August 5, 2014

When your Airbnb guests become squatters, isn't it nice that Airbnb seems willing to cover the rent they're not paying and also your legal expenses?

But what else would you expect it to do when it's getting hundreds of millions of dollars in venture funding and "a potential valuation of $10 billion"?
It’s a bit mind-boggling that Airbnb, fraught as it is with legal issues, is valued so highly, although admiteddly [sic] $10 billion is the new $1 billion valuation for hot startups in the current over-heated tech boom. For example, ride-sharing service, Uber Technologies Inc., received additional funding in June at a valuation of $18.2 billion....

“Airbnb’s business is not a simple app like Twitter, Instagram or WhatsApp, where the service is entirely virtual,” said Sam Hamadeh, founder and chief executive of PrivCo, which analyzes private companies, in an email. “Most of Airbnb’s business is inherently unlawful, violating a combination of short-term hotel regulations and taxation, tenant leases relating to subletting, and condominium and co-op bylaws requiring board approval for any sublets.... The Airbnb squatting debacle is simply underscoring the constant risks and liability exposure to Airbnb that makes it — and many other sharing economy startups — overvalued on a risk-adjusted basis.”

10 comments:

tim maguire said...

Reminds me of the early days of Pinterest, a website more or less founded on the idea of profiting off copyright infringement was valued at 1 billion. I'm more surprised it still exists than that it's IPO never actually happened.

Airbnb is a more legitimate company fighting less legitimate opponents and I hope it succeeds, but still, I think it made a big mistake trying to go big. It threatens too many deep pocketed rent seekers.

cubanbob said...

None of this would be a problem if squatting was a criminal act and tossing the squatters out would be a legally simple and quick affair. Their is no difference between a squatter and a thief.

lgv said...

Overvalued also on the risk of never seeing cash flow to support a $10 billion valuation, let alone the legal risk.

Matching supply and demand is going to be nightmarish if it grows as they might hope.

$9,000,000,000 Write Off said...

I like the airbnb approach. If you delayed the launch of a national business until you buttoned down every state and local regulatory issue, you'd squander all your funding on lawyers (NTTAWWT). Instead, airbnb adopted the approach taken by all human success- trial and error, launch and adjust.

I think that's why tech and finance are the main growth industries in this country, they avoid the vast, grabby regulatory octopus that constricts, say, Elon Musk's hyperloop or Amazon's drone delivery.



Brando said...

Why is ti Airbnb's fault that the authorities won't let the rightful owners/occupants evict the squatters? The problem should be very simple to solve--show the police you are the rightful owner/occupant (e.g., a copy of the current lease with your own name on it) and have them accompany you to throw out the squatter. If the squatter has a right to be there, let them prove it with their sublet contract or whatever else they got. Otherwise, out!

But typical of our deep pockets obsessed legal shakedown system that they're going to blame the service that simply enabled two private parties to make an agreement that one of the parties is breaching.

MadisonMan said...

Most of Airbnb’s business is inherently unlawful, violating a combination of short-term hotel regulations and taxation, tenant leases relating to subletting, and condominium and co-op bylaws requiring board approval for any sublets

This only confirms that there are too many laws.

The Godfather said...

From a market standpoint, Washington, DC would seem like a natural for Airbnb, but from a legal standpoint it could be a disaster. In the District of Columbia, no tenant can be evicted from a rental unit, notwithstanding the expiration of the lease, so long as he/she pays the rent. This is part of the rent control law, but applies to all rental units, even those not subject to rent control. The owner can serve a 90-day notice to vacate if he/she intends in good faith to occupy the unit as a residence, and then take the occupant to Landlord-Tenant Court for several months to a year. If the owner recovers possession, he/she cannot receive any rent for the unit during the next 12 months. I assume that Airbnb would be obliged to advise potential clients of these problems.

Joe said...

Madison Man, just to be clear, assuming you own a house, you have no problem having your neighborhood turn into a bunch of cheap hotels?

I'm sure you also realize that prohibitions against subleasing are usually part of a lease agreement.

MadisonMan said...

@Joe, why should I be clear? Put whatever words you want in my mouth to make your argument.

I'm here to serve.

It's laughable, though, to think people in my neighborhood -- all of them -- will turn their homes into cheap hotels.

Bryan C said...

"Most of Airbnb’s business is inherently unlawful"

Inherently unlawful? Because luring a customer away from a hotel or making use of your property in ways frowned upon by a zoning board are grave crimes, indistinguishable from rape and arson.

Who knew our neighborhoods were so overrun with stone-cold inherent criminals?