Airbnb Rental Held to Constitute an Illegal Use of Property

Landlord & Tenant Law and Real Estate Law

AirBNB (and similar rental sites) have been omnipresent in the news for the last few years.  Controversy has arisen in many cities as regulations and restrictions have been implemented.  The recent case of Chen v. Kraft is an example how these restrictions can impact landlords and tenants.

In Chen v. Kraft, Chen (“Landlord”) filed an unlawful detainer complaint against Kraft (“Tenant”), asserting that Tenant failed to comply with multiple 10-day notices to cease using the attic of the premises and stop subletting the unit to subtenants or short term renters.  The property was zoned R-1 and was subject to the Los Angeles Rent Stabilization Ordinance.  Los Angeles prohibits short-term rentals in homes that fall within the R-1 zone.

Tenant’s affirmative defenses included the following: the “attic” plaintiff referred to was actually a “loft” which was part of the rental agreement with plaintiff’s predecessor in interest; the Los Angeles Municipal Code permitted the “sharing of the premises”; plaintiff’s predecessor in interest expressly permitted her to use the premises as an Airbnb location; and plaintiff breached the warranty of habitability.

Landlord filed a motion for summary judgment, arguing that Tenant was operating an illegal bed and breakfast or transient occupancy.  Tenant argued that there were triable issues of fact, including as to the nature of the occupancy of the Airbnb guests, the approval of such use, the circumstances under which the premises may be restricted from use, and waiver by Landlord’s predecessor.

The Trial Court granted Landlord’s motion, holding there was no triable issue of any material fact, and that Tenant’s use of the premises as a vacation rental violated the zoning ordinance.  Tenant appealed.

THE DECISION

The Appellate Court affirmed the Trial Court decision.  The Appellate Court determined that Landlord established all of the elements of unlawful detainer based on the theory of illegal purpose.  Essentially, a landlord is entitled to evict a tenant if they are using the premises for an unlawful purpose.  Since the Municipal Code was clear that short term rentals were not allowed in premises zoned R-1, the Tenant’s Airbnb listings and rentals were unlawful, and Tenant failed to comply with the notices to quit.  Tenant’s argument that the prior landlord allowed the rentals was not dispositive, as such approval was an illegal contract and therefore void and unenforceable.

WHY THIS DECISION IS IMPORTANT

This decision confirms that municipal ordinances control over contracts between parties.  Even though the prior landlord expressly approved the short term rentals, the new landlord was able to evict the tenant after she failed to comply with the 10-day notice provided.

COMMENT

This case is another strike on Airbnb.  Between court decisions and cities continually passing ordinances that limit, tax, restrict or all-together ban short term rentals, Airbnb and similar providers are facing an uphill battle.

Moreover, the tenant here could have remained in the property had she stopped listing the premises on Airbnb after receiving the notice to quit, however her decision to continue the short term rentals was her downfall.

To learn more about the legal issues surrounding short-term rentals, including how to determine if you can list your property on Airbnb and how to find local & city restrictions on short-term rentals, check out our recent webinar: Real Estate Law in the Sharing Economy.

Chen v. Kraft (2016) 243 Cal. App. 4th Supp. 13

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