The short-term lodging landscape has changed radically in recent years. Rather than always book hotels when away from home, people now frequently book to stay in the homes or apartments of other people through sites like Airbnb and VRBO. The growth in this area is reflected by the $30 billion estimated worth of Airbnb. But does this mean that these short-term rental sites are completely free of legal concerns? No.
According to a recent Fortune.com article, regulations passed in various jurisdictions threaten the online, short-term rental model. For example, New York has passed regulations that Airbnb says could damage its business in New York City — its largest market in the United States. Hours after Governor Andrew Cuomo signed the bill, Airbnb filed a federal lawsuit claiming the law will cause “irreparable harm.”
Moreover, Berlin, the capital of Germany, just passed a law that bans most short-term rentals. And Amsterdam and Barcelona reportedly are imposing heavy fines for short-term rental listings that violate their laws.
And now, Airbnb reportedly is countering regulations in its own backyard, in San Francisco. Indeed, Airbnb has initiated legal action in its home city to block a new requirement that it must deny booking fees from property owners who are not registered with the city. Airbnb is taking the position that it should not be responsible as a matter of law as to how landlords use the Airbnb platform. If Airbnb were forced to abide by this local law on short-term rentals, this likely would reduce its listings and revenue substantially in San Francisco, and potentially in other large markets to the extent other jurisdictions were to follow the lead of San Francisco.
In countering the San Francisco requirement, Airbnb is relying on Section 230 of the Communications Decency Act (CDA). Generally speaking, Section 230 is designed to provide immunity to internet service providers regarding third-party content posted on their sites. Airbnb argues that as an internet service provider, it is not its job to police its site to determine whether and how landlords should comply with local lodging regulations.
When it comes to platforms like Airbnb and VRBO, there are various competing players. Obviously, players like Airbnb and VRBO want to be as free as possible from local regulations while they take a cut of revenue whenever a room or home is booked. Many who own homes and apartments like the freedom to earn money by renting out their places on a short-term basis. Consumers also like the freedom and options afforded by online lodging platforms.
But local jurisdictions are concerned that various hotel taxes and fees are bypassed by these types of short-term rentals. And there are concerns that these platforms end up taking affordable homes off the market, drive up home prices, and wreak havoc on neighborhoods with an influx of transient visitors.
The legislative history of the CDA states that one of the purposes of Section 230 is to support the commercial viability and vitality of the internet. In other contexts, a number of courts have held that internet service providers are NOT to be held liable for third-party content (but there have been some exceptions).
It will be interesting to see whether the court in San Francisco, and courts elsewhere (especially in other countries where Section 230 does not apply) will uphold platforms like Airbnb and VRBO, or if they will decide that these platforms truly have a duty to comply with regulations that place more requirements on them, like those imposed on hotels.
Are the short-term rental platforms here to stay with further explosive growth still to come, or will they be reigned in by legal strictures? Stay tuned!
Eric Sinrod (@EricSinrod on Twitter) is a partner in the San Francisco office of Duane Morris LLP, where he focuses on litigation matters of various types, including information technology and intellectual property disputes. You can read his professional biography here. To receive a weekly email link to Mr. Sinrod’s columns, please email him at ejsinrod@duanemorris.com with Subscribe in the Subject line. This column is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this column are those of the author and do not necessarily reflect the views of the author’s law firm or its individual partners.