BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015-2016 Regular Session
SB 761 (Hall)
Version: April 6, 2015
Hearing Date: May 12, 2015
Fiscal: No
Urgency: No
RD/TH
SUBJECT
Advertising: Internet private residence rental listings:
notice
DESCRIPTION
This bill would require that a hosting platform provide a
specific notice to hosts listing a residence for short-term
rental on a hosting platform, as specified. The notice must be
provided immediately before the occupant lists each real
property on the online platform or Internet Web site, and must
require the occupant to interact with the online platform
Internet Web site to affirmatively acknowledge that he or she
has read the notice. The bill would define various terms,
including "hosting platform," for these purposes.
(This analysis reflects author's amendments to be taken in
Committee.)
BACKGROUND
It is not uncommon for a tenant with a lease to need to move out
before the lease ends, or require assistance in paying their
rent. In these situations, the tenant may want to sublease the
rental unit or assign the lease to another tenant; however, the
tenant cannot sublease the rental unit or assign the lease
unless the terms of the lease allow the tenant to do so. A
"sublease" is a separate rental agreement between the original
tenant and a new tenant to whom the original tenant rents all or
part of the rental unit. In contrast, an "assignment" is a
transfer of person's rights as a tenant to someone else. The
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tenant might use an assignment if he or she has a lease and
needs to move permanently before the lease ends. Many rental
agreements, however, specifically forbid the tenant from
subletting all or any part of the premises without landlord
approval, or using the premises for any commercial purpose.
In recent years, California has seen a rise in what is known as
the "sharing economy," with the influx of ridesharing businesses
such as "Lyft" and "Uber" and homesharing businesses such as
"Airbnb," "FlipKey," and "VRBO." Generally, homesharing is
recognized as an agreement between two parties, in which one
party rents out all or part of his or her home to another party
on a temporary, one-time basis (i.e. Airbnb and HomeAway)."
(DuPuis and Rainwater, The Sharing Economy: An Analysis of
Current Sentiment Surrounding Homesharing and Ridesharing,
National League of Cities (2014)
[as of
May 7, 2015].)
With the increasing popularity of short-term vacation rentals
made available through websites such as Airbnb and VRBO, among
others, however, questions have arisen as to whether tenants (as
opposed to homeowners) of rentals are in violation of their
rental agreements if they list their rental on these platforms
for short-term rent. According to some, "[w]ith an Airbnb
rental, the tenant is using the premises for an illegal
commercial purpose, and is often creating a nuisance and
substantial interference with the comfort, safety or enjoyment
of the other building occupants by allowing strangers access who
have not been screened by the landlord. These are grounds for
terminating tenancy." (See San Francisco Apartment Association,
SF Apartment: August 2014, Legal Q&A
[as of May 7,
2015].) Moreover, while the tenant could be subject to eviction
for those activities, there is debate over whether the 3-day
notice that may be served needs to offer a right to cure.
"Short-term rental, like other forms of subletting, falls into a
gray area. Some argue that it is curable simply by stopping any
future subletting. Others argue that the subletting, having
already occurred, is no longer curable." (Id.)
While questions may linger, it is clear that a tenant could be
at risk of eviction if not careful, and that many are not even
aware of the possibility of this risk as they are exposing
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themselves to as they participate in this relatively new
economy. This bill seeks to provide a specified notice to the
tenant that would make them aware of the potential restrictions
in their rental agreement that could subject them to eviction.
CHANGES TO EXISTING LAW
Existing law defines the rights and duties of landlord and
tenants, including presumptions regarding the terms of the
hiring, the lawful means of terminating a lease or rental
agreements, and the remedies available to the respective parties
in the event of a breach of a lease or rental agreement,
including remedies in the event of a tenant's wrongful
assignment or sublet of a lease. Generally, the landlord may
elect either to continue the lease in effect or to terminate it
and collect damages. (Civ. Code Secs. 1940 et seq., 1951.4)
Existing law provides that a tenant of real property, for a term
less than life, or the executor or administrator of his or her
estate heretofore qualified and now acting or hereafter to be
qualified and act, is guilty of unlawful detainer if he or she
engages in certain activity. (Civ. Code Sec. 1161.) Existing
law defines an unlawful detainer to include, among others, the
situation where a tenant continues in possession, in person or
by subtenant, after a neglect or failure to perform other
conditions or covenants of the lease or agreement under which
the property is held, including any covenant not to assign or
sublet, than the one for the payment of rent, and three days'
notice, in writing, requiring the performance of such conditions
or covenants, or the possession of the property, shall have been
served upon him or her, and if there is a subtenant in actual
occupation of the premises, also, upon the subtenant. Within
three days after the service of the notice, the tenant, or any
subtenant in actual occupation of the premises, or any mortgagee
of the term, or other person interested in its continuance, may
perform the conditions or covenants of the lease or pay the
stipulated rent, as the case may be, and thereby save the lease
from forfeiture; provided, if the conditions and covenants of
the lease, violated by the lessee, cannot afterward be
performed, then no notice, as last prescribed herein, need be
given to the lessee or his or her subtenant, demanding the
performance of the violated conditions or covenants of the
lease. (Civ. Code Sec. 1161(3).)
Existing law provides that a tenant who assigns, sublets, or
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commits waste upon the premises contrary to the conditions or
covenants of the lease, or maintains, commits, or permits the
maintenance or commission of a nuisance upon the premises, or
uses the premises for an unlawful purpose, is guilty of an
unlawful detainer and may, upon service of three days' notice to
quit, be evicted from the premises by the landlord. (Civ. Code
Sec. 1161(4).)
Existing law requires an operator of a commercial Web site or
online service that collects personally identifiable information
through the Internet about individual consumers residing in
California who use or visit its commercial Web site or online
service to conspicuously post its privacy policy on its Internet
Web site. (Bus. & Prof. Code Sec. 22575 et seq.) Existing law
also limits advertising by an operator of an Internet Web site,
online service, online application, or mobile application
directed to minors, as provided. (Bus. & Prof. Code Sec. 22580
et seq.) Existing law also provides provisions that protect the
privacy of student's online personal information. (Bus. & Prof.
Code Sec. 22584 et seq.)
This bill would establish requirements for a hosting platform
providing internet private residence rental listings. This bill
would define "hosting platform" to mean a marketplace that is
created for the primary purpose of facilitating the rental of a
residential unit offered for occupancy for tourist or transient
use for compensation to the offeror of that unit, and the
operator of the hosting platform derives revenues, as specified,
from providing or maintaining that market place. "Facilitating"
includes, but is not limited to, the act of allowing the offeror
of the residential unit to offer or advertise the residential
unit on the Internet Web site provided or maintained by the
operator.
This bill would require a hosting platform to provide the
following notice to hosts listing a residence for short-term
rental on a hosting platform:
If you are a tenant who is listing a room, home,
condominium, or apartment, please refer to your rental
contract or lease, or contact your landlord, prior to
listing the property to determine whether your lease of
contract contains restrictions that would limit your ability
to list your room, home, condominium, or apartment. Listing
your home may be a violation of your lease or contract, and
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could result in legal action against you by your landlord,
including possible eviction.
This bill would provide that the mandated notice must be in a
font size that is equal to or greater than 100 percent of the
standard font size of the other paragraphs on the online
platform or Internet Web site or equal to the default font size
on the online platform or Internet Web site.
This bill would require that the notice be provided immediately
before the occupant lists each real property on the online
platform or Internet Web site, and that the occupant interact
with the online platform Internet Web site to affirmatively
acknowledge that he or she has read the notice.
COMMENT
1. Stated need for the bill
According to the author:
Over the past few years, there has been significant growth in
online Web site companies that allow people to rent a room or
their entire unit on a short-term basis. These companies
include AirBnb, VRBO, Homeaway, Flipkey, and others. They
allow not only property owners to list, but tenants who rent
apartments as well. Unlike homeowners, however, tenants who
list their rooms or units, create a host of potential problems
for the property owner and neighboring tenants, while at the
same time, they jeopardize their own tenancy.
In California, the majority of rental leases contain a
prohibition against subletting. Under current law, landlords
have the right to evict tenants for subletting and for
violating the rental agreement. Unfortunately, many tenants
are not aware of these prohibitions. Standard leases include
many legally required disclosures that can make the lease as
long as 25 pages and many tenants may not have reviewed their
lease in years.
Short-term rental Web sites provide little or no disclosure to
prospective tenants who list their rooms or units for rent.
By providing no information to prospective tenants, short-term
rental websites are putting unsuspecting tenants in a position
where they can face eviction.
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Short-term rental websites are great and valuable tools, but
they must be used responsibly in accordance with existing laws
and contractual agreements. Tenants in apartments who list
with short-term rental Web sites can create significant safety
issues for their neighbors and the community. Short-term
guests have had no screening or background checks, and keys or
gate codes are given by the listing tenant to the short term
guests. The risk of liability is significant for both tenants
and owners.
SB 761 is intended to protect and educate tenants about the
risks of listing their room or unit on short-term rental Web
sites. It will simply require short-term rental companies to
disclose very clearly and openly that listing a room or unit
may be a violation of the lease and may subject the tenant to
eviction. [ . . . ]
In support, the San Diego County Apartment Association (SDCAA)
writes that "renting-out/sub-leasing a rental unit without
permission, in violation of one[']s lease agreement, could be
grounds for eviction. This has become an increasing problem
with sites like Airbnb, et.al. This bill will put the person on
notice that renting-out units may cause them to be evicted."
2. Bill would provide legally factual warning to tenants
The sponsor of this bill, the California Apartment Association
(CAA) notes that this is a problem specific to tenants of
rentals. "Unlike homeowners, tenants who list their rooms or
units on short-term rental websites create a host of potential
challenges for the property owner and neighboring tenants, and
at the same time, listing tenants jeopardize their own tenancy."
This, they assert, is due to the fact that in this state, "the
majority of rental leases contain a prohibition against
subletting" and landlords have the right under existing law to
evict tenants who sublet in violation of the rental agreement.
This is also compounded by the fact that many tenants are
unaware of such prohibitions, especially when a standard lease
can be as long as 25 pages, includes numerous notices, and the
tenant has not reviewed the lease in years. CAA writes that
"[w]hile eviction is never the preferred option for a landlord,
the potential liability risks associated with short term rentals
are too great for landlords and the neighboring tenants." As
described the proponents:
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Tenants in apartments who list with short-term rental websites
can create safety issues for their neighbors and the
community. Short-term guests have had no screening or
background checks, and keys or gate codes are given out by the
listing tenant to strangers. Short-term rental web sites
provide little or no disclosure to prospective tenants who
list their rooms or units for rent. By providing no
information to prospective tenants, short-term rental web
sites are putting unsuspecting tenants in a position where
they can face eviction.
Accordingly, this bill would arguably protect tenants by
educating them about the potential risks of listing their room
or unit on a short-term rental website, such as Airbnb, VRBO,
and others. The bill would require that a "hosting platform"
-i.e. a marketplace that is created for the primary purpose of
facilitating the rental of a residential unit offered for
occupancy for tourist or transient use for compensation to the
offeror of that unit in order to generate specified fees or
revenue-provide a specific notice to the hosts listing a
residence for a short-term rental on the hosting platform. That
notice would simply put the tenant on notice that they should
refer to their rental contract or lease or contact their
landlord, prior to listing the property to determine whether
their lease of contract contains restrictions that would limit
their ability to list their room, home, condominium, or
apartment. The notice would also clearly indicate to the tenant
that listing their home may be in violation of their lease or
contract and result in legal action by their landlord-including
eviction.
As a matter of public policy, insofar as hosting platforms
generate revenue from facilitating activities that may cause
unwitting tenants harm in the case of an eviction, they arguably
should provide reasonable notice of factually accurate
information of the potential legal and practical consequences to
the tenant from participating in those activities without legal
authorization from their landlord. The possible harm can be
even direr in localities that are particularly attractive to
tourists, as the tenants in such localities (such as San
Francisco) face incredibly high rents and could risk losing
their rent-controlled home over a short-term sublet that they
did not realize would be in violation of their lease agreement.
3. Opposition concerns
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Airbnb writes in opposition to the bill (as in print):
For thousands of Californians, home sharing provides a vital
economic lifeline that makes it possible to pay the bills and
pursue their dreams while the cost of living increases rapidly
across our state. [ . . . ] As more and more middle class
Californians embrace innovations that enable them to make
efficient use of their resources, it is important to avoid
unnecessary hurdles that stunt this new peer to peer economy.
We understand [the author's] intentions with the proposed
disclosure and have been working with his office to craft
language that achieves his goal. We are concerned, however,
that the currently proposed disclosure implies that all leases
in California are constructed identically. Indeed, there is
no standard lease language utilized across the State of
California, and the proposed disclosure should clearly and
adequately alert hosts, as Airbnb already does, of the
importance of checking their lease and understanding their
rights. Internet platforms like Airbnb cannot play the role
of interpreting private contractual arrangements or mediating
disputes that might arise between private parties.
To address their concerns, Airbnb requested two amendments,
which are largely embodied in the recent amendments (see below).
However, whereas Airbnb would have preferred the second half of
the notice to provide that "Listing your home may, or may not,
constitute a material breach of your lease, depending on the
specific terms of your lease. A material breach of your lease
could result in legal action against you by your landlord," the
bill provides, instead, "Listing your home may be a violation of
your lease or contract, and could result in legal action against
you by your landlord, including possible eviction."
4. Amendments
This analysis reflects the following author's amendments, for
which mock-up will be provided in Committee.
Author's amendments:
On page 2, in line 5, strike "private residence rental
listings" and insert: "Private Residence Rental Listings"
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On page 2, between lines 8 and 9, insert: "(a) "Hosting
platform" means a marketplace that is created for the primary
purpose of facilitating the rental of a residential unit
offered for occupancy for tourist or transient use for
compensation to the offeror of that unit, and the operator of
the hosting platform derives revenues, including booking fees
or advertising revenues, from providing or maintaining that
marketplace. "Facilitating" included, but is not limited to,
the act of allowing the offeror of the residential unit to
offer or advertise the residential unit on the Internet Web
site provided or maintained by the operator."
On page 2, in line 9, strike "(a)" and insert: "(b)"
On page 2, in line 11, strike "(b)" and insert: "(c)"
On page 2, strike lines 14 to 18, inclusive, on page 3, strike
out lines 1 to 8, inclusive, and insert:
22592. A hosting platform shall provide the following notice
to hosts listing a residence for short-term rental on a
hosting platform:
If you are a tenant who is listing a room, home, condominium,
or apartment, please refer to your rental contract or lease,
or contact your landlord, prior to listing the property to
determine whether your lease of contract contains restrictions
that would limit your ability to list your room, home,
condominium, or apartment. Listing your home may be a
violation of your lease or contract, and could result in legal
action against you by your landlord, including possible
eviction.
On page 3, line 15, strike "commits to offer" and insert:
"lists"
The following amendment would address a drafting error in the
notice language that may inadvertently imply that eviction is
only possible with respect to short-term rentals of homes (in
contrast to rooms, condominiums, or apartments). This language
would track the language used elsewhere in the notice.
Suggested technical amendment :
On page 3 of the mockup, strike "Listing your home may" and
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insert "Listing your room, home, condominium, or apartment
may"
The following amendments are also suggested to strike
unnecessary language.
Suggested amendment :
On page 2, strike lines 9-13
Support : San Diego County Apartment Association (SDCAA)
Opposition : Airbnb
HISTORY
Source : California Apartment Association
Related Pending Legislation : None Known
Prior Legislation : None Known
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