Legal Issues with Respect to Virtual Hotels
By Banks Brown Partner, McDermott Will & Emery LLP | December 20, 2015
Co-authored by Audrey Lu, Associate, McDermott, Will and Emery, LLC
Over the past few years a new business model has taken center stage in the market for transient lodging. The fundamental nature of this new model is an internet booking platform that facilitates and participates in the short-term transient rental of private homes and apartments. Participants in the market are, for example, Airbnb, HomeAway, and onefinestay. The model is often described as part of the sharing economy, in the sense that it facilitates the "sharing" of residential space between transient guests and the primary occupant of that space.
This new model raises a number of legal concerns that have long been addressed by the hotel industry. The legal requirements imposed upon the transient lodging industry trace their origin to the ancient days of England where road houses, taverns, and inns provided rooms to travelers. A series of common-law requirements were imposed by the English courts upon these transient lodging facilities because travel was so dangerous. It was during this period of time that inns became known as "quasi-public" institutions, with duties of requiring housing for those who were traveling as long as there was room and providing safety precautions for such persons and their property. These duties still exist to this day and have been supplemented by further stringent regulations and rules concerning safety of guests and their property and the additional duty to take in guests without discrimination(i).
These duties can be – and are – fulfilled by hotels and inns because the innkeeper is in charge of the building that contains the rooms in which guests stay. However, the use of private residences (such as apartments, co-ops and condominiums) that are spread throughout a building and throughout a city for transient lodging purposes, creates a near impossibility that the rules developed to protect transient guests in a foreign place can be followed. Additionally, in an urban setting, this new model creates questions concerning land-use and affordable housing. This article addresses the legal issues that are now being raised as a result of such a model that is operating in the well-developed and highly regulated market of transient lodging. Although the article concentrates on New York law, which is the most developed in the country on these issues, it also applies, in part, to other jurisdictions.
Findings of the New York State Attorney General.
An October 2014 report by the New York State Attorney General Eric Schneiderman ("NYAG Report"), based on data obtained directly from Airbnb for bookings on its platform between January 1, 2010 and June 2, 2014, provides clear insight into these types of enterprises(ii).
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