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Squatters, Transients and…Luxury Apartment Renters?

donotredAll of these months, the owner of apartment 3A could not figure out why there was a constant buzz of activity surrounding his neighbor’s apartment.  Beginning around January, there had been an influx of strange happenings including loud parties and exotic meetings being conducted by constantly changing and often unfriendly faces.

The new and unwelcomed hullabaloo aroused the owner’s suspicion and caused him to probe its origins.  After a quick Google search, he had discovered the source of the activity – a rental advertisement by Airbnb.com – a website devoted to providing apartment dwellers a platform for advertising the rental of their space for short periods of time, just like a hotel.

This is hardly a novel concept, and up until recently, it was arguably legal.  Yet despite its newfound illegal status in New York, there remains a plethora of websites offering this service for those who want to be part time inn-keepers and transform their traditional living space into a transient hotel.  To deal with these amateur inn-keepers, New York State amended the Multiple Dwelling Law, Article I §4(8)(a) in 2010 and cleared up the confusion surrounding its previously ambiguous language.  The law now plainly states “A Class A multiple dwelling shall only be used for permanent residential purposes…which is defined as occupancy of a dwelling unit by the same natural person or family for thirty consecutive days or more…”  The Administrative Code of the City of New York § 27-2004(a)(8)(a) mirrors the language of the Multiple Dwelling Law.   The penalty for noncompliance can be $2,400 per violation and targets landlords, who are considered the legally responsible party, even if the landlord’s tenants are to blame for renting out the space.  That would mean the cooperative corporation for coop abusers and the owners of condominium units in condos.

However, it is not just recreational apartment renters who have come under scrutiny, as large companies have not overlooked the fact that there is a lot of money to be made in the hotel industry.  In October 2012, New York City filed suit against Smart Apartments, a major operator of short-term rentals in more than 50 buildings in the City.  While the suit is sure to please the hotel lobby, the City’s lawsuit focused on the safety concerns, nuisance and deceptive trade practices presented by illegal hotels.

In February 2013, the City was successful in enjoining Smart Apartments from advertising or allowing the transient occupancy in New York City Class A Multiple Dwellings, and compelling them to remove any such advertising from all internet websites and other media.  The decision stated that Smart Apartment’s business was illegal, unsafe, a public nuisance and was based on deceptive trade practices.

The crux of the argument posed by the City is that short-term rentals are unsafe and a nuisance.  The City claims they are unsafe because New York City Fire and Building Codes require transient residences to observe significantly higher fire safety standards than non-transient residences and most apartment buildings are not up to that higher code.  However, whether that higher standard for a less than 30 day stay makes any sense is another question.  After all, what is the practical difference between someone who is subletting an apartment for a month and one who is only there for a week?  It is not likely that the former is more familiar with the staircases and thus more capable of evacuating the building in case of a fire.

The City argues they are a nuisance because of (among other reasons) security risks, loud parties and the occupants not conducting themselves in the “civilized, genteel manner of the locals”.

And it is not just the internet sites that have to worry.  Recently, an administrative law judge sustained a notice of violation for “occupancy contrary to Certificate of Occupancy in that apartment 5G was used transiently” issued by the NYC Environmental Control Board to an owner of a condominium unit.  The owner was issued a fine for $2,400 after the owner’s tenant used Airnb, Inc. to arrange for a guest to occupy the premises for less than 30 days.

There is no doubt that constantly changing neighbors may pose a nuisance to others who live in the building.  As an advisor to Mayor Bloomberg said, “It’s not the bargain that somebody who bought or rented an apartment struck, that their neighbors could change by the day.”   However, in coops and condos this can and generally is controlled by the building’s bylaws or proprietary lease.  For example, most coops have strict subleasing restrictions and some condos have time limits as well as rights of first refusal.  In other words, this is an activity which the building’s owners are fully capable of regulating and all such regulation decisions should be deferred to them.  Potential purchasers who perform their due diligence can themselves decide whether they want to live in a building which allows short-term rentals.

So what are we left with?  The issue of safety seems baseless because it strains logic to conclude that the same apartment is safe for a 30 day rental but not for a 29 day rental.   The idea that short-term renting is a nuisance to other owners in the building is erroneous because the coop or condo owners can set the rules and a buyer should know these rules before he or she signs a contract.

While we recognize that the City should insure that housing is safe even for short-term rentals, we believe that these current laws should be re-examined in light of the fact that people are using the internet to find housing for short stays in the City.  It simply does not seem reasonable to allow the same apartment to be rented for 30 days but not for 29.  Certainly there must be a way to find logical protections that make sense given the realities of the internet and how it has affected the marketplace.

By: Ryan V. Stearns and Jerome J. Strelov

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