suggestion. Rent it out on Airbnb for a really low rate (just covering costs) for a couple of months. That way it's not commercial and you can honestly say so.

Then when the fuss has died down, you can increase your charges.

If your neighbour is really concerned about the security aspect rather than just sour grapes as you are making money, that issue doesn't go away regardless of whether it's commercial or private. But at least you will have satisfied the legalities asked by the developer.

[David1747]

Yes, I had been thinking about that too, because we wouldn't have to reduce the rate very much because at the moment it doesn't do much more than cover costs if we take depreciation and maintenance into account. We only started Airbnb in January and priced what we have to offer quite low to make it attractive. We went from zero to over 50% occupancy in less than 6 months. If I were to reduce the rate even further, that would likely increase the occupancy rate and only exacerbate the situation with the developer and neigbour.  It was always my intention to increase the room rate when we got to 50% occupancy, but I'm reluctant to do that now for obvious reasons.

On your last point, my wife also thinks it is more sour grapes on the part of a neighbour, rather than a real concern about security. Our house is on a residential farm estate and our nearest neigbour is 500 metres away, so it is hardly likely that our guests (who are mostly professional people) will start robbing houses - especially as our estate is patrolled by armed guards on motorbikes 24 hours a day!

[David1747 · Accepted solution]

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.

[Evan153]

 "the lawyers said that the Deed's restrictions related to the use of the land not the use of the building", what sort of lawyer was it?

Any restrrictions in a lease would normally affect land and anything on it such as a dwelling house, it may reflect the planning laws that govern the land use so watch out for that too. The neighbors in a gated community are rightly concerned because they have no control over who you let all or part of the property out to, be careful.

We have a similar problem with a property on Airbnb, twice since March we have had up to 20 people having very noisy weekends of drunken parties, howling, fireworks, throwing stones at horses...you name it. 

[Helen3]

Hello @Evan153 

There are some things you can do.

1. Report the listing on Airbnb.

2. Call the police when this happens

3. Report the listing for noise nuisance to your local authority

4. Speak to the host ask him about what measures he is putting in place to minimise disruption. At a minimum this should be a) having CCTV b) having a co-host on hand to close down party activity and evict guests c) having quiet time house rules d) having house rules that say only guests who have booked and paid can stay on the premises.

5. If you have a management company contact them to complain

[Evan153]

Report it to Airbnb for what breach of rules?

She says 'no parties' and maximum number of guests but how can she control any of these when she lives 3 hours away? It isn't her home, I thought this platform was all about people sharing their own homes, it has become a monster.

[Helen3]

Airbnb hasn't been a platform just for those who share their homes for at least the last five years.

@Evan153  look on Airbnb Help

https://www.airbnb.co.uk/help/article/1293/how-do-i-file-a-complaint-if-my-neighbor-is-an-airbnb-hos...

It is not enough for a host to simply add in house rules they need to enforce them.

If she hosts remotely, then she should at the very least have CCTV or similar so she can monitor it and those using it and a local co-host to be on hand to manage bad guests and stop parties before they start. She should also give neighbours her contact details so you can contact her if her guests aren't abiding by her house rules.

Is that what she is doing?

[Evan153]

No

[Anca25]

Thank you for the info. I have to deal with something similar here in the US. I am now researching more. Some neighbors are threatening a lawsuit because I am renting part of the house on Airbnb. I live on the property also. I am thinking of getting legal advice. My Airbnb rental has been going so well, I can't stop it, I will fight to keep it going.

[Lin27]

Hi 

I’m in the U.K. and just applied to release equity from our house which is mortgage free ,it has been declined because we rent one room in our house on Airbnb....anyone else come across this ?

[Evan153]

I've been in the mortgage market for 30 years plus. Stop doing it and try again.  

[Cheryl389]

It seems that the laws about Airbnb are still developing in most places because it's so new. I think I would be able to have a commerical or residential property and use it the same way where I am, but it's a big tourist city so the local govenrment seems really accepting of Airbnb. Recently, they added the 5% hospitality tax that is charged to hotels on Airbnbs which seems to make it more legitimate. I think it's the type of thing you go ahead and do if there are no regulations, and wait for them to form once there is a demand for them. As long as you are paying the appropriate taxes I can't imagine there'd be a breach.

[Emily352]

In Italy the administrative part of the tourist regulation is left to the Regions. All the Regions as well as the Autonomous Provinces have enacted laws on tourist rentals managed by private individuals, trespassing into the private law which falls within the exclusive competence of the State. In Italy the shortest line between two points is never the straight line, it’s always the arabesque, believe me.

In most cases, the private individual who owns less than three apartments (eg. Emilia-Romagna Region) or two (eg. the Lazio Region) is not considered an entrepreneur, but his management must respond to not clearly defined rules related to occasionality and other parameters.

The term "occasionality" does not only have the meaning of temporality, but it also indicates that this activity must be managed in a simple, familiar way, without those means, strategies and advertising plans that characterize whoever carries out this activity in a professional manner, usually an entrepreneur.

And in fact in some Italian Regions, despite the enactment of Legislative Decree 50/2017, the so-called "AIRBNB Law"  (Article 4 "Tax regime for short leases") the owner of a family-run B & B and a private who makes tourist leases are not allowed to advertise on AIRBNB. Advertising on home-booking portals is allowed only to entrepreneurs, owners of holiday homes, guest-houses, etc.

It is clear that where a private individual systematically manages a large number of accommodation units through several home-booking portals, connecting with other hosts (see the latest AIRBNB invention: the "Teams"), using paid staff (co-host), maintenance and janitorial companies, external laundry services, frequently generating high incomes, without making leases, it is difficult to say that it is not an organized management of accommodation facilities with a strong entrepreneurial connotation.

The suspicion is that the only goal of this private individual is no longer to supplement his salary or pension, but to carry out a real economic activity, producig revenues on a continuing basis: in Italy a steady business falls within the auspices of VAT taxation, in accordance with Article 4 of Decree 633/1972.

But in any case, it is not for me nor for the Regions to establish when the leasing activity is considered exercised as a commercial enterprise or as a private axctivity, but for the State and, in fact, paragraph 3-bis of Article 4 of the above Decree refers to the Ministry of Economics and Finance the onerous task of resolving the matter.

[Xiaodong1]

I live in Canada Montreal south shore La Praire.  I got my permit from Quebec Tourism CITQ and CITQ got approval from my city. But after one year the city sent me to notice to ask me to stop doing Airbnb because my house located on the zone which cannot have commercial activities.  I still live in the house  I don't think it's commercial activities.  I will call the city today to clarify.  Also, I cannot stop because I have a lot of bookings will come soon.  I cannot cancel it.