Drew Grewal faced fines of nearly half a million dollars because his Miami Beach home was being listed illegally on Airbnb.
In Miami Beach — as in New York, San Diego and many other U.S. cities — short-term rentals of the kind facilitated by Airbnb, VRBO, Tripadvisor and others are strictly limited. Laws, fees and taxes vary regionally, but fines for violations are typically high. In Miami Beach, the fines run at $20,000 for a first violation and rise from there.
When the first notice arrived on Jan. 19, Grewal thought the city of Miami Beach must be mistaken. He hadn't used Airbnb as a host in years. Then it dawned on him that his long-term tenants might be responsible, despite a clause in their lease barring them from using his place for transient occupancy.
An agent checked up on the property for him and confirmed his suspicions. The yard had been trashed, with some patio furniture shredded. Somebody had installed electronic locks — presumably so guests could check in and out.
Grewal expected it may take time to clear his name with the city or to evict his tenants if they didn't fix the situation. But he figured a tech start-up like Airbnb should be able to remove the listing pretty easily.
First, he had to figure out where the listing was, since Airbnb's site doesn't let users search by address to check whether properties they own might be listed illegally. He was looking for a place for four or six adults, since the house has three bedrooms.
He eventually found the unauthorized listing on March 17. It was promising a "Tropical, Eclectic Home...Sleeps 12!!"
That day, he emailed Airbnb's customer service team with a link to the listing in question. He said: "I am the homeowner of this property. This is being rented by tenants I have a year-long contract with without my authorization. It needs to be removed immediately."
Correspondence shared with CNBC shows that Airbnb sent Grewal down a customer service rabbit hole. First, the company sent him an automated response to which he could not reply. Then he placed a couple of urgent calls to Airbnb, spoke with different employees and was promised a response in five to 10 minutes. That didn't happen.
He emailed Airbnb's trust and safety team that night. Nothing.
Five more days passed, correspondence shows, without Airbnb assigning a dedicated person to his case. Then on March 23, Airbnb wrote Grewal with what amounted to a shrug.
A customer service representative wrote: "All users by agreeing to our Terms of Service and when listing a property, agree that they have all rights to the accommodations. I do understand your concern regarding confirming rights to a listing; however, we do not provide any type of legal advice to our users."
Meanwhile, fines from the city of Miami Beach were accruing to Grewal. And he was spending thousands on legal help and travel from Silicon Valley, where he lives today, back to Miami Beach for eviction-related hearings.
Grewal then tapped his personal connections who knew people at Airbnb, and finally on March 28 — 11 days after he first contacted Airbnb — the company informed Grewal that they would reach out to his tenants to inform them of their "obligations."
The illegal listing came down on April 4. Grewal breathed a sigh of relief.
But four days later, travelers showed up at the house ready for a dream vacation to find locked doors and an eviction notice. They called Grewal, whose number was on that notice, to complain.
Grewal sought an explanation from Airbnb but says he got no response.
After he evicted his tenants, Grewal says, he noticed some of his furniture missing, including a distinct purple futon and a white couch. He says he saw both items later appear in two other Miami Beach listings on Airbnb.
"This was just one more kick in the face. Like here – throw some furniture out with all the other money I was spending to fix this," Grewal said.
The listing that had been pulled down from Airbnb appeared with the same photos and copy on a site called Vacayo.com. It turns out that Grewal's tenants, Isabel Berney and Temitope "Truth" Oladapo, were behind that site — Oladapo registered the domain, and Berney lists herself as the company's co-founder on her LinkedIn page.
Vacayo was recently accepted into start-up accelerator 500 Startups. Today Vacayo touts itself as a start-up that "transforms long-term rentals into beautiful, short-term group vacation homes available online." 500 Startups did not respond to requests for comment. After we published this story, Vacayo was no longer listed on 500 Startups' web site.
When contacted by CNBC, Berney and Oladapo declined to comment on the specific incidents reported here, but both said in emails that Vacayo was not involved. However, Grewal provided screenshots, which file data shows were created on April 14, showing his property listed on Vacayo. In fact, the property was listed on Vacayo.com as of Aug. 30, as seen in a screenshot below taken by CNBC.
Oladapo said that he did not install the locks. He also said Grewal asked him to take the furniture, which Grewal disputes.
Grewal's misery has plenty of company. Other homeowners and real estate professionals are facing similar troubles in Miami Beach and beyond.
A long-time real estate investor in Miami Beach, Rula Giosmas, told CNBC she had Airbnb-related problems at two of her four properties there. In the most extreme case, she thought she had rented out her place to a nice couple with a kid moving from New York.
Her tenants in this house? Oladapo and Berney, according to correspondence viewed by CNBC.
(Giosmas did not know the other landlord quoted in this story, Grewal, at the time, but the two have been in touch after Grewal saw his missing purple futon in photos on a listing for her home on Airbnb.)
Within a couple of months, the plumbing at her property had been clogged. Giosmas sent a plumber out, who suggested she may want to drop by for an inspection.
When she did, she says she found the place had been outfitted with smart locks and security cameras, presumably so the tenants could remotely let guests and a maid service in and out of the property — or keep inspectors and landlords locked out.
The place was also crammed with cheap furniture, double beds in every room, and had signs taped up throughout the house admonishing guests not to throw parties or make loud noises, she says.
Knowing that short-term rentals were not allowed in this zone of the city, she checked Miami Beach records for any notices on the property. She found that the city was fining her $20,000 for short-term rental violations there.
Giosmas says she lost more than four months' rent to the tenants who were running what she said was "like a flop house" out of her property. And she lost the faith of her neighbors who complained about raucous guests who left trash strewn around the neighborhood. "They had dozens of bags of trash on the side of the house that hadn't been picked up."
When Giosmas reached out to Airbnb with the listing, the company told her she needed to talk to the hosts (her tenants) to resolve the issue, she says. But within five days, she estimates, the company took the listing down.
Still, she's not pleased. "It's a huge scam," she told CNBC of her experiences with renters illegally subletting their places to travelers. "And the city sticks the owners with the fees. Airbnb, VRBO and the rest of them are like real estate cancer."
She is still working on getting tens of thousands of dollars in fines resolved with Miami Beach. And as with Grewal, payments to lawyers have also cost her thousands.
In a statement provided to CNBC, Airbnb placed the blame on the city.
"The Miami Beach fines are outrageously punitive and simply bad policy. They've initiated significant confusion among the residents and, worst of all, turned neighbors against neighbors. We advocate strongly on behalf of our hosts for fair home sharing regulations in order to ensure that the laws are simple and understandable for everyone."
The problem isn't limited to Miami Beach, however.
In San Diego, two real estate professionals who asked to remain unnamed said homeowners' associations have been plagued by long-term tenants turning houses into "youth hostels" in the area, typically using Airbnb to book guests.
One, in the San Diego suburb of Coronado, told CNBC, "It's a no-margin bed-and-breakfast for them. Homeowners are getting fined by their HOA, and sometimes the city, having to hire property managers and lawyers to deal with it all. They're losing their livelihoods. They rely on rent to pay mortgages. And they didn't count on all these expenses."
Airbnb did not comment on the alleged incidents in San Diego.
Airbnb seems to have the financial resources to address this problem.
A crown jewel among Silicon Valley tech start-ups, the company has raised more than $3 billion in funding from high-profile investors and has a reported valuation of $31 billion.
Travel industry insiders expect the company to go public in 2018, according to PhocusWright's senior vice president of research, Douglas Quinby. He points out, "Airbnb is one of the largest online sellers of accommodations in the world after C-Trip and Expedia."
Giosmas, Grewal and the San Diego real estate professionals contend Airbnb could stem this problem by adding a verification layer, or by "geo-fencing" their site so that it does not allow listings to be generated in zones that make short-term rentals illegal.
This may be harder than it seems. The company has listings in more than 65,000 cities, and faces a conflicting maze of laws and HOA regulations, making it hard to enforce rules by geography.
But other more basic steps might help. Today, for instance, Airbnb does not require people who list properties on their site to verify that they either own that property or have gotten legal permission to rent it out on a short-term basis.
One property manager also recommended that Airbnb give property owners or realtors a way to block listings from being created for their addresses.
Meanwhile, both Grewal and Giosmas tell CNBC the experience led them to sell their houses before they wanted to.
Following months of lost rent, Grewal sold his Miami Beach property and says he accepted a price 10 to 15 percent lower than he would have sought under different circumstances.
Giosmas said she sold off two properties in Miami Beach already and is listing her other two. She lamented, "After 26 years here, I'm trying to get off the beach. I felt like my house was prostituted."