Cheers for progressive stand: How businesses should be treated in absence of regulatory clarity

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Published: September 22, 2017 4:43:08 AM

Himachal Pradesh High Court takes a progressive stand on regulation vis-a-vis disruptive and new-age businesses

AirBnB upended hospitality by channelling unused accommodation capacity in private residences. (Reuters)

New age enterprises that have disrupted how business was done traditionally in certain segments have proved a regulatory puzzle in many jurisdictions. AirBnB upended hospitality by channelling unused accommodation capacity in private residences. The home-stay aggregator has also exposed the gaps in property regulation given residential and commercial property are governed in most jurisdiction by separate sets of laws. In England, a court last year said that leaseholders couldn’t use leased properties as home-stays on AirBnB if there was any clause in their lease agreement that constrained the use of the property for any purpose other than residential—though it clarified that the application of its ruling will have to be judicious. Given home-stays are not pure-play commercial establishments nor fully residential, but inhabit an “in-between” space, the ruling put many leaseholders/home-stay operators in a quandary. Similarly panicking after house rentals went North with home-owners preferring to list their properties for AirBnB than rent them out, Berlin last year banned AirBnB as an option for tourists.

Against such a backdrop, a ruling by the Himachal Pradesh High Court offers insight into how businesses should be treated in the absence/lack of regulatory clarity. The state government had cancelled the home-stay licence for a property given to a former army officer, claiming that the commercial use of the property violated the portions of the land and tenancy law that dealt with transfer of land to non-agriculturists. The court struck down this contention and instead chose to draw attention to the gains from using the property as a home-stay. Though it acknowledged the law, it also noted that the home-stay was a place where “A guest comes and stays in the house as a member of the family, intermingles… The whole object and purpose being to make the society and culture inclusive…”. It also noted the practical aspects of allowing the home-stay to function, saying, “The Government has no accommodation in rural, remote and far-flung areas”. Such a progressive outlook on how business that are disruptive or thrive in regulatory grey areas is something that regulation everywhere needs to keep in mind.

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