A San Diego Woman Renting Rooms Through Airbnb Was Fined $25K

In the latest legal hurdle confronting modern-age home rentals, a woman in San Diego has been hit with a hefty $25,000 fine for failing to obtain the required permit to operate a bed-and-breakfast out of her home.

But Rachel Smith, a 70-year old retired schoolteacher, contends she never served breakfast to travelers who rented her guest bedroom through Airbnb. This, Smith claims, would technically exempt her from the city's legal definition of a "bed-and-breakfast" and the necessary permit to run one.

Smith bought her five-bedroom historical home in Burlingame, an affluent neighborhood in San Diego, in 2007 after receiving a large inheritance.

In May 2012, Smith decided she had more space than she, her daughter, and granddaughter needed. With her daughter's help, she set up an Airbnb account, advertising her guest room for $80 a night, with access to a kitchen, laundry room, and backyard.

"I bought this house for my family to enjoy," Smith told the San Diego Reader. "But I still had these extra rooms. I thought how fun this house, this community, would be for families to come and enjoy. I guess I'm a dying breed, but I wanted to share this beautiful home with others."

But her neighbors didn't feel the same way. Smith's apparent passion for entertaining friends and travelers reportedly rubbed some of her neighbors the wrong way.

Smith's troubles began in September 2013 when a neighbor contacted a council member to express concern that she was operating a bed-and-breakfast out of her home.

That council member then contacted the deputy director of code enforcement. An investigation was launched into the legal parameters of Smith's Airbnb activities.

In the official complaint that Smith's attorney, Omar Passons, shared with VICE News, the primary concerns cited are "security," "over-crowding in a residential neighborhood," "impact to our privacy," and "impact to our home value."

"We first realized that she was using her home as a business during a Memorial Day holiday," the complainant states in the document, "when we saw four men leaving the property with roller luggage, followed by a new shipment of guests about an hour later. I asked my husband if it was possible she was running a hotel."

The complainant also expresses concern that cigarette smoke was drifting over from Smith's patio and into their children's bedrooms.

Noise pollution is not mentioned in the complaint. "We are waiting for something very bad to happen," the complainant concludes. "We had a wonderful few years in our home before this owner purchased the property and decided that her right to ignore common courtesy … is more important than the welfare of the Burlingame community."

In July 2014, Smith was informed that she had violated the municipal code by running a bed-and-breakfast without the appropriate permits.

The requirement for a conditional use permit or "neighborhood-use permit" allows someone to use their home in a new way — like run a bed and breakfast. The review of an application for a neighborhood-use permit can take almost a year.

Smith agreed to pay San Diego's 13% hotel, or occupancy, tax, retained Passon as her attorney and told the city she would stop renting out her room to Airbnb-ers until the city council clarified "the bed and breakfast statute."

But Smith's neighbors were suspicious, and believed she continued to rent out rooms even after she'd promised to stop hosting travelers. Passons claims their suspicion likely arose from Smith's rich social life.

In February 2015, one of Smith's neighbors told City Hall they had reason to believe that she was still renting out her home to Airbnb — even though records from the home-sharing website would suggest otherwise, says Passons.

"One of the neighbors came over very frantic," Smith told a local news outlet at the time, "saying she just couldn't take it anymore — and would not tell me what happened."

"I am a good neighbor," Smith said in a recent interview with the San Diego Reader. "I have always intended to be a good neighbor. Unfortunately it seems that gossip and subterfuge and tattling to city officials is more 'neighborly' where I live."

"The real issue," Passons says, "is an understandable question of policy. Some people believe that none of this should be happening in residential neighborhoods."

The statute defining a bed-and-breakfast is murky and the zoning policies need to be clarified, says Passons. A clarified version of the zoning code is currently being drafted.

Smith has consistently contended that she has never offered breakfast, just a bed to sleep in, but the administrative law judge Catriona Miller sided with the San Diego city council on August 5.

"While [Smith] did not serve breakfast regularly in this establishment, it is the type of establishment where breakfast is typically served," Miller stated in her ruling.

"I can say with certainty that Airbnb are not involved in the case," said Passons. "They have not offered to help in any way. They wanted me to make sure I was clear about that." Smith's intention to file a lawsuit against the City of San Diego is still being discussed.

VICE News contacted Airbnb to request comment on Smith's predicament. In response, Airbnb shared a letter that their director of public policy David Owen sent on Tuesday to the mayor of San Diego. "Regular San Diegans like Rachel should not be penalized," the letter states. "Accordingly, we are calling for the City to stay the full amount of Ms. Smith's fine and suspend enforcement efforts against other home-sharers until the City Council completes its consideration of these code changes."