After Ruling in New York, Airbnb Sees More Legal Troubles on the Horizon

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Airbnb, an online booking service that allows anybody to rent out any premises for as little as a night, sounds like a great idea that leverages the “sharing economy.” Investors think Airbnb is pretty slick too: Two years ago, the San Francisco company was valued at over a billion dollars and today its value has more than doubled.

But is Airbnb about to experience a crash landing? A judge in New York City has just ruled that an Airbnb user broke an “illegal hotel” law when Nigel Warren rented out the bedroom of his apartment in the East Village for three days. The law “restricts residents from renting out apartments, or rooms in them, for fewer than 30 days, unless they are also living in the home during the guests’ stay.”

Airbnb representatives appeared in court along with Warren, arguing that “certain language” in the code allowed him to make the room available to a renter. But judge Clive Morrick indicated that “Airbnb renters did not have access to all parts of the apartment, specifically the room of Mr. Warren’s roommate, who was still living there while Mr. Warren was away and renting out his room.”[more]

The case is significant because Airbnb has a large number of listings in New York, but also because “many of its listings in large cities are probably violating local laws,” according to The New York Times. In fact, Airbnb told the Times that it will now be warning users that “some cities have laws that restrict your ability to host paying guests for short periods.” The service advises users to “please review your local laws before listing your space on Airbnb.”

This is not the only legal headache hampering the service. Illegal hotel activities are also under investigation in Amsterdam in the Netherlands. With close to 5,000 listings in Amsterdam, Airbnb could face another serious setback. According to The Next Web, “Aside from safety concerns, the local government is fighting back because most hosts don’t pay taxes on their income from ‘illegally renting.’ The government believes Airbnb doesn’t comply with local legislation (VAT and tourist tax). Conversely, Airbnb calls itself a marketplace, and states that its users are responsible for complying with the local legislation.”

Legal actions against Airbnb are symbolic of the gray areas a sharing economy can create. A recent survey indicates that 77 percent of respondents thought borrowing or renting property or belongings was “a great way to save money,” and 68 percent thought it was “a good way to earn additional income.” But when sharing bumps into legislative realities, a conflict arises. Just last week, RelayRides, which enables users to share their cars much the way Airbnb enables apartment sharing, suspended its service in New York after being accused of non-compliance with state insurance regulations.

Will the will of the people—at least those who want to share—win out? This is one battle that’s far from over.

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