News and Articles

STATE OF NEW YORK PASSES LEGISLATION IMPOSING FINES FOR THE ADVERTISEMENT OF ILLEGAL APARTMENT RENTALS

Erin Lloyd - Friday, December 16, 2016

Recently, the New York state legislature passed a law that imposes significant fines on those who advertise the renting of apartments in ways that violate certain New York City and state laws. Specifically, any print, television, radio, mail, text, or online advertisement, such as one through Airbnb, which solicits an illegal rental of an entire residential apartment, is punishable by up to $1,000 for a first offence, as much as $5,000 for a second offense, and $7,500 for a third and subsequent violations.

Almost immediately, and as previously promised, Airbnb filed a lawsuit to contest the law, which included asking the Southern District of New York to grant a temporary injunction blocking the enforcement of the new law. Both state Attorney General Eric Schneiderman and attorneys for the city agreed not to enforce the law until the request for a preliminary injunction was resolved, but as of the end of November, Airbnb agreed to withdraw its lawsuit against New York State entirely. The company appears poised to continue its battle with New York City, challenging its legal jurisdiction to impose the fines. This battle is sure to come with many more twists and turns in the coming months and we will surely revisit it.

For years now lawmakers and proponents of home sharing, like Airbnb, have been at odds over the legality and regulation of short-term rentals. The combination of rising rents and costs of living, along with the increased convenience of home sharing online through Airbnb has led to a spike in short-term rentals statewide as a means of generating much-needed supplemental income. As the number of short-term rentals has grown exponentially, lawmakers and officials have been scrambling to figure out how to best address the home sharing economy.

On the one hand, many residents feel that they should be allowed to generate extra income through home sharing. Often, monies paid by transient guests is absolutely necessary for tenants to pay their monthly rents. By participating in the home sharing economy, people are able to stay in their homes and make ends meet. Home sharing proponents say that their actions are beneficial overall and claim that the real motivation behind “anti-Airbnb” legislation is to protect the hotel industry, which has been declining with the rise of the share economy.

On the other hand, the government does have an interest in insuring that rentals are safe and properly equipped to handle numerous transient guests. A rotating set of strangers in a residential building can cause a plethora of safety issues and skirts the various tax and other requirements imposed on commercial spaces, such as hotels. When individuals or landlords rent out apartments on a short-term basis with such a frequency that they are essentially operating illegal hotels, this becomes contrary to the residential purpose of the buildings and is more akin to a commercial operation.

Also at issue is the effect that Airbnb and other short-term rental platforms are having on affordable housing as a whole. A 2014 report by the Attorney General’s office revealed that almost three-fourths of local Airbnb advertisements between 2010 and 2014 were illegal hotels that violated state and city laws. What’s more concerning is that even though a small percentage of Airbnb hosts have multiple listings, these hosts account for more than one-third of Airbnb’s business in New York. In effect, this means that at least one-third of all New York listings on Airbnb are being managed not by people renting out part or all of their own homes, but by those who are acting as de facto illegal hotel operators.

Politicians and some tenants’ rights groups argue that this study supports their claims that Airbnb is worsening New York City’s housing crisis by making affordable housing unavailable to its residents. Their argument is that apartments that are occupied entirely or mostly by transient guests by definition reduce the number of apartments available for full-time residents. A reduced housing stock skews the level of demand, which is already out of control, which in turn causes rents to go up. Also, because the amounts transient guests pay per week or per day add up to significantly more than what monthly tenants typically pay, there is a disincentive to lease apartments to permanent residents. The overall effect is skyrocketing rents and fewer affordable apartments for rent for residents.

What makes the most current legislation different is that for the first time, lawmakers are going after the advertisement of an illegal rental as a stand-alone offence – whether or not the apartment is ultimately rented in a manner that violates the law.

We will be following any developments in this case carefully, so check back for updates. Our office can help individuals navigate the laws and regulations specific to your situation. For questions about Airbnb, contact Kyle Carraro (kc@lloydpatel.com) or Erin Lloyd (el@lloydpatel.com).

 

Potential New York State and City Legal Violations Arising From Hosting Guests Using Airbnb

Erin Lloyd - Thursday, January 29, 2015

    Users of the online service Airbnb beware: there have been a flurry of lawsuits against New York hosts using the popular Internet service to accommodate guests, and careful consideration of all relevant legal regulations and laws is important to understand your risks and liabilities. The New York State Attorney General has taken the position that hosts using Airbnb’s website—or others like it—to accommodate guests are responsible for understanding the laws of their own locales and complying with them.[1] For this reason, it is important that New Yorkers using or intending to use Airbnb are aware of the potential legal repercussions and seek legal advice before agreeing to host guests. 

    First and foremost, this article provides a basic introduction to some of the New York laws that Airbnb hosting can conflict with and some of the risks posed by hosting guests in exchange for money in New York, and is not a substitute for individual legal advice. Due to the variety of housing situations throughout the City, any New Yorker considering hosting Airbnb travelers for any period of time should always consult legal counsel to ensure that their particular housing situation is or will be or is in compliance with all applicable laws. This article may not be relied on as legal advice. 


Airbnb Hosts May Not Violate the NYC Building Code if They Have a Permanent Resident Co-Occupy the Residence During the Traveler’s Stay

    In some scenarios, New Yorkers may legally host guests using Airbnb’s services—at least under the New York City’s Building Code. The NYC Building Code permits Airbnb hosts to accommodate long-term residents, assuming there are no other legal restrictions on the rental, such as the apartment being rent controlled/stabilized or Mitchell-Lama housing which will be discussed more below. New York law defines a “long-term” resident as a person who lives in a residence for more than thirty days. Hosts should be aware that any guest or roommate that occupies the apartment or house for thirty days or more will be classified as a “permanent” resident or occupant, which can entitle the traveler to occupancy rights just as much as if the host met a longer-term roommate on Craigslist or some other source. For this reason, hosts should always seek legal counsel to understand the full extent of their own and their renter’s or roommate’s legal rights, obligations, and liabilities in this scenario. 

    Generally, hosts that rent a room to a traveler for less than thirty days will not be fined under the New York City Building Code if a “permanent resident” (someone who is living in the space for at least thirty days) is also present while the home is occupied by the traveler. This was the Environmental Control Board’s finding in New York City v. Abe Carrey.[2] If no permanent resident occupies the home with the traveler, New York State Law prohibits short-term rental of apartment space (less than 30 days) unless the property is a licensed hotel or bed-and-breakfast. 

    Again, it is extremely important to note that although a host may not be fined for violations of the Building Code, they could still face other fines—or even eviction—if the host-tenant is found to have violated rent-regulations laws, tax laws, or terms of their residential operating agreement (e.g. leases, condominium contracts, and cooperative shareholder contracts). Due to the complexity of the law and the variety of circumstances, it is recommended that any host using or seeking to use Airbnb, review—with the assistance of an attorney—all applicable State and City laws as well as the terms of the document(s) governing their housing situation.


Airbnb Hosts That Live in Rent Controlled, Rent Stabilized, or Mitchell-Lama Housing Should Think Twice Before Accommodating Travelers

    Hosts living in rent controlled, rent stabilized or Mitchell-Lama housing must also be aware of other laws (independent of the NYC Building Code) that affect the rental of their apartment to travelers. In a recent case, a tenant paying $4,193 per month for a rent controlled four-bedroom apartment in Manhattan was found to be in violation of City and State laws because she rented the unused rooms each month and made about $6,500 per month. In addition to taking the tenant to court to halt her rental of rooms in the apartment, the building owner also sought to evict her based on her violation of the rent control law, which prohibits tenants in rent controlled apartments from earning more money than they legally pay for rent. These types of housing accommodations are traditionally intended to provide low-cost housing, and tenants who exploit low-cost housing to “profiteer” can be found in violation of the law.

    If a host rents out a rent-regulated apartment while they are not occupying it as his or her primary residence, they have engaged in an unauthorized sublet. In this situation, it is illegal for the primary tenant of the residence to rent the space—or in some instances even a portion of it—for a price over the legal rental value.[3] Under these circumstances, the primary tenant of a rent-regulated apartment may be evicted.[4] On the other hand, some courts have determined that a landlord cannot evict a tenant for charging his or her roommate(s) a disproportionate amount of the legal rent as long as the tenant cures the overpayment (in that case by refunding the excess charged rent to the roommate).[5] Residents of Mitchell-Lama housing are generally prohibited from renting their apartment to travelers.[6] Although the result is not always the same, courts that have addressed these cases have tended to evict the host-tenant for profiteering.

    As stated before, though a host in these situations may be in compliance with the NYC Building Code, violations of a residence’s rent-regulated status is an independent violations of the law that can potentially result in the tenant’s eviction. For this reason, hosts residing in rent-regulated apartments or Mitchell-Lama housing should think twice before deciding to rent space in their apartment and, again, should always seek advice from an attorney before proceeding.


Airbnb Hosts in Non-Regulated Apartments Should Consult the Terms of Their Lease, Cooperative, or Condominium Agreement Before Accommodating Travelers

    Airbnb hosts in private, non-regulated apartments may also risk violating the terms of their lease, cooperative, or condominium agreement when they rent their space to travelers. For instance, most leases require tenants to receive written consent from their landlord before renting all or part of their apartment to a non-tenant. A tenant can be faced with an eviction for violating the terms of their lease. Because of the landlord’s discretion in deciding whether to initiate such a proceeding, tenants should carefully read the terms of their lease with an attorney and seek written permission from their landlords—where required—before hosting Airbnb travelers to ensure compliance with the terms of their lease.

    Similarly, occupants of cooperatives and condominiums risk violating the terms of their respective residential operating agreements by hosting travelers without reviewing these documents. The directors of residential housing cooperatives always have the right to approve or deny the transfer of shares and the assignment of proprietary leases (assuming they do so in a non-discriminatory fashion).[7] Likewise, many condominium agreements have a right of first refusal provision that a host’s rental of their condominium can potentially violate. For these reasons, hosts should take care to check over their applicable residential operating agreement to ensure that their rental of the space to travelers is permissible.


All Airbnb Hosts Must Abide by New York State and Local Tax Laws

    Finally, Airbnb hosts must be aware of any applicable New York tax laws. The New York Attorney General’s report on the use of Airbnb in New York notes that hosts who rent out a unit or portion of it short-term must pay applicable hotel taxes.[8] These New York City tax laws are notoriously complex and difficult to understand. According to the Attorney General’s report, the Airbnb host is liable for a portion of the hotel tax and must collect and pay it unless the rental is of one room in an owner-occupied home, the rental is less than fourteen days or for fewer than three occasions per year, or involves a rental for a continuous period of 180 consecutive days. The report also indicates that sales taxes and New York City Unincorporated Business Taxes may also apply to these short-term Airbnb rentals. In order to ensure compliance with these various tax laws, make sure to discuss your housing situation with your attorney.

    Currently, Airbnb is pushing for legislation that will allow at least some tenants to host temporary travelers in their homes without running afoul of New York State or City laws that tenants are currently at risk of violating. As of this writing, however, no such legislation has been enacted.


Conclusion

    Because of the interaction of numerous New York City and State laws that apply to Airbnb rentals, hosts should proceed cautiously and seek an attorney’s help before renting space in their home. Tenants who fail to ensure compliance face a variety of potential penalties, from fines to eviction. Discussing these various laws with an attorney will ensure that you comply with them and are able to keep your home.

 

Erin Lloyd, Esq. is an employment and business lawyer and partner at Lloyd Patel LLP, a general practice law firm. Ms. Lloyd works closely with each client to develop a personalized strategy based on his or her individual needs and concerns.  She can be reached at el@lloydpatel.com or (212) 729-4266. For more information on Lloyd Patel LLP, visit their website at www.lloydpatel.com.

 

Samuel Gaulthier is a second year law student at City University of New York School of Law focusing on criminal and administrative law, and an intern at Lloyd Patel LLP. Mr. Gaultier expects to graduate with his J.D. in May 2016.



[1] Airbnb even acknowledges this risk on its own website: https://www.airbnb.com/help/article/376.

[3] See Brookford, LLC v. Penraat, 2014 WL 7201736 (NY County Sup. Ct. 2014) (rent controlled apartment); See also 220 West 93rd St., LLC. v. Stavrolakes, 2006 WL 4758817 (NY County Sup. Ct. 2006) (holding that a rent controlled tenant who profiteers can be evicted).

[4] Continental Towers Limited Partnership v. Freuman, 128 Misc.2d 680, ___ (App. Term. 1st Dep’t 1985) (holding that a primary tenant can be evicted for subleasing the whole or part of their rent-stabilized apartment for an amount in excess of the legal rental value of the residence).

[5] See 520 East 81st Street Associates v. Roughton-Hester, 157 A.D.2d 199, ___ (1st Dep’t 1990) (holding that a landlord cannot evict a primary tenant for overcharging a roommate in a rent stabilized apartment if the violation is remedied); See also 270 Riverside Drive, Inc. v. Braun, 4 Misc.3d 77 (App. Term 1st Dep’t 2004) (holding that a primary tenant in a rent controlled apartment cannot be evicted for collecting rent from two roommates in excess of the rent controlled cost of the residence if the violation is remedied); See also Giachino Enterprises LP. v. Inokuchi, 7 Misc.3d 738, ___ (Civ. Ct. 2005) (holding that a tenant cannot be evicted for overcharging their roommate in a property subject to the NYC Loft law if the violation is remedied).

[6] See Padilla v. Levy, 300 A.D.2d 62, 62-63 (1st Dep’t 2002)

[7] See Bachman v. State Div. of Human Rights, 104 A.D.2d 111, 114 (1st Dep’t 1984)

[8] Research Department and Internet Bureau, Office of the Attorney General of the State of N.Y., Airbnb in the City, 18-20 (2014), http://www.ag.ny.gov/pdfs/Airbnb%20report.pdf.


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