airbnb unilaterally, and in violation of hosts cancellation policies, refunded guests who booked reservations between the dates March 14th and May 31st. Hosts have a viable breach of contract case against airbnb: airbnb recently relied on the “extenuating circumstances clause” of its standard terms / agreement with property owners and guests to justify its first round of guest refunds due to Covid-19 / coronavirus. But does a pandemic fall within the language of the extenuating circumstances clause?

As you will read below, airbnb may be in breach of its agreement and terms of service with hosts as a result of providing refunds. Stated another way, guests were arguably NOT entitled to refunds under the rental agreement and terms standard to airbnb’s policies. airbnb could be liable for money damages to hosts under its arbitration clause, or as a possible class action if that waiver is determined a violation of public policy.

The airbnb terms adjusted risk between all parties

While both guests and hosts are suffering under this pandemic known as covid-19, the terms of service agreement clickwrap agreement that all parties – airbnb, hosts and guests – agreed. airbnb included numerous extenuating circumstances such as an endemic, but did not include an epidemic / pandemic in adjusting the risk between host and guest. We can also infer this since airbnb appears to have covered-up its recent change in the policy to specifically include a pandemic which might apply to guests booking after April 1, 2020 or whenever it was put in place. The risk of pandemic which would limit guests refund rights is part of the terms of survive. Those terms should be followed. The current covid-19 refund policy seems to conclude that the hosts policy at the time of reservation controls and that the pandemic is not covered under its policy.

What rights do hosts have to recoup refunds unilaterally provided to guests?

We will address legal rights, liability issues, possible claims, where hosts can sue airbnb, lawsuits and potentially class actions against airbnb as result of its decision to refund guests under the extenuating circumstances clause in future articles. The purpose of this article is to help airbnb property hosts / owners understand the legal language in your terms of service agreement with airbnb so you can understand your legal rights. Here are some highlights set forth in more detail in the article below:

• airbnb changed its extenuating circumstances policy after the coronavirus outbreak in the United States, and seemingly tried to hide all evidence of the old airbnb refund policy which governs nearly all reservations prior to early March, 2020.
• The new airbnb extenuating circumstances policy allows airbnb to override the hosts cancellation policy in extenuating circumstances which specifically lists epidemic. Covid-19 meets the definition of epidemic and pandemic.
• The now hidden policy in affect for nearly all issues involving refunds to travelers by airbnb, overriding the hosts cancellation policy did not identify epidemic or pandemic as a reason for refund. That policy used endemic which is a distinct epidemiological / medical term. Covid-19 is not an endemic.
• airbnb’s general terms of service paragraph 9.5 provide airbnb certain rights to refund guests under its extenuating circumstances policy and also in three other instances as set forth below. That clause may or may not be enforceable as illusory or inconsistent with the more detailed provisions about refunds. Regardless, airbnb did not rely on any other provision except its extenuating circumstances policy, referenced in paragraph 9.5, when it refunded guests.

What does your contract / terms with airbnb say?

What does airbnb say your contract say? Guests (renters) and Hosts (property owners) agree to standard rental and software platform terms when rentals occur on the airbnb platform. While there is more to the agreement than will be analyzed here such as what terms apply to which reservations given the recent change of policy) , one portion of the rental policy governs refunds as a result of an emergency or unavoidable circumstances. Essentially, the rental terms allow renters to cancel their reservation without penalty under limited circumstances, such as when a rental is not habitable. For other circumstances, airbnb is allowed to override the rental terms and refund policy selected by the host (read below for the agreed cancellation policy), and a agreed to by the guest, airbnb may allow for a refund if in its discretion it decides to do so because of extenuating circumstances and the traveler can establish that they are ‘directly affected’.

One such extenuating circumstance is an ENDEMIC. Note the spelling ‘e-n-d-e-m-i-c.’ An EPIDEMIC – note the spelling – (or pandemic) is not listed as an exceptional circumstance under airbnbs terms. Endemic refers to the constant presence and/or usual prevalence of a disease in a geographic population or particular population or demographic. Endemics are defined by characteristics of a particular population (race, gender, age), environment, or region. Examples of endemic diseases include  chicken pox that occurs at a predictable rate among young school children in the United States and malaria defined by region in some areas of Africa.

So what is and Endemic Disease?

Suffice it to say that coronavirus is not and endemic disease. Endemic refers to the constant presence and/or usual prevalence of a disease in a geographic population. Things like Malaria are endemic disease.

Contract and endemic with and epidemic or pandemic. An Epidemic refers to a sudden increase in the number of cases of a disease above what is normally expected. A Pandemic refers to an epidemic that has spread over several countries or continents, usually affecting a large number of people.

Clearly Covid-19 was a epidemic in China which turned into a pandemic across the world and the United States.

Why did airbnb change the policy?

We noticed the change in policy sometime between March 28 and April 2, 2020. Our attorneys had already identified the possible breach of contract issue for clients. This article at VRM Intel is one of the few web pages which more recently the change in airbnb’s refund policy, although the article fails to analyze the legal implications. The following factors suggest that airbnb knew or has become aware that they were providing refunds to guests was a potential breach of contract and liability issue:

• Not only did airbnb change the policy, it apparently did nothing to advise hosts, guest, the media or anyone else what words were changed or why.
• The old pages on its website describing the endemic policy, or referencing the policy using the word endemic, were removed from the airbnb website.
• An endemic is clearly not an epidemic or a pandemic. Any business or contract lawyer would have advised airbnb that they were potentially breaching the policy and terms with hosts by unilaterally issuing refunds to renters.
• Airbnb later offered some compensation possibilities for hosts who had refunds forcibly applied and provided to guests.

It is also worth noting that airbnb seems to be arbitrarily changing its terms without providing the required notice. airbnb may have breached its own terms os service in revising its extenuating circumstances policy. The terms of use for the platform provide:

3. Modification of these Terms

Airbnb reserves the right to modify these Terms at any time in accordance with this provision. If we make changes to these Terms, we will post the revised Terms on the Airbnb Platform and update the “Last Updated” date at the top of these Terms. We will also provide you with notice of the modifications by email at least thirty (30) days before the date they become effective. If you disagree with the revised Terms, you may terminate this Agreement with immediate effect. We will inform you about your right to terminate the Agreement in the notification email. If you do not terminate your Agreement before the date the revised Terms become effective, your continued access to or use of the Airbnb Platform will constitute acceptance of the revised Terms.

Every host and traveler agree to airbnb’s general terms of service when they sign up. Those terms also address refunds. Paragraph 9.5 provides:

In certain circumstances, Airbnb may decide, in its sole discretion, that it is necessary to cancel a pending or confirmed booking and initiate corresponding refunds and payouts. This may be for reasons set forth in Airbnb’s Extenuating Circumstances Policy or (i) where Airbnb believes in good faith, while taking the legitimate interests of both parties into account, this is necessary to avoid significant harm to Airbnb, other Members, third parties or property, or (ii) for any of the reasons set out in these Terms.

It is unclear what airbnb did to decide to refund guests. However, hosts will be entitled to argue that:

1. airbnb only relied on the exceptional circumstances clause, not any other provision of paragraph 9.
2. Coronavirus did not present a significant harm to Airbnb;
3. Coronavirus, at the time of refunds or as applied universally in all situations, did present a significant harm to other Members, third parties or property.
4. There are not ‘other reasons’ set out in these Terms which would apply. In fact the policy that does apply would not have provided a refund.

The second contingency is the one airbnb would likely argue. Putting aside the fact that airbnb arguably did not include pandemic in its list of exceptional circumstances, travel was only limited in a few states at the time of the refund. Certainly, moving forward, it is unclear how travel will be restricted, and if guests will still be able to travel of car or plane to their destinations. The clause could also be considered illusory or unenforceable for other reasons if argued broadly by airbnb. What is a mystery is why airbnb would go through the trouble of providing detailed reasons for refunds under its various policies, including the extenuating circumstances policy, if it indeed at the same time to be able to refund whenever it wanted. It i likely airbnb already believes that a broad interpretation of paragraph 9 would be unenforceable .

Did airbnb have the right to change its policy on coronavirus?

While our lawyers are still analyzing this matter, we are unaware of any notice given to airbnb hosts or guests concerning its revised language for what would constitute extenuating circumstances. Here is what the airbnb terms of services say as of this post date. We are still trying to determine what the language was prior to covid-19.

3. Modification of these Terms

Airbnb reserves the right to modify these Terms at any time in accordance with this provision. If we make changes to these Terms, we will post the revised Terms on the Airbnb Platform and update the “Last Updated” date at the top of these Terms. We will also provide you with notice of the modifications by email at least thirty (30) days before the date they become effective. If you disagree with the revised Terms, you may terminate this Agreement with immediate effect. We will inform you about your right to terminate the Agreement in the notification email. If you do not terminate your Agreement before the date the revised Terms become effective, your continued access to or use of the Airbnb Platform will constitute acceptance of the revised Terms.

Your legal rights to compensation.

If your are a host who had guests refunded who had previously booked stays on the platform with a check-in between March 14th and May 31st under the company’s “extenuating circumstances” policy, regardless of the host’s cancellation preference so long as the booking was made before March 14th, you may have legal rights to receive full, not part, compensation and damages for those refunds. If you are a property owner, property manager or airbnb host, we can help you secure compensation for airbnbs unilateral refund of guests arguably in violation of the terms of service. Contact us for more information about your rights, arbitration provisions, class action waiver and analysis of the relevant law.