In July, the Phuket Provincial Land Office sent a notice to all 234 registered condominium projects in the province, totalling more than 26,000 units. It said that daily renting by condominium owners was a violation of the Hotel Act of 2004, and also caused a public nuisance, affecting tourist safety and possibly leading to loss of life and property. The penalty for such a criminal offence is up to one year in jail or a fine of 20,000 baht.

While we are not lawyers, and not qualified to comment on the questions surrounding the legality of short-term rentals in Thailand, from a layman's perspective it is clear that current laws do not directly address some of the issues raised by the emergence of Airbnb, the online accommodation marketplace. As such, there is some uncertainty as to whether the courts would support the position of the authorities.

The Hotel Act requires properties offering commercial accommodation on a less than monthly basis to have a hotel licence. However, the 2008 ministerial regulation that governs hotel operations specifically excludes properties for temporary accommodation from being considered hotels if a) they have four rooms or less, b) they can accommodate no more than 20 people at once, c) they create additional income for owners, d) they promote tourism or local culture and e) the authorities have been notified. This exemption is designed to excuse guesthouses and homestays from the requirements of the Hotel Act, and can be viewed as generally supportive of Airbnb-style short-term rentals.

The official attempt to close down the Phuket short-term rental market indicates a different school of thought. As the Phuket controversy focused on the daily renting of condominium properties, the assumption was that such rentals constituted a breach of the Hotel Act.

It is certainly true that very few condominium buildings have hotel licences. However, the fact that there are a handful with licences indicates that hotel licensing is not an impossibility for a condominium.

Applying for a licence retrospectively once a condominium is up and running is extremely hard because it would require the co-owners to agree on a change of use and then for significant modifications to the building, which may not be physically or economically feasible. According to a recent study by BHMAsia, the main areas where condominiums tend to fall short as hotels are in the provision of car parking and lifts. However, if the use and building requirements are built in from the start, condominiums could in theory obtain hotel licences.

But even if a condominium doesn't have a hotel licence, is it possible for a co-owner to rent out his or her unit on a short-term basis providing it has no more than four rooms? Many would argue (as Phuket authorities appear to think) that the answer is no, on the basis that the entire building has more than four rooms. Again, if that is the case, it is not clear where liability would lie: is it with the co-owner or the juristic person -- or even the management committee?

Alternatively, can an individual condominium with no more than four rooms be said to be exempt from the licensing requirement altogether? In that case, would an owner with multiple units totalling more than four rooms in the same condominium lose eligibility for the exemption?

Clarity is also lacking on the rights and duties of housing estate and condominium committees in regard to co-owners who rent out their properties on a short-term basis. Some co-owners unhappy with the constant traffic of short-stay tourists have threatened to sue their management committees. But what powers does the management committee have to stop the practice, other than issuing rules and writing letters of complaint? If proof of short-term rental activity could be obtained (which in itself is a challenge), can access for guests be denied or fines imposed?

Despite these legal uncertainties, the Phuket authorities' claims do have some merit. To qualify for the Hotel Act waiver, landlords would need to have registered with the authorities and, presumably, show evidence of paying household tax on the rental income. It is safe to assume that not many have done this. Furthermore, foreign landlords may also need to show official permits allowing them to undertake such activity, which would be extremely hard to come by.

THE CONTROVERSY

The ability of web-based peer-to-peer platforms to shake up or "disrupt" traditional businesses is a key ingredient in the modern, sharing economy.

While detractors claim that ride-sharing apps such as Uber create unfair competition to taxi operators, the arguments against Airbnb go much deeper: Airbnb is accused not only of undermining traditional hotel operators, but also of worsening both the housing crisis in big cities and the quality of life of residents.

Impact on hotels: The most common complaint against Airbnb is that it competes unfairly with hotels because the host properties are lightly (if at all) regulated and don't need to meet the same standards of fire, health and safety as licensed hotels, and often don't pay taxes.

However, the impact is not consistent across the hotel market. Luxury hotels, where branding and the visitor experience are of paramount importance, have so far proved largely immune to competition from the ad hoc market. The impact on the two- to three- star segment, where price competition is key, is more apparent. Airbnb counters this argument by claiming that its services increase the overall size of the pie more than taking a slice from incumbents.

Impact on the housing market: In some markets, the big disruption attributed to Airbnb isn't so much on the hotel industry, but more on the stock of affordable housing, especially in big cities such as New York and San Francisco where the stock of long-term rental housing is already in short supply. Access to higher short-term rents through platforms such as Airbnb, it is argued, encourage landlords to shun the long-term rental market in favour of short-term tourists. To make matters worse, some tenants of rent-controlled flats in these cities have been sub-letting their properties through Airbnb, effectively profiting from a government subsidy.

The exacerbation of the housing shortage is seen as putting more upward pressure on rents and thus creating more problems for middle-class families. Airbnb, on the other hand, argues that the housing shortage in cities is caused by overly restrictive land development policies, rather than supply and demand in the rental market. Furthermore, it argues that middle-class households are the main beneficiaries of access to short-term rentals as they can earn some extra income to make ends meet -- and help pay those exorbitant rents in the first place.

Impact on the quality of life: Transient residents can be more disruptive than long-term residents. Residents in many popular Airbnb communities have lodged complaints against neighbours whose Airbnb guests hold noisy parties and disrupt the tranquil environment. In the US, some cities with strong conference or tourist markets have taken the problem very seriously. Austin, Texas -- a popular city for conferences -- has imposed noise and occupancy limits on properties, effectively banning stag and hen parties from short-term accommodation. In Miami Beach, complaints of noise and too many transients in the neighbourhood has led authorities to impose $20,000 fines on violators of the prohibition on short-term rentals.

Positive impacts: Apart from disputing the claims of its critics, Airbnb and its supporters have argued strongly that Airbnb-style services are a good thing for both ordinary people and the economy overall.

First, it is often argued that Airbnb stimulates economic activity in general. Supportive studies have been undertaken, for instance, in New York City where it was concluded that the economic benefit amounted to some $632 million with 4,600 jobs created. A similar study in Barcelona argued that the platform had added $175 million to economic activity and created 4,300 jobs.

Second, the argument that Airbnb helps the less wealthy members of society is supported by the Barcelona study which showed that 75% of hosts were from low- and lower-middle-income families.

Third, hotel industry complaints of unfair competition are often countered by the "bigger pie" argument. As already noted, price competition is most likely to affect lower-grade hotels, but there is some truth in the argument that Airbnb brings in new products in new areas and therefore is not necessarily a direct competitor.

It also allows for peak-period flexibility, as was evident most recently in Rio de Janeiro where some 66,000 guests were accommodated by Airbnb hosts during the Olympics, thus mitigating a severe shortage of hotel accommodation in the market. Similar effects can be seen in other markets in peak-demand periods, such as Songkran, Christmas and New Year in Thailand. Apart from providing supply flexibility at peak times, Airbnb can be a constraint on the peak pricing power of the hotel sector.

Finally, there is evidence that indicates Airbnb deepens a city's tourism potential by opening up new areas to visitors. Tourists often say the Airbnb experience helps them to live more like a local. Typically, Airbnb stays are longer than in hotels and guests tend to spend more in the immediate area than in traditional tourist spots. In New York City, where hotels tend to be concentrated in Manhattan, some 82% of Airbnb listings are outside Manhattan. Airbnb claims that in many cities more than 70% of its stock lies outside the main hotel districts.

VARIOUS RESPONSES

Governments around the world have devised a wide range of responses to control Airbnb. They range from generally supportive measures that aim to bring Airbnb into the regulatory and taxation system, to measures whose rationale appears to be the total eradication of Airbnb from the market. Most authorities sit somewhere in the middle, but with a bias to offering some protection to market incumbents.

Most places already have laws that require owners or operators of commercial accommodation to be licensed. Often, this requirement is waived for long-term rentals, which may be defined as at least one month as in Thailand or can be as high as six months, as in Paris and Miami. This waiver provides space for the private rented sector while protecting hotels.

As the market for short-term rentals has grown, policy responses have become more sophisticated. Pressure to allow property owners to benefit from a limited amount of short-term renting has led to various attempts to open up the market without undermining the hotel sector.

Some cities now allow hosts to rent out their properties on a short-term basis for a maximum period per year (90 days in London and San Francisco, two months in Amsterdam). Often, this permission will be given to a primary residence only (London, San Francisco, France) and usually it is subject to a registration process and the payment of tourist or occupancy taxes.

Some jurisdictions require short-term rentals to meet more stringent qualifications. For instance, in Santa Monica, short-term rentals are allowed only for hosted properties (where the host is also in occupation), while in Berlin not more than 50% of the apartment area can be rented short-term. Amsterdam allows no more than four people to rent a property on a short-term basis, while Chicago has imposed particularly complex new rules.

At the eradication end of the spectrum, we find efforts to close down or limit Airbnb's market with extreme prejudice. New York City authorities, for instance, prohibit short-term rentals of less than 30 days. As a result, a controversial proposal to ban the advertising of short stays is in the works. which would effectively shut down many Airbnb services.

Berlin has also taken a strong line against the short-term rental market. There, the courts recently upheld a law passed in May 2016 banning short-term rentals that contravene regulations and making landlords who violate the law subject to a fine of €100,000.

While regulations have become more sophisticated, the issue for many governments is one of enforcement. It is one thing to stipulate a minimum rental period, comply with building codes and pay tax, but how can these be enforced when much of the business is handled on an individual basis by private landlords via international websites?

Given this difficulty, some governments have decided to put the burden for compliance on the platform as well as -- or instead of -- the provider. As a large corporate, it is thought that Airbnb is likely to take such legal challenges more seriously than an individual homeowner.

In Barcelona, where the law requires all residences rented out to tourists to be registered with the authorities, Airbnb and its rival HomeAway were fined €30,000 (1,175,547 baht) in 2015 for violating this law. An amendment in June 2016 would allow that fine to be increased to €600,000 (23,510,950 baht).

SOME RECOMMENDATIONS

The Thai demographics most concerned by Airbnb are not homogenous. We have the hotel industry, which is worried that its business model is being undermined by a lightly regulated, ad hoc service that does not need to comply with the onerous regulations imposed on hotels. We have often middle-class residents, who are worried the proliferation of transient tenants in their buildings and neighbourhoods has a negative impact on the quality of life, the value of their properties and personal safety. Finally, we have the government authorities who will partly reflect the concerns of the other two groups, but also worry about the potential damage caused by unlicensed businesses, tax leakage and national security.

On the other side of the fence sit property owners and property developers who believe they have a right to maximise the value of their assets, and government supporters who favour the general growth in commerce and economic activity due to the short-term rental business.

Other jurisdictions have struggled to find a solution that will satisfy all parties. However, we would recommend two courses of action.

First, new regulations that permit the short-term rental business within defined parameters would benefit all parties. Examples would include allowing homeowners to rent out their homes for a maximum number of days per year, subject to their obtaining a permit to do so, paying appropriate taxes and obtaining safety certification and insurance.

The US and European example of allowing only a primary residence to be rented out may not make much sense in the Thai context. However, restrictions could be placed on the number of residences permitted for short-term rental, or higher taxes imposed on any rented properties that are not the owner's registered residence.

Second, to ensure compliance with the new regulations, as much of the burden of compliance as possible should be put on the operator of the platform. Without such a requirement, enforcement of the rules would be likely to fail.

Simon Landy is the executive chairman of Colliers International Thailand.