The Host's Moral Dilemma - Stiff Landlord or Shut Down

The building my full apartment listing is in has just banned short term rentals “until further notice” due to fears that guests will spread the virus. I have a month to month residential lease with the condo owner - he knows I do Airbnb full time and live elsewhere. A huge rent bill and no visibility on when I might be able to resume hosting again. By the way, the owner is very greedy and our lease is far above market rent, which I put up with because I was still making money. Now rents have cratered so if we get through this I’d have to renegotiate (I’m paying $4100 a month, market rate is now $2800). He’s offered me a two month break on the rent (to $2800) but generally speaking he’s pretty delusional about how serious this is going to be.

To add a further wrinkle, the government (I live in Toronto, Canada) has halted all eviction proceedings and basically told people to not pay rent if they can’t afford it. They’re talking about normal residential leases, but technically I’m covered until the same legal framework since we have a residential lease too. So far there’s no financial help for hosts or small businesses in general, but there are huge problems brewing with small businesses not being able to make April or May rent so the government is going to have to do something to avoid a wave of bankruptcies and mortgage defaults.

Obviously it doesn’t make sense for me to continue paying rent on a place where I can’t host, but I don’t like the idea of screwing over the landlord and I’m worried he’ll end up suing me when things recover, or revoke his permission to let me host.

My inclination is to do the honorable thing and give notice to move out ASAP, but I worry I’m shooting myself in the foot by giving up so quickly. What do y’all think?

I don’t think you’re doing a moral analysis at all, I think you’re doing a cost/benefit risk analysis. 1. Savings on rent by taking advantage of a rental forbearance program vs. 2. Paying the reduced rate the owner is offering to avoid them chucking you out or otherwise mucking up your future business vs. 3. Giving notice and saving rental costs long term whilst losing potential future business.
Why is the owner greedy? He’s charging what you’re willing to pay, just as you are charging more for Airbnb stays than your rent payment, because rental arbitrage is your business and makes you money.
Also don’t understand how this property qualifies for “residential lease” relief when it’s not actually your residence, it’s your business location.

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Pot, meet kettle. Weren’t you just posting completely oblivious to the track the disease is taking?

Honestly, I take no pleasure in your situation. It’s horrible in every way.

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I can appreciate the irony of the situation… maybe I am delusional about the spread of the virus, but I can see that the restrictions on travel and STRs are probably going to last a long time even if the virus remains under control.

He’s greedy because among other things, at our last annual rent adjustment he tried to hike my rent from $4,000 to $4,600, which happens to be illegal. And in the face of a massive downward shift in market rents he basically stuck his head in the sand and offered me a two-month discount that only brings us back in line with market rates (for which there are few if any takers). It’s in contrast to my other place where the landlord told me we’re all in this together, and to pay whatever I can.

There is no rent forbearance program as of yet, they’ve just put a stop to eviction proceedings. I could easily still be on the hook for months of back rent if I simply stop paying. I also do feel badly that I’m considering throwing my landlord under the bus, even though I don’t like him.

We have a residential lease so technically I can’t be “evicted” for non-payment at this time, but he can try to start proceedings at the government tribunal that handles disputes between landlords and residential tenants. That tribunal is also basically shut down except for cases of criminality or physical violence so I could pretty much just stop paying with no consequences until things recover. But then the consequences could be quite serious for me.

If you think the virus is currently under control, then you are truly delusional. Time to wake up, and get real I think.

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If your rent is month-to-month with no end in sight as to when you can begin making money, I’d say close down, get out and wait for the landlord to come asking you to come back. After all you say he can’t get what you are paying. Call his bluff…it’s costing you money otherwise.

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I think this is the best move. Not your property, not your problem.

RR

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  1. You have a “greedy landlord” who overcharges you, and tries to further increase rents illegally.
  2. You have a month to month lease that allows you to exit at a time your AirBNB revenue will be diminished.

You are in a far better position than most who may have mortgages or leases that they can’t get out of and are dealing with a net loss.

The honorable thing is to save you and your family the financial drain / risk, if not also pausing the AirBNB business in support of the lockdown.

It seems like a no-brainer answer (to me) for you to put in notice ASAP, but we have had divergent opinions on far more important things than this.

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Toronto and Vancouver along many other big cities have been over run by AirBnB’s. Landlord is greedy because you will pay it just to AirBnB. This is what drives the rent up by demand.
I agree you should just walk away.
Hopefully the rent will continue to drop and someone who needs that for their LTR will be able to afford it.

Yes he is.

By how you describe him he would throw you under the bus in a “New York Minute” !!!

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Give up the apartment and let your landlord rent it to a long term tenant. Do the ethical thing.

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Well said. Reset the moral compass

This pandemic is going to bring about changes globally.
Some of them will be good ones.
Perhaps this is going to release LRT apartments/condos/suites world wide for people local in those cities to rent them for their own homes without being gouged…

I went to Hawaii for the first time January 2016 (LOVED IT !!)
Wanted to stay longer so I went on to Trip Adviser forum to ask for ideas on places to stay. There were some established members there who berated me for adding to the housing crisis for the locals. It was an eye opener. I didn’t feel guilty because my accommodation had a local family in one part, owner in the other and us. All in our separate suites. I ended up booking a condo at Turtle Bay resort on more secluded part of the island. Would love to go back someday…

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All ethics aside, you need to consider how long you might go without business and how long it will take to recover. I assume not paying your rent does not mean what you don’t pay is forgiven, so:

  • You don’t have to pay your rent if you can’t afford it.
  • You will have no income from this unit for some time X as business is prohibited.
  • You will have low income from this unit for some time Y as business recovers.
  • You may be able to negotiate a lower rent for some time Z.
  • You still have to pay back the rent owed during the time you didn’t pay it, and it’s not clear what the terms of repayment will be.

Estimate the numbers and do your cost/benefit analysis. I think it all comes down to whether the specific location of the unit is worth that much. Personally, I’d vacate ASAP and try to find another place when business picks up again. I fully expect a real estate decline in the next few months and that will open up an opportunity to buy at a good price instead of rent, and not paying (or not owing) rent on an unused unit for several months could put a lot of extra cash in your pocket to help in purchasing a unit that would have much higher profit margins.

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If you’re in a month-to-month lease, why not just give your 30 days notice? I agree with @Atlnative. It is time the walk away. We don’t know how long it will take for the STR market to recover. You can start again with a new place in a year or two or whenever it is people start vacationing again.

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It is a no-brainer: STR is history in that building until further notice. Get out, give notice and pay up what you still owe in rent until then.

Settle your accounts so that you could possibly return if things start to look up and it would be ‘legal’.

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As a “traditional” shared home host I have absolutely NO sympathy for arbitragers like you or your greedy landlord who have been taking long term housing off the market and creating resentment against all Air hosts.

“Moral Dilemma” my ass! As far as your greedy landlord go, I hope that you both suffer the full financial consequences of your greed and mendacity.

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Perfectly phrased - exactly how I feel about this scenario - Thank you.

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I do not see this a moral dilemma at all. @cooperjto has a contract with the landlord, the contract allows him to give notice and vacate. It is business. Think back to the last housing bubble when people who were over leveraged walked away from mortgages, the banks were screaming that you should do the right thing and pay anyway when upside down on equity. I never agreed with this, the banks helped fuel the fire then it got out of control.

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Give 30 days notice. Move your business out

  1. You have a residential lease. Your are running a business. There is proof of that on the Airbnb website and here. It doesn’t matter that your landlord knows.

When you don’t pay, you can be evicted for violating your residential lease by running a business. It doesn’t matter that you have an informal agreement with your landlord. What is in the RESIDENTIAL lease rules

  1. You called your landlord greedy for wanting a rent payment of $4600.

Considering you have made money with someone else’s property/investment and are even considering NOT paying because you can’t be evicted speaks to a larger problem here.

Do the right thing. Give notice and vacate. Don’t screw someone over just because you think you can.

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Thanks all for the feedback, confirming what I thought was best. There’s been a lot of talk here about a “rent strike” effectively forcing lenders to give breaks to cash strapped landlords in lieu of the suspension of eviction orders, but it didn’t sit right to me to screw him over.

I told him I was giving notice - technically it’s 60 days required but he’s going to list it for immediate occupancy. We’ll leave it furnished with my furniture so it shows well, and I’m letting him use my listing photos for the MLS listing. He said I don’t have to vacate unless he finds a new tenant, and offered me right of first refusal if he does find someone or the building allows STRs again. I didn’t pay the April rent, but he does have my last month rent deposit so hopefully he can find someone within the next month. If not I won’t give him another month’s rent, so technically I will owe him another month but we’re calling it even in light of everything.

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In my opinion, you landlord should not be charging you above market rents no matter what you are doing with the property. You were able to make a profit on short term rentals due to economy of scale i.e., short term vacation rental guest staying a few nights or a week will expect to pay a higher per night rate than a month to month or annual tenant. It does not seem to me that your landlord is doing you any favors, and if it unlikely that you cannot continue with your short term rental business for a few months due to recent global events, I’d suggest you give up that property asap. Otherwise, what was once a profit center for you will end up costing you more and more for every day it sits vacant (after the two months free, that is). As long as you have a history of paying the rent on time, are not violating any agreement you have with your landlord, and if you do break a lease you give him sufficient notice as per the terms of the lease, then there should be no fault he can find with you leaving, or staying. It’s up to you.

As for the ban on short term rentals in your building due to COVID-19, that is happening everywhere. For example, the City of Palm Springs had banned all vacation rentals until April 30, and just today they extended that to June 16. Like you, I am also wondering whether I should keep my vacation rental or not. Hope this helps.