5 ms·

The contract outlines the penalty (or cost) for unapproved guests or sublets. If the lessee is willing to pay the penalty, what's the problem? If the penalty is

by imgabe 11y ago

The contract outlines the penalty (or cost) for unapproved guests or sublets. If the lessee is willing to pay the penalty, what's the problem? If the penalty isn't sufficient to deter the unwanted behavior, increase it until it is. If we have an agreement that I give you $5000 or you can punch me in the face, and I choose to take the punch in the face, that's not breaking the agreement. You didn't get "cheated" out of $5000. I chose an option that was specifically outlined in the agreement.

JonFish85 11y ago
So clearly you don't have a problem with a company intentionally breaking rules because they stand to profit, regardless of any fine they may have to pay?
- imgabe 11y ago
  A contract is not a rule, it is an agreement between two parties. A good contract spells out the penalties for what happens when one party doesn't adhere to the terms. It's up to both parties to make sure those penalties are sufficient to make themselves whole in the case that happens. If at any time the penalties are less than the cost of adhering to the terms of the contract, it's only rational to break the contract and pay the penalty. Let's say you had an employment contract where you get paid $100k/year, but if you leave before 5 years, you have to pay a $50k penalty. 3 years in, you get a job offer for $500k/year. Are you going to stick to the contract because you need to obey "the rules", or are you going to pay $50k and take the much higher paying job?
  - TeMPOraL 11y ago
    > If at any time the penalties are less than the cost of adhering to the terms of the contract, it's only rational to break the contract and pay the penalty. The rules that are broken here aren't in the contract, they're about the contract. So if it's rational (in economical sense) for me to break a contract, then I should break it[0] and then pay the penalty. The problem with people subletting on AirBnB is that they don't show up at their landlord's doors immediately after the guest leaves, ready to pay the price. They just keep cheating the other side until they get caught. In your employment example, it would be as if I worked remotely at the first job, then joined the second company and didn't tell my former employer - just logged hours for doing nothing, hoping he doesn't notice (maybe it's a big company). [0] - that how it may work in Serious Business, but contracts between regular people are usually entered with an assumption that both sides want to follow them through; to break them on purpose based on cost-benefit calculation means one is an asshole.
  - alsetmusic 11y ago
    > Let's say you had an employment contract where you get paid $100k/year, but if you leave before 5 years, you have to pay a $50k penalty. 3 years in, you get a job offer for $500k/year. Are you going to stick to the contract because you need to obey "the rules", or are you going to pay $50k and take the much higher paying job? What does that have to do with this? Someone who rents a property with the intent of subletting through Airbnb is not paying a penalty to break the contract so that they can enter a new one with different terms. They are still bound by the original contract. I'm not talking about the details of the terms, simply pointing out that your analogy of leaving one job for another does not apply.
    - imgabe 11y ago
      My point is it's not a moral issue, it's an economic transaction. Both parties are free to negotiate the terms. The landlord often has significantly more leverage to do so.
      - TeMPOraL 11y ago
        But herein lies the problem. By treating a civil contract as a purely economical transaction you just robbed us of the best advantages of being humans rather than mindless systems. Or look at it this way: everyone on this site knows that the basic problem with programming is that machines execute what you wrote to the letter, and do not know about what you meant. That leads to bugs, because our descriptions rarely capture our intentions precisely enough. But we, as humans, most of the time know the intention of the instructions we're receiving. Every time we force something to be evaluated formally instead of socially, we're robbing ourselves of the increased efficiency our minds give us. It's a trade-off, and it's often worth it - but it should be done only when we gain something from it. In the AirBnB subletting situation we gain nothing - contracts gets more complicated to cover new abuse vector, and end result is the same except we've just lost flexibility and efficiency by codifying another part of our interactions.
        imgabe 11y ago
        We obviously gain something. We gain an increased supply of rooms available for short-term use on AirBnB (and corresponding lower prices). The landlord gains a tenant. The tenant gains the margin between the rent and the AirBnB fees, in exchange for the risk of vacancy, the work of listing the property and managing the guests, and the additional risk of being discovered and having the lease terminated. The tenant has a stronger incentive than usual to maintain the apartment as impeccably as possible, pay rent promptly in full, and screen AirBnB guests to minimize risks, since the lease can be cancelled with little warning if they're discovered. There's clearly a demand in the market for AirBnB. The landlord could easily cut out the middleman and list the property there themselves if they wanted to. If they want to write lease to cut themselves a portion of the profits while letting the tenant do all the work of managing the AirBnB guests, there are probably people who would take them up on that offer as well. Yes, contracts might get some extra words, but they're not written in stone. We can read the words and negotiate to change them to our liking for the mutual benefit of both parties.
  - dragonwriter 11y ago
    > A contract is not a rule, it is an agreement between two parties. A good contract spells out the penalties for what happens when one party doesn't adhere to the terms. Actually, contract law spells out the penalties for what happens when one party doesn't adhere to the terms; a contract may opt to do so for certain cases, but doing so doesn't make it a "good contract", there are costs and benefits to doing so, and whether it makes sense to do so depends on the context of the contract, the types of violations being addressed, whether the parties envision continuing the relationship after the violations addressed, and other factors.
brk 11y ago
This is correct, however you also have to look at the spirit of the agreement overall. In cases like this, penalty amounts are often selected to be of an amount that discourages unreasonable behavior, enforceable (and by extension payable by the other party), and with the idea that it would be an exception event, not a continuous event. To use a sort of residential analogy, if you have a wild party and your carpets get stained from spilled drinks and dirty shoes, you can probably give them a good cleaning and they'll be almost like before, no noticeable wear unless you really look for it. Overall, the carpet would still be good for its expected lifetime of say 10 years. But, do that every weekend and the carpet will need to be replaced within a year. Property rental agreements (and prices) have all kinds of assumptions in them. If the agreement is based on the idea of one tenant moving in, staying for a bit, maybe having family over during the holidays, and then moving out it would be structured a lot differently than a tenant who wants to be a junior landlord.
- imgabe 11y ago
  I'm sure most pricing has assumptions built into it that can be invalidated when the market changes. When that happens, it's easier to change your assumptions than to try to change the market.
breischl 11y ago
Legally you may be right, but it's still dishonest to enter into an agreement with the intention of immediately breaking it. It might come back to bite him, too. If any of those landlords report him to a monitoring service, he'll have a hard time renting anything ever again. As well he should. But if you really think it's OK, let's make that face-punching deal. Just don't be too surprised when I show up wearing spiked brass knuckles - you didn't say anything about that in the contract, so it's OK, right?
TeMPOraL 11y ago
The problem isn't choosing to break a contract and pay the penalty - the problem is that people break contracts and conveniently forget about the second part, hoping that the other party won't notice and ask for compensation.
- imgabe 11y ago
  If they don't even notice, what do they need compensation for? They're satisfied that they've gotten what they wanted out of the contract.
  - TeMPOraL 11y ago
    That's not how contracts works. You're bound to both sides of the deal, if you try to weasel out, you're a cheater.
    - imgabe 11y ago
      Ultimately, what most landlords care about is: 1. the rent gets paid on time 2. the property is kept in good condition If those two things are satisfied, they have little incentive to go finding reasons about why their tenant who always pays the rent and keeps up the property should be kicked out. The other terms of the contract are just proxies for achieving those two outcomes. If the tenant delivers on both, they haven't "weaseled out" of anything.
      - TeMPOraL 11y ago
        That's just rationalizing breaking of a contract. You don't have a right or reason to assume that landlord cares only about 1. and 2. Also, the biggest issue (after 2.) with AirBnB subletting is that in many cases, it affects other tenants and/or neighbourhood - in which case you're dumping an externality on innocent third parties.
        imgabe 11y ago
        As long as an economic incentive exists, people are going to take advantage of it. Wagging your finger and moralizing is only going to convince people who probably weren't going to do it anyway. If you want to change behavior, you have to change the incentives. Last time I checked, AirBnB was a publicly accessible website. It should be trivial for a landlord to see if their property is on there and enforce the penalties if it is. Another comment mentioned that landlords are inserting language into leases that they get the profits from AirBnB if it's used. That seems like a reasonable response to me.
mfringel 11y ago
"Every contract or duty within the Uniform Commercial Code imposes an obligation of good faith in its performance and enforcement." US UCC 1-304. Every contract starts with the assumption that both parties are inclined to perform as stated. Viewing a contract as "putting a price tag on bad faith" is a very good way to get hit with treble damages in court.
- imgabe 11y ago
  Then the landlords should have no problem suing and receiving treble damages, rendering this practice unprofitable.
  - 7Figures2Commas 11y ago
    The law doesn't hand out treble damages like candy. Please explain the legal basis under which landlords are going to magically receive these for civil breach of contract claims.
    - imgabe 11y ago
      The comment above me literally cited the relevant piece of the code under which treble damages could be pursued. If leasing an apartment is as reprehensible as so many people here seem to think, then landlords should have no trouble convincing a judge that the person doing so entered into a contract in bad faith.
      - 7Figures2Commas 11y ago
        > The comment above me literally cited the relevant piece of the code under which treble damages could be pursued. I see. So you're not a real lawyer, you just pretend to be one on HN.
        imgabe 11y ago
        Not once did I ever claim to be a lawyer.
7Figures2Commas 11y ago
> If the lessee is willing to pay the penalty, what's the problem? If the penalty isn't sufficient to deter the unwanted behavior, increase it until it is. You are ignoring the practical realities of landlord-tenant relationships. Let's say you rent an apartment from me and I add a liquidated damages clause to the lease. It states that you will owe me $50,000 if you are found to be subletting your apartment using a service like AirBnB. Unless you have $50,000, the liquidated damages clause is effectively worthless and you can easily choose to break the lease ("my landlord can't get blood from a stone"). If I increase the liquidated damages to $100,000, the deterrent effect likely doesn't increase.
fra 11y ago
In your sad, twisted world, only the lawyers win. Rental agreements have already ballooned into legal tomes no first-time lessee could ever understand. If they now have to spell out penalty for a variety of different breaches, they will become much worse (why not a single, higher penalty? That will get abused to extort tenants who commit minor violations...) IMO it should not be about contracts. You should enter agreements in good faith and there should be social consequences for doing otherwise (reputation ruined, ... etc.). Be excellent to each other.
- TeMPOraL 11y ago
  > IMO it should not be about contracts. You should enter agreements in good faith and there should be social consequences for doing otherwise (reputation ruined, ... etc.). Be excellent to each other. Exactly this! The consequence of letting people abuse trust on massive scale is more complicated contracts, which is a worse outcome than if everyone just agreed to act in good faith.
  - dragonwriter 11y ago
    Yes, things would be much simpler if our societies were composed of angels rather than humans.
    - TeMPOraL 11y ago
      That we aren't angels doesn't mean we should give up on striving to be them though.
      - dragonwriter 11y ago
        It does, OTOH, mean that it is irrational to draft business contracts on the assumption that your counterparty is going to conduct themselves as one, absent some extraordinary evidence that the particular circumstances are unusual in that way.
- imgabe 11y ago
  By all means, if you want to depend on social consequences to enforce business contracts, you are welcome to do so. Some people are able to operate that way in areas where there are limited players and everyone's reputation is well known or easily discoverable. Companies like Uber and AirBnB with reviews and ratings systems actually bring us much closer to this being a reality. If social consequences were sufficient, we wouldn't have invented this whole legal system in the first place.
usrusr 11y ago
> If the lessee is willing to pay the penalty, what's the problem? Do they happily turn themselves in, or are they relying on a yet to be established, landlord sponsored snitch industry providing state of the art tenant surveillance services to smoothen the transaction?
dragonwriter 11y ago
> If we have an agreement that I give you $5000 or you can punch me in the face, and I choose to take the punch in the face, that's not breaking the agreement. There is a difference between an agreement that grants a choice, and an agreement which includes specified obligations and a specified predefined payments due for particular breaches. They are not equivalent, and the breaching the obligation in favor of accepting the preset consequences in the latter case is still breaking the agreement. And, anyway, the security deposit discussed upthread is neither a predefined payment for breach nor an option in lieu of performing some other obligation in most rental contracts, its a deposit in advance against potential liability for damages owed by the tenant to the landlord; so your response seems to be a non-sequitur on several levels.
- imgabe 11y ago
  If it's defined as the payment for damages owed, then it is de facto a choice to either not do the damages, or to pay for them. There's always a choice. People aren't automatons. We can't pull strings and make them do what we want. All we can do is offer incentives and penalties. If those aren't aligned in such a way to produce the behaviors we want, then they need to be adjusted. Don't get mad at people for responding in a logical way to the incentives that exist. Fix the incentives or deal with it. I'm curious how you think people adhere to contracts then. Mind control? Magic? How else could they possibly do it except that they choose to?

by imgabe 11y ago

JonFish85 11y ago

So clearly you don't have a problem with a company intentionally breaking rules because they stand to profit, regardless of any fine they may have to pay?

imgabe 11y ago
A contract is not a rule, it is an agreement between two parties. A good contract spells out the penalties for what happens when one party doesn't adhere to the terms. It's up to both parties to make sure those penalties are sufficient to make themselves whole in the case that happens. If at any time the penalties are less than the cost of adhering to the terms of the contract, it's only rational to break the contract and pay the penalty. Let's say you had an employment contract where you get paid $100k/year, but if you leave before 5 years, you have to pay a $50k penalty. 3 years in, you get a job offer for $500k/year. Are you going to stick to the contract because you need to obey "the rules", or are you going to pay $50k and take the much higher paying job?
- TeMPOraL 11y ago
  > If at any time the penalties are less than the cost of adhering to the terms of the contract, it's only rational to break the contract and pay the penalty. The rules that are broken here aren't in the contract, they're about the contract. So if it's rational (in economical sense) for me to break a contract, then I should break it[0] and then pay the penalty. The problem with people subletting on AirBnB is that they don't show up at their landlord's doors immediately after the guest leaves, ready to pay the price. They just keep cheating the other side until they get caught. In your employment example, it would be as if I worked remotely at the first job, then joined the second company and didn't tell my former employer - just logged hours for doing nothing, hoping he doesn't notice (maybe it's a big company). [0] - that how it may work in Serious Business, but contracts between regular people are usually entered with an assumption that both sides want to follow them through; to break them on purpose based on cost-benefit calculation means one is an asshole.
- alsetmusic 11y ago
  > Let's say you had an employment contract where you get paid $100k/year, but if you leave before 5 years, you have to pay a $50k penalty. 3 years in, you get a job offer for $500k/year. Are you going to stick to the contract because you need to obey "the rules", or are you going to pay $50k and take the much higher paying job? What does that have to do with this? Someone who rents a property with the intent of subletting through Airbnb is not paying a penalty to break the contract so that they can enter a new one with different terms. They are still bound by the original contract. I'm not talking about the details of the terms, simply pointing out that your analogy of leaving one job for another does not apply.
  - imgabe 11y ago
    My point is it's not a moral issue, it's an economic transaction. Both parties are free to negotiate the terms. The landlord often has significantly more leverage to do so.
    - TeMPOraL 11y ago
      But herein lies the problem. By treating a civil contract as a purely economical transaction you just robbed us of the best advantages of being humans rather than mindless systems. Or look at it this way: everyone on this site knows that the basic problem with programming is that machines execute what you wrote to the letter, and do not know about what you meant. That leads to bugs, because our descriptions rarely capture our intentions precisely enough. But we, as humans, most of the time know the intention of the instructions we're receiving. Every time we force something to be evaluated formally instead of socially, we're robbing ourselves of the increased efficiency our minds give us. It's a trade-off, and it's often worth it - but it should be done only when we gain something from it. In the AirBnB subletting situation we gain nothing - contracts gets more complicated to cover new abuse vector, and end result is the same except we've just lost flexibility and efficiency by codifying another part of our interactions.
      - imgabe 11y ago
        We obviously gain something. We gain an increased supply of rooms available for short-term use on AirBnB (and corresponding lower prices). The landlord gains a tenant. The tenant gains the margin between the rent and the AirBnB fees, in exchange for the risk of vacancy, the work of listing the property and managing the guests, and the additional risk of being discovered and having the lease terminated. The tenant has a stronger incentive than usual to maintain the apartment as impeccably as possible, pay rent promptly in full, and screen AirBnB guests to minimize risks, since the lease can be cancelled with little warning if they're discovered. There's clearly a demand in the market for AirBnB. The landlord could easily cut out the middleman and list the property there themselves if they wanted to. If they want to write lease to cut themselves a portion of the profits while letting the tenant do all the work of managing the AirBnB guests, there are probably people who would take them up on that offer as well. Yes, contracts might get some extra words, but they're not written in stone. We can read the words and negotiate to change them to our liking for the mutual benefit of both parties.
- dragonwriter 11y ago
  > A contract is not a rule, it is an agreement between two parties. A good contract spells out the penalties for what happens when one party doesn't adhere to the terms. Actually, contract law spells out the penalties for what happens when one party doesn't adhere to the terms; a contract may opt to do so for certain cases, but doing so doesn't make it a "good contract", there are costs and benefits to doing so, and whether it makes sense to do so depends on the context of the contract, the types of violations being addressed, whether the parties envision continuing the relationship after the violations addressed, and other factors.

brk 11y ago

This is correct, however you also have to look at the spirit of the agreement overall. In cases like this, penalty amounts are often selected to be of an amount that discourages unreasonable behavior, enforceable (and by extension payable by the other party), and with the idea that it would be an exception event, not a continuous event. To use a sort of residential analogy, if you have a wild party and your carpets get stained from spilled drinks and dirty shoes, you can probably give them a good cleaning and they'll be almost like before, no noticeable wear unless you really look for it. Overall, the carpet would still be good for its expected lifetime of say 10 years. But, do that every weekend and the carpet will need to be replaced within a year. Property rental agreements (and prices) have all kinds of assumptions in them. If the agreement is based on the idea of one tenant moving in, staying for a bit, maybe having family over during the holidays, and then moving out it would be structured a lot differently than a tenant who wants to be a junior landlord.

imgabe 11y ago
I'm sure most pricing has assumptions built into it that can be invalidated when the market changes. When that happens, it's easier to change your assumptions than to try to change the market.

breischl 11y ago

Legally you may be right, but it's still dishonest to enter into an agreement with the intention of immediately breaking it. It might come back to bite him, too. If any of those landlords report him to a monitoring service, he'll have a hard time renting anything ever again. As well he should. But if you really think it's OK, let's make that face-punching deal. Just don't be too surprised when I show up wearing spiked brass knuckles - you didn't say anything about that in the contract, so it's OK, right?

TeMPOraL 11y ago

The problem isn't choosing to break a contract and pay the penalty - the problem is that people break contracts and conveniently forget about the second part, hoping that the other party won't notice and ask for compensation.

imgabe 11y ago
If they don't even notice, what do they need compensation for? They're satisfied that they've gotten what they wanted out of the contract.
- TeMPOraL 11y ago
  That's not how contracts works. You're bound to both sides of the deal, if you try to weasel out, you're a cheater.
  - imgabe 11y ago
    Ultimately, what most landlords care about is: 1. the rent gets paid on time 2. the property is kept in good condition If those two things are satisfied, they have little incentive to go finding reasons about why their tenant who always pays the rent and keeps up the property should be kicked out. The other terms of the contract are just proxies for achieving those two outcomes. If the tenant delivers on both, they haven't "weaseled out" of anything.
    - TeMPOraL 11y ago
      That's just rationalizing breaking of a contract. You don't have a right or reason to assume that landlord cares only about 1. and 2. Also, the biggest issue (after 2.) with AirBnB subletting is that in many cases, it affects other tenants and/or neighbourhood - in which case you're dumping an externality on innocent third parties.
      - imgabe 11y ago
        As long as an economic incentive exists, people are going to take advantage of it. Wagging your finger and moralizing is only going to convince people who probably weren't going to do it anyway. If you want to change behavior, you have to change the incentives. Last time I checked, AirBnB was a publicly accessible website. It should be trivial for a landlord to see if their property is on there and enforce the penalties if it is. Another comment mentioned that landlords are inserting language into leases that they get the profits from AirBnB if it's used. That seems like a reasonable response to me.

mfringel 11y ago

"Every contract or duty within the Uniform Commercial Code imposes an obligation of good faith in its performance and enforcement." US UCC 1-304. Every contract starts with the assumption that both parties are inclined to perform as stated. Viewing a contract as "putting a price tag on bad faith" is a very good way to get hit with treble damages in court.

imgabe 11y ago
Then the landlords should have no problem suing and receiving treble damages, rendering this practice unprofitable.
- 7Figures2Commas 11y ago
  The law doesn't hand out treble damages like candy. Please explain the legal basis under which landlords are going to magically receive these for civil breach of contract claims.
  - imgabe 11y ago
    The comment above me literally cited the relevant piece of the code under which treble damages could be pursued. If leasing an apartment is as reprehensible as so many people here seem to think, then landlords should have no trouble convincing a judge that the person doing so entered into a contract in bad faith.
    - 7Figures2Commas 11y ago
      > The comment above me literally cited the relevant piece of the code under which treble damages could be pursued. I see. So you're not a real lawyer, you just pretend to be one on HN.
      - imgabe 11y ago
        Not once did I ever claim to be a lawyer.

7Figures2Commas 11y ago

> If the lessee is willing to pay the penalty, what's the problem? If the penalty isn't sufficient to deter the unwanted behavior, increase it until it is. You are ignoring the practical realities of landlord-tenant relationships. Let's say you rent an apartment from me and I add a liquidated damages clause to the lease. It states that you will owe me $50,000 if you are found to be subletting your apartment using a service like AirBnB. Unless you have $50,000, the liquidated damages clause is effectively worthless and you can easily choose to break the lease ("my landlord can't get blood from a stone"). If I increase the liquidated damages to $100,000, the deterrent effect likely doesn't increase.

fra 11y ago

In your sad, twisted world, only the lawyers win. Rental agreements have already ballooned into legal tomes no first-time lessee could ever understand. If they now have to spell out penalty for a variety of different breaches, they will become much worse (why not a single, higher penalty? That will get abused to extort tenants who commit minor violations...) IMO it should not be about contracts. You should enter agreements in good faith and there should be social consequences for doing otherwise (reputation ruined, ... etc.). Be excellent to each other.

TeMPOraL 11y ago
> IMO it should not be about contracts. You should enter agreements in good faith and there should be social consequences for doing otherwise (reputation ruined, ... etc.). Be excellent to each other. Exactly this! The consequence of letting people abuse trust on massive scale is more complicated contracts, which is a worse outcome than if everyone just agreed to act in good faith.
- dragonwriter 11y ago
  Yes, things would be much simpler if our societies were composed of angels rather than humans.
  - TeMPOraL 11y ago
    That we aren't angels doesn't mean we should give up on striving to be them though.
    - dragonwriter 11y ago
      It does, OTOH, mean that it is irrational to draft business contracts on the assumption that your counterparty is going to conduct themselves as one, absent some extraordinary evidence that the particular circumstances are unusual in that way.
imgabe 11y ago
By all means, if you want to depend on social consequences to enforce business contracts, you are welcome to do so. Some people are able to operate that way in areas where there are limited players and everyone's reputation is well known or easily discoverable. Companies like Uber and AirBnB with reviews and ratings systems actually bring us much closer to this being a reality. If social consequences were sufficient, we wouldn't have invented this whole legal system in the first place.

usrusr 11y ago

> If the lessee is willing to pay the penalty, what's the problem? Do they happily turn themselves in, or are they relying on a yet to be established, landlord sponsored snitch industry providing state of the art tenant surveillance services to smoothen the transaction?

dragonwriter 11y ago

> If we have an agreement that I give you $5000 or you can punch me in the face, and I choose to take the punch in the face, that's not breaking the agreement. There is a difference between an agreement that grants a choice, and an agreement which includes specified obligations and a specified predefined payments due for particular breaches. They are not equivalent, and the breaching the obligation in favor of accepting the preset consequences in the latter case is still breaking the agreement. And, anyway, the security deposit discussed upthread is neither a predefined payment for breach nor an option in lieu of performing some other obligation in most rental contracts, its a deposit in advance against potential liability for damages owed by the tenant to the landlord; so your response seems to be a non-sequitur on several levels.

imgabe 11y ago
If it's defined as the payment for damages owed, then it is de facto a choice to either not do the damages, or to pay for them. There's always a choice. People aren't automatons. We can't pull strings and make them do what we want. All we can do is offer incentives and penalties. If those aren't aligned in such a way to produce the behaviors we want, then they need to be adjusted. Don't get mad at people for responding in a logical way to the incentives that exist. Fix the incentives or deal with it. I'm curious how you think people adhere to contracts then. Mind control? Magic? How else could they possibly do it except that they choose to?