BILL ANALYSIS                                                                                                                                                                                                    



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          Date of Hearing:  June 30, 2015


                           ASSEMBLY COMMITTEE ON JUDICIARY


                                  Mark Stone, Chair


          SB  
          761 (Hall) - As Amended May 19, 2015


          SENATE VOTE:  35-3


          SUBJECT:  ADVERTISING: INTERNET PRIVATE RESIDENCE RENTAL  
          LISTINGS: NOTICE


          KEY ISSUE:  SHOULD the operator of An online hosting platform  
          allowing persons to list their residences for short-term rental  
          be required to notify persons seeking to list their residences  
          for rent on the platform, immediately before the act of listing  
          their residences for rent, that if they are tenants, they should  
          check their rental contracts to determine whether renting a  
          residence on a short-term basis is a violation of the rental  
          contract?


                                      SYNOPSIS


          Internet-based companies such as AirBnb and VRBO have created  
          popular online marketplaces that allow people to list their  
          residential properties for rent on a short-term basis, primarily  
          to travelers and tourists, and facilitate communication between  
          the parties to make arrangements for short-term rental of the  
          properties.  Many rental agreements, however, specifically  








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          forbid the tenant from subletting all or any part of the  
          premises without landlord approval, or using the premises for  
          any commercial purpose.  According to the bill's sponsor, the  
          California Apartment Association (CAA), the majority of rental  
          leases in California contain a prohibition against subletting,  
          and under current law, landlords have the right to evict tenants  
          for subletting in violation of a lease agreement.  There is  
          evidence that, in some cities, such as San Francisco for  
          example, the number of evictions associated with Airbnb rentals  
          is increasing.


          Accordingly, this bill seeks to require operators of such  
          websites ("hosting platforms") to provide a specified notice to  
          tenants who use the platform, informing them that listing their  
          residence for short-term rental may be a violation of their  
          leases, and recommending that they check their lease before  
          listing the property on the platform for short-term rental.   
          According to the author, these hosting platforms are putting  
          unsuspecting tenants in a position where they may be subject to  
          eviction for violating their leases, and the bill is needed to  
          protect and educate tenants about the risks of listing their  
          rooms or units on short-term rental Web sites.  In addition to  
          CAA, the bill is supported by the California Realtors  
          Association and the San Diego County Apartment Association.   
          Prior to amendments taken in Senate Judiciary Committee, the  
          bill was opposed by Airbnb.  It is unknown whether Airbnb  
          continues to remain in opposition to the current version of the  
          bill.  This bill was approved by the Senate by a 35-3 vote.


          SUMMARY:  Requires the operator of a hosting platform, as  
          defined, to provide a specified notice to tenants using the  
          platform that listing their residence for short-term rental may  
          be a violation of their lease.  Specifically, this bill:   


          1)Defines a "hosting platform" to mean a marketplace that is  
            created for the primary purpose of facilitating the rental of  








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            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.  Provides that the act of  
            "facilitating" includes, but is not limited to, 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.


          2)Requires a hosting platform to provide any person listing a  
            residence for short-term rental on a hosting platform with the  
            following notice:  


            "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."


          3)Requires the above notice to appear in a font size that is  
            equal to or greater than 100 percent of the standard font size  
            of the other paragraphs on the hosting platform's Internet Web  
            site or equal to the default font size on the hosting  
            platform's Internet Web site.


          4)Requires the above notice to be provided immediately before  
            the occupant lists each real property on the online platform  
            or Internet Web site, and that the occupant interacts with the  
            online platform Internet Web site to affirmatively acknowledge  
            that he or she has read the notice.








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          EXISTING LAW:   


          1)Generally, 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.  (Civil Code  
            Sections 1940 to 1951.4.) 


          2)Provides that a tenant is guilty of unlawful detainer when,  
            among other things, he or she continues in possession, in  
            person or by subtenant, after a neglect or failure to perform  
            certain conditions or covenants of the lease or agreement  
            under which the property is held, including any covenant not  
            to assign or sublet the premises.  (Code of Civil Procedure  
            Section 1161(3).)


          3)Provides that a tenant who assigns, sublets, or 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.   (Code of Civil  
            Procedure Section 1161(4).)


          FISCAL EFFECT:  As currently in print this bill is keyed  
          non-fiscal.


          COMMENTS:  In recent years, there has been an explosion in  








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          popularity of Internet-based companies that allow people to list  
          a room or their entire residence for rental on a short-term  
          basis.  These companies, such as AirBnb, VRBO, and Homeaway,  
          have created online marketplaces which allow travelers and  
          tourists to peruse listings for properties in a destination  
          city, and then contact the listing party to make arrangements  
          for short-term rental of the property.  Typically, the companies  
          hosting these online platforms make money through advertising  
          and by charging a fee on each listing (in the case of Airbnb,  
          typically a fee of 9% to 15% of the total amount paid for the  
          rental.)  These companies generally make no distinction with  
          respect to who may list a property on the platform, allowing not  
          only property owners, but also tenants, to list their residences  
          for rent.  


          As the popularity of short-term rentals listed through Airbnb  
          and similar marketplaces has increased, so has the concern of  
          many landlords and property owners about safety and liability  
          issues associated with unauthorized use of rental property by  
          guests.  According to the sponsor of the bill, the California  
          Apartment Association, "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."  


          Accordingly, this bill seeks to require that operators of such  
          websites ("hosting platforms") provide a specified notice to  
          tenants who use the platform, informing them that listing their  
          residences for short-term rental may be a violation of their  
          leases, and recommending that they check their leases before  
          listing their residences for rent.


          Short-term rental of property to visitors by the tenant of the  
          property typically violates the rental contract or lease between  








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          the tenant and landlord/owner.  A "sublease" is a rental  
          agreement between the original tenant and a subtenant to whom  
          the original tenant rents all or part of the rental unit.  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.   
          According to CAA, the majority of rental leases in California  
          contain a prohibition against subletting.  Under current law,  
          landlords have the right to evict tenants for subletting in  
          violation of the lease agreement.  Despite these prohibitions,  
          many tenants are apparently still incentivized to rent out their  
          homes to short-term guests because of the potential windfall  
          involved, particularly in rent-controlled jurisdictions. (See  
          "Airbnb sublets in S.F. land some renters in the doghouse," S.F.  
          Chronicle (March 18, 2014).)


          The author contends that many tenants are unaware of these  
          prohibitions on subletting and using rental property for  
          commercial purposes, or have not reviewed their leases in detail  
          because of their length and complexity.  While the Committee  
          does not have statewide data about the prevalence of eviction  
          actions for illegal subletting associated with short-term  
          rentals on sites like Airbnb, there is some evidence that the  
          number of such evictions is on the rise, particularly in San  
          Francisco.  According to a recent article in the S.F. Examiner: 


               Bigger than the Ellis Act and more disruptive than  
               condominium conversions, San Francisco-based Airbnb is  
               playing a major role in city evictions. A total of 145  
               eviction notices filed with the Rent Board that  
               specifically mention the short-term rental website or  
               violations of The City's rules on short-term occupancy  
               were filed over a 12-month period that ended in  
               February, records show. Attorneys for tenants and  
               landlords agree there could be many, many more  
               Airbnb-related evictions that go unreported.









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               "There are hundreds of cases" that involve Airbnb,  
               said tenant attorney Joseph Tobener, who has defended  
               several individuals in Airbnb-related eviction cases.  
               "It's insane." [According to] Daniel Bornstein, a  
               prominent landlord attorney who handles hundreds of  
               evictions every year, Airbnb "has emerged as a  
               fundamental core of my law practice [within] the last  
               12 to 18 months."


               Tenants can be evicted for using Airbnb and other  
               websites to rent out their units in a variety of ways  
               under San Francisco's Rent Ordinance: for "illegal  
               use," breaching provisions of the lease that ban  
               guests or subtenants or causing a "nuisance." More  
               than 1,100 just-cause eviction notices that cite one  
               of the three reasons above were filed between March 1,  
               2014, and Feb. 28, 2015, according to the Rent Board.  
               Overall, evictions filed with the Rent Board did  
               increase 7 percent, from 1,977 to 2,120, from the  
               previous 12-month period, records show. And it appears  
               Airbnb played a role in that. While Ellis Act  
               evictions dropped year over year, notices citing  
               "illegal use of unit" and "breach of rental agreement"  
               went up for the fifth straight year. (See  
               "Airbnb-related Violations Cited More and More in SF  
               Evictions," S.F. Examiner (April 23, 2015).)


          In light of reports that Airbnb-related evictions are on the  
          rise, the author states the need for the bill as follows:  


               Short-term rental Web sites provide little or no  
               disclosure to prospective hosts 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  








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               can face eviction.  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.


          Factual notice warning of possible lease violations for listing  
          property.  This bill requires a specified notice to be provided  
          by the hosting platform (as defined) to tenants seeking to list  
          their residences on the platform for short-term rental.  The  
          notice reads as follows:  "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."


          The notice consists of a statement urging those who are tenants  
          to consult the rental contract for restrictions that would limit  
          the tenant's ability to list the property, followed by a simple  
          warning of possible consequences if the rental violates the  
          contract.  The notice does not presume that every rental  
          contract prohibits subletting, nor that the response of every  
          landlord to instances of unauthorized subletting would be to  
          file for eviction.  Instead, the required notice simply provides  
          factually accurate information to the tenant and warns of  
          potential consequences.  


          The bill requires that the notice is provided immediately before  
          the person lists the property on the hosting platform's website,  
          and also requires the person to interact with the website to  








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          affirmatively acknowledge reading the notice.  According to the  
          author, this interaction is intended to be accomplished by  
          having the website ask the user to check a box before proceeding  
          further, similar to what many websites already do when they  
          require users to check a box acknowledging having read and  
          agreed to the terms of service for using the website or opening  
          an account with the company.


          ARGUMENTS IN OPPOSITION:  The Committee did not receive any  
          opposition letters to this bill subsequent to the bill being  
          referred to this Committee on June 11, 2015.  Nevertheless, the  
          author did share with the Committee a copy of a letter, dated  
          May 7, 2015, reflecting Airbnb's "Oppose Unless Amended"  
          position when the bill was pending a hearing by the Senate  
          Judiciary Committee.  In that letter, Airbnb stated:


               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.


          According to the Senate Judiciary bill analysis, amendments were  
          taken in that committee that largely addressed the objections  
          and requests by Airbnb.  It is unknown whether Airbnb continues  
          to oppose the current version of the bill, or whether the  
          amendments taken in Senate Judiciary were sufficient to address  








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          all of Airbnb's concerns.


          REGISTERED SUPPORT / OPPOSITION:




          Support


          California Apartment Association (CAA) (sponsor)


          California Association of Realtors 


          San Diego County Apartment Association




          Opposition (to previous version of the bill)


          Airbnb




          Analysis Prepared by:Anthony Lew / JUD. / (916)  
          319-2334















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