Use of condos for hosting Airbnbs has become increasingly popular, not only in places like the Bay Area and Southern California, but also in Midwestern cities like Cincinnati, Ohio. As of October 2017, the Cincinnati Business Journal estimates that there are at least 580 active Airbnb hosts in the metro area.[i] Several of the most popular units are located in Over-the-Rhine (OTR). In little over a decade, OTR has transformed from a neighborhood described by Politico as one of the most dangerous in the country, to a cultural hub, where one can find top dining and shopping.[ii] However, there are not any hotels in OTR for potential visitors. This has created demand for Airbnbs, and it has piqued the interest of owners and buyers of condominium units in OTR. However, neither Ohio law nor the Cincinnati Municipal Code have addressed Airbnbs. Many of the Airbnbs in OTR are condos or townhomes, and therefore are subject to homeowners’ associations, which restrict the leasing of units. As a result, there is currently ambiguity surrounding the legality of Airbnbs in Cincinnati, particularly when the unit is a condo.
The chief legal concern is that “hosting” an Airbnb establishes a landlord-tenant relationship, resulting in short-term leases. Under the Ohio Revised Code and Cincinnati Municipal Code, Airbnbs do not establish a landlord-tenant relationship; thus, accordingly, the use of a unit as an Airbnb would not result in the formation of a lease. However, Airbnbs do not fit neatly into either the Ohio or Cincinnati Codes, nor is there any jurisprudence focusing on Airbnbs, or similar services, in Ohio. This ambiguity could result in future regulatory and licensing issues for Airbnb hosts.
Developers have treated Airbnbs like they are leases that establish landlord-tenant relationships. The principal concern over the use of condos as Airbnbs or other short-term rentals is that a landlord-tenant relationship forms. Formation of a landlord-tenant relationship creates issues in obtaining financing from lenders and allows for potentially abusive leases. First, lenders are unwilling to provide financing for sales in buildings that are considered at-risk, which results when at least 25% of the units are leased. If Airbnbs are considered leases that create a landlord-tenant relationship, then future buyers in the development will be unable to obtain financing if more than 25% of the units are leased because the building will be considered at-risk. Second, condominium ownership documents typically contain provisions that prohibit leasing units for terms of less than six months in order to prevent predatory, month-to-month leases. If Airbnbs create a landlord-tenant relationship, in order to allow units to be rented as Airbnbs, these provisions must be eliminated. This would effectively open the door to predatory leases in OTR that urban redevelopers, like the Cincinnati City Center Development Corporation (3CDC), have battled extremely hard to eradicate. Moreover, as has been the case in California, hosts must go through formal, lengthy eviction procedures to remove Airbnb guests that refuse to leave at the conclusion of their scheduled stay. As a result, developers and condominium associations have sought to eliminate use of units as Airbnbs and other short-term rentals.
Airbnbs do not establish a landlord-tenant relationship in Ohio. Ohio Revised Code § 5321.01(a) provides that a “tenant” is “a person entitled under a rental to the use and occupancy of residential premises to the exclusion of others,” but Ohio Revised Code § 5321.01(c)(3) excludes “[t]ourist homes, hotels, motels, [ ] and other similar facilities where circumstances indicate a transient occupancy” from inclusion as residential premises. Airbnbs can be classified as either tourist homes or as a facility where circumstances indicate transient occupancy. The Code does not define “tourist home,” meaning its plain meaning definition is applied. Webster’s New World College Dictionary, 4th Edition, defines tourist home as “a private home in which bedrooms are rented to tourists or travelers.” Clearly, such a classification applies to Airbnbs where a room in a condo is rented to a traveler, but it is unclear if this comprises whole unit Airbnb rentals. The Code also does not define “transient occupancy,” meaning the plain meaning definition should be applied. Merriam-Webster defines “transient” as “passing through or by a place with only a brief stay,” and defines “occupancy” as “the fact or condition of holding, possessing, or residing in or on something.” Taken together, the plain meaning of “transient occupancy” is residence for a short period with no limitation on the type of residence being occupied. This clearly applies to short-term Airbnb rentals, both those of a single room or an entire unit, meaning that even full unit Airbnbs do not, for the purposes of the Ohio statutory law, establish a landlord-tenant relationship.
Airbnbs and other short-term rentals do not establish a landlord-tenant relationship under the Cincinnati Municipal Code either. § 871-3(e) of the Municipal Code defines a “tenant” as “an occupant of a rental unit other than an owner or operator.” § 871-3(b) defines “rental unit” as “the whole or part of a building including common areas used by a person for living dining, cooking, sleeping, and sanitation purposes owned or controlled by another, under an agreement for the periodic payment of rent.” (emphasis added). Based on these definitions, establishment of a landlord-tenant relationship requires periodic payment of rent. There are not periodic payments when units are rented through Airbnb because Airbnb requires full payment prior to the guest’s stay. Because there are not periodic payments, the statutory definition of “tenant” is not met, meaning Airbnb rentals do not establish a landlord-tenant relationship under the Cincinnati Municipal Code.
Beyond not establishing a landlord-tenant relationship, the status of Airbnbs under the Cincinnati Municipal Code is unclear. Typically, Airbnbs do not meet the statutory definition of Hotels, Bed and Breakfast Homes, Bed and Breakfast Inns, or Rooming Houses. Unless a host rents at least six units in the same building, the statutory definition of a Hotel, under Municipal Code § 1401-01-H5, is not satisfied. For those larger hosts that do satisfy the definition, they need to charge and pay the Transient Occupancy Tax, under § 312 of the Municipal Code, or risk 10% late fee or 25% penalty for failure to pay as a result of fraud.
For Airbnbs hosts that rent out a room or rooms in a unit, while occupying the remainder of the unit themselves, Bed and Breakfast Home may be applicable. Municipal Code § 1401-01-B3 of the Municipal Code requires that: 1) the host occupies the unit; 2) there are fewer than three guest rooms; 3) breakfast accommodations are provided; 4) the stay is for no more than four consecutive weeks; and 5) kitchen facilities are not provided for guests. Owner-occupied Airbnbs may fall under this definition, if they provide breakfast to their guests and do not provide guests with access to a kitchen. If a host meets the requirements of a Bed and Breakfast Home, then the host must obtain a license from the city, under § 855-5, which provides that if a host operates without a license, a fine of $500 per day of operation without a license is levied.
Airbnbs that rent multiple rooms in the same unit may be Rooming Houses. § 855-1-R1 of the Municipal Code requires that a Rooming House offer for rent occupancy for at least three roomers or at least three rooms for rent. However, it excludes “dwelling units” and any dwelling in which one or two rooms are rented out by the occupants of the units. § 1401-06-D16 defines dwelling unit as “one or more rooms with a single kitchen designed for occupancy by one family for living and sleeping purposes.” The exclusion of dwelling units seems to exclude Airbnbs that offer an entire unit for rent, even if it sleeps three or more, because such a unit is a dwelling unit. The second exclusion prohibits circumstances where the host occupies the unit and then rents out one or two rooms, which seems to exclude host-occupied Airbnbs. Seemingly, the only Airbnbs that would qualify as Rooming Houses are non-host occupied units, which separately rent out at least three rooms with multiple kitchens within the unit to different guests simultaneously. Those units that do qualify must also obtain a license from the city pursuant to § 855-5.
Airbnbs that the host does not simultaneously occupy may be Bed and Breakfast Inns. A Bed and Breakfast Inn, pursuant to § 1401-01-B4 of the Municipal Code, provides: 1) lodging accommodation; 2) meal accommodations; 3) to no more than five guest rooms; 4) for no more than four weeks of consecutive stay; and 5) does not provide kitchen facilities to guests. There is no lower limit on the number of guest rooms provided, so the rental of an entire single unit is acceptable. But, it seems unlikely that few, if any Airbnbs, will satisfy the other requirements because this requires the host of the Airbnb to prepare food in the unit, while simultaneously not providing kitchen facilities. For any unit, that does satisfy the requirements, licensing with the city pursuant to § 855-5 is required.
The vast majority of Airbnbs, particularly those in OTR, do not fit any of the categories in the Municipal Code. This lack of legislation or regulation means that Airbnb hosts do not need to pay the Municipal Occupancy Tax required of hotels, obtain a license under § 855-5 or be subject to the substantial penalties for failure to pay the Occupancy Tax. However, the lack of a clear category for Airbnbs presents potential issues in terms of zoning, business regulation and taxation. Bed and Breakfasts, both Inns and Homes, are permitted to operate in Commercial Districts and in Residential Multi-Family Districts, the most common types of zoning in OTR. Without regulation, it is unclear how Airbnbs will be treated due to the absence of a definite legal category.
Airbnbs do not create a landlord-tenant relationship under the laws of Ohio or the Cincinnati Municipal Code. Therefore, current language in condo ownership documents as to limitations on leasing do not affect the use of units as Airbnbs, which means that permitting or prohibiting them in developments will likely depend on express provisions in ownership documents. Outside of standard critiques leveled against Airbnbs as reasons for their prohibition in developments, Airbnbs do not have a clear legal status under the Cincinnati Municipal Code. Such legal ambiguity could result in future liability to hosts.
[i] Hannah McCartney, These are Cincinnati’s most-wished-for Airbnb rentals, Cin. Bus. Courier (Oct. 26, 2017, 12:00 PM), https://www.bizjournals.com/cincinnati/news/2017/10/26/these-are-cincinnatis-most-wished-for-airbnb.html (last visited Feb. 15, 2018).
[ii] Colin Woodward, How Cincinnati Salvaged the Nation’s Most Dangerous Neighborhood, Politico (June 16, 2016), https://www.politico.com/magazine/story/2016/06/what-works-cincinnati-ohio-over-the-rhine-crime-neighborhood-turnaround-city-urban-revitalization-213969 (last visited February 15, 2018).