The internet has undoubtedly changed the way people work, shop, travel, and consume. The internet, specifically Airbnb, is also changing how people view and arrange for housing. According to AirBnb’s website, over two million people book on AirBnB each and every night. AirBnB has listings in over 81,000 cities in over 191 countries. Short-term rentals of houses, apartments, and condominium units are becoming ubiquitous and a profitable way to use one’s real estate.
For community associations, short-term rentals are a hot topic in today’s legal and association governance landscape. Courts and localities are attempting to deal with the unique challenges presented by short-term rentals. Some jurisdictions are seeking to limit or otherwise tax short-term rentals. Community associations are also faced with regulating short-term rentals, responding to potential objections by certain owners, as well as planning to minimize the potential risks posed by short-term rentals.
As short-term rentals become more and more common, accidents are bound to happen. As more lawsuits are being filed relating to short-term rentals, a critical legal question has arisen: what legal duties do short-term rental owners owe their guests? Duties are legal obligations imposed upon people under law. A breach of such a duty, should it proximately cause injuries to a guest, may result in tort liability in a civil lawsuit. Tort-related claims in short-term rental situations could range from slip and falls to mold exposure claims, and seemingly include anything and everything in between.
In a recent opinion, the Virginia Supreme Court recently took up this question of what legal duties owners owe to guests in a short-term rental. The case is Haynes-Garrett v. Dunn, Record No. 171055, decided on October 4, 2018 (“Dunn”). While the Dunn case involved a unique set of facts – a beach house, non-resident owners, and a management company – the legal principles set forth in this case would potentially apply in other short-term rental tort lawsuits with different facts. Accordingly, it’s important for community associations and their legal counsel to take heed of this case.
In Dunn, the plaintiff (“Guest”) sued the Dunns (the “Owners”) for a slip and fall that occurred in Owners’ beach house. Owners owned a beach house in Virginia Beach. The Guest also sued the Dunns’ management company (“Management Company”). The Guest rented the Owners’ home in Virginia Beach for one week. The Guest alleged that the Dunns owned, controlled, and operated the house. The Guest also alleged that the Management Company controlled and operated the house on behalf of the Owners. When she arrived, the Guest apparently tripped over some flooring in the home. The Guest fell and sustained injuries. The Guest argued that Owners and Management Company were negligent because they failed to maintain the floors in a safe and fit condition, failed to reasonably inspect the floors, and failed to warn her of hidden, hazardous or other dangerous conditions that caused her fall and injuries.
In the trial court (the “Trial Court”), the Trial Court granted the Owners’ motion to strike the Guest’s evidence. A motion to strike is a trial motion that asserts that the opposing party has failed to put forth enough evidence for a reasonable jury to enter a verdict for the plaintiff. In so doing, the Trial Court held that the Owners owed only “landlord” duties to the Guest in this short-term rental situation, not the higher “innkeeper” duties. The Trial Court ultimately found that there was no evidence that showed that the Owners breached their “landlord” duties to the Guest.
On appeal, the Virginia Supreme Court (the “Supreme Court”) explained the two different types of duties. There are two separate sets of duties that could potentially apply to these types of cases: one set owed by landlords, and one set owed by innkeepers. A landlord has no duty to maintain a safe condition for those portions of the premises under the tenant’s exclusive control. In the absence of some fraud or concealment by a landlord concerning a defect in the premises, the tenant takes the premises as it is and assumes the risk of injury. Owners, community associations, and management companies would logically prefer that “landlord” duties apply to short-term rental cases.
On the other hand, an innkeeper owes an elevated duty of care to a guest. An innkeeper holds the premises out as open as a public place and/or an accommodation for travelers. In innkeeper situations, guests may assume that they are safe. Ultimately, responsibility for the premises’ safety is on the innkeeper. Under Virginia law, an innkeeper has to take every reasonable precaution to protect the guest. Guests suing for tort claims logically want the “innkeeper” duties to apply.
The Supreme Court noted that determining which of the two sets of duties applies turns on the extent over which the owner of the premises maintains possession and control during the occupancy. In determining which set of duties applied here, the Supreme Court emphasized the following factors, amongst others: (i) the presence of the Owners and Management Company at the premises during the stay, (ii) whether the premises was open and available to the public, and (iii) whether the Management Company and the Owners maintained control over the premises during the tenancy.
Ultimately, the Supreme Court affirmed the Trial Court’s decision that the Owners did not owe “innkeeper” duties to the Guest, but rather owed only “landlord” duties. Specifically, the Supreme Court noted that the Owners were located in Northern Virginia (a considerable distance away), and were not even remotely nearby during the tenancy. Moreover, the Owners did not hold the premises open to the general public, but rather the Guest had an exclusive lease. Additionally, pursuant to the lease, neither the Owners nor the Management Company were to maintain control over the premises. The lease also did not contemplate the Owners or the Management Company coming to the premises during the stay; nor did the lease contemplate the provision, by the Owners or Management Company, of food service, daily maid service, room service, or security services to the Guest
While the Supreme Court ultimately held that the lesser “landlord” duties applied in this scenario, it is easy to imagine a situation where in other short-term rentals situations, the higher “innkeeper” duties would apply. Specifically, the higher “innkeeper” duties may apply if (i) an owner is renting out a room and remains on site (in another bedroom or on another level of the house, perhaps), (ii) if the owner offers to provide food or daily cleaning services to the guest, or (iii) if the owner comes by the premises to check in on occasion.
While owners may think they don’t have much legal risk if there is an accident, they may well be mistaken. Moreover, owners’ homeowners insurance policies may not cover such liability as potential losses arising from short-term rentals may be excluded from the policy as a “business” activity.
Additionally, given the potential of accidents occurring on the common element or common area, community associations need to be especially attuned to the legal risks surrounding short-term rentals. If an owner fails to maintain adequate insurance coverage, community associations may find themselves being sued as well by guests claiming injuries. To lessen their legal risks, community associations may wish to consider speaking to their legal counsel about their insurance needs and amending their governing documents to limit, or otherwise regulate, such short-term rentals.
The legal landscape surrounding short-term rentals is rapidly changing. Short-term rentals pose unique legal challenges to community associations and their owners. Community associations ought to consult with their legal counsel and other professionals to analyze their risks, develop strategies to minimize such risks, and potentially consider modifying their governing documents and insurance coverages.