BILL ANALYSIS                                                                                                                                                                                                    



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          SENATE THIRD READING


          SB  
          761 (Hall)


          As Amended  May 19, 2015


          Majority vote


          SENATE VOTE:  35-3


           ------------------------------------------------------------------ 
          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Judiciary       |10-0 |Mark Stone, Wagner,   |                    |
          |                |     |Alejo, Chau, Chiu,    |                    |
          |                |     |Gallagher,            |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |Cristina Garcia,      |                    |
          |                |     |Holden, Maienschein,  |                    |
          |                |     |O'Donnell             |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
           ------------------------------------------------------------------ 


          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:   








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          1)Defines a "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,  
            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% 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  








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            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.


          FISCAL EFFECT:  None


          COMMENTS:  In recent years, there has been an explosion in  
          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, Vacation Rentals by  
          Owner (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 this bill, the California  
          Apartment Association (CAA), "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."  









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          Accordingly, this bill seeks to require that operators of such  
          Web sites ("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  
          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 Assembly  
          Judiciary 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.  (See, e.g., "Airbnb-related  
          Violations Cited More and More in SF Evictions," S.F. Examiner  
          (April 23, 2015).)








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          In light of reports that Airbnb-related evictions are on the  
          rise, the author states the need for the bill as follows:  "By  
          providing no information to prospective tenants, short-term  
          rental websites are putting unsuspecting tenants in a position  
          where they 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."


          Importantly, 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 Web  








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




          Analysis Prepared by:                                             
          Anthony Lew / JUD. / (916) 319-2334  FN: 0001109