The Airbnb question: What’s a broker to do?

Agents discuss how they respond to clients looking to rent their future units short term

New York /
Mar.March 17, 2016 08:30 AM

UPDATED: March 17, 9:50 a.m.: Airbnb and other short-term rental services make it easy for “hosts” to find willing renters for their spaces.

Before that can happen, though, they need a space. And for that, they often need a broker.

Brokers, both sales and rental, are encountering an increasing number of clients who – openly or otherwise – seek units they plan to market through the services, sometimes “commercially,” as de facto hotels.

The Real Deal spoke to a handful of agents navigating this 21st Century problem and encountered a range of responses: from solicitude to suspicion.

“We’re seeing a lot of people who want to cash cow their investment,” said Frances Katzen, a luxury broker at Douglas Elliman.

She described the typical Airbnb-oriented buyer – the practice is more common on the sales side, in her experience, Katzen said – as shrewd professionals, often based in Europe, often working at high-profile jobs in fields such as finance and high tech. They’re typically seeking pied-a-terre units for the handful of days they spend in the city every few months.

“It’s expensive,” she said. “They want a return.”

Though it’s illegal under the state’s Multiple Dwelling Law to sublease an apartment for fewer than 30 days without the owner or leaseholder present, the practice is common.

Roughly half the New York listings on Airbnb as of Nov. 17 2015 were for whole units that weren’t restricted to 30 days or more, according to data released by the company.

Some buyers keep their plans “on the down low,” Katzen said, but others just come right out with it. “They say, ‘I want to do Airbnb,’ literally.”

How she responds, Katzen said, depends on the building’s bylaws.

“We strongly oppose illegal hotels, and regularly remove commercial operators from our site,” a spokesperson for Airbnb said in a statement. “They are not good for our community in New York and do not offer the authentic experience our visitors seek out.”

Karla Saladino, founder and managing partner of Mirador Real Estate, a boutique brokerage and property management firm, took a significantly harder line.

When it comes to rental buildings, she said, “the answer in New York is always no. You don’t mess with it at all. If they’re caught, the landlords are hit with tremendous fines. If we catch people using Airbnb at the buildings we manage, we move to evict immediately.”

Saladino said she and her colleagues have been discussing ways to police the practice for years, ever since the first major fines connected to the Multiple Dwellings Law – which took effect in 2011 – were levied.

While the law is only sporadically enforced, several landlords have been hit with hefty fines in recent months. Ben and Herman Schulman, owners of 357 West 54th Street, were fined over $120,000 when several of their tenants were caught renting out their units on Airbnb. The landlords sued the tenants in turn, hoping to pass the costs onto them.

“Nobody comes straight out and asks [about renting units on Airbnb],” Saladino said. “They lie.”

Her firm has developed screening methods to catch the more wily would-be short-term renters. Mirador runs a check to see if applicants’ credit information has been requested multiple times over the course of the past year, suggesting they’ve applied for — and potentially operate — multiple apartments.

The company also wants to know, “Do they work in real estate? Do they actually own an apartment? Where do they live currently?” Saladino said.

Mirador often reaches out to the parents of college-age applicants, she said, and sometimes requires what are called “comfort guarantor” agreements, where parents simply acknowledge that they know their child is applying to rent the unit, rather than actually guaranteeing payment of the rent.

There’s good reason to be thorough, according to Saladino. Mirador, she said, caught one would-be client paying NYU students for the right to use their names during the application process, to get around the multiple-credit-check sweep.

“It was an entire business,” she said, “He had something like nine apartments running.”

The company is currently assembling evidence against a “giant ring” of similar fraudsters, Saladino said, with plans to file a lawsuit.

She declined to provide details on the alleged ring, on the advice of Mirador’s attorneys.

The question of how brokers should react has also hit the Real Estate Board of New York’s radar.

“We have major concerns about the illegal short-term rental of apartments through Airbnb, which are a violation of state law and have serious safety implications and negative impacts on the quality of life of legal residents,” REBNY’s president, John Banks, said in a statement. “Through ongoing discussions with a working group of owners and managers, we are seeking to identify best practices and legislative solutions, on the city and state level, that would minimize illegal short term rentals and ensure that the appropriate party is held responsible when a violation of law does occur.”

Neil Garfinkel of law firm Abrams Garfinkel Margolis Bergson, who works with REBNY as a legal advisor for brokers, said the group suggests brokers make their position crystal clear in writing, in brokerage agreements.

Still, the practice seems likely to grow as Airbnb – currently valued at $25.5 billion – continues to expand in New York, along with its competitors.

“I think the rules are going to change.” Elliman’s Katzen said. “The demand for Airbnb is going to be such a seductive thing.”

A statement from Airbnb was appended. 

Correction: A previous version of this article identified Frances Katzen as a managing partner at Douglas Elliman. Her title is actually managing director. 

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