This past winter, a $21 Million lawsuit was filed against a group of real estate brokers for renting out illegal Airbnb apartments in Manhattan. The news of this lawsuit, the largest of its kind ever brought by the city. sent waves of shock through the landlord community in New York City.
And if you think this was a one-time thing, think again. In other incidents, 20 apartment owners in a West Side condo building were raided and slapped with similar violations and even a private two-family house which converted an extra apartment in the basement into a rental, was issued four violations in total and a whopping $183,000 in fines, with additional violations and fines still pending.
From these violations, one thing is definitely clear: the city is cracking down hard on property owners who disregard the law and rent out their units on sites like Airbnb, VBRO, and Home Away.
If you’re still not convinced, consider this: in April, New York City mayor Bill de Blasio allocated $2.9 million in funding to Office of Special Enforcement (OSE) over the next two years, and stressed that the fund be spent mostly on “illegal hotel enforcement.” Soon after, the OSE expanded their special enforcement task force from 27 members to 47. Also, fines for violations of this law have increased by $5000 – $15000 increased over the last few months. Low fines are now a thing of the past.
With the summer tourist season at its peak and vacation rentals at an all-time high, make sure the next news item isn’t about you. If you’re a building- or condo-owner, it’s a good idea to know what your tenants are up to, because you may be liable for any illegal vacation rental that occurs on your property. If you suspect that one of your tenants may be renting out their units this summer, it’s time to take action.
Here’s what you need to know to make sure you’re not in violation:
What does the law say about short-term rentals?
First, it’s crucial that you know exactly what is legal and what is not with regards to short-term rentals in NYC.
- According to the law, it is illegal for all New Yorkers who live in buildings with three or more residential units to rent their apartments out for less than 30 days. The only exception to this law is if the owner or leaseholder of the unit is present during the entire stay. This law makes nearly all temporary summer rentals illegal.
- Rent-stabilized buildings have specific restrictions for how much residents can charge renters on sites like Airbnb.
- Co-ops cannot allow short-term leases at all. Again, this means all summer rentals are out.
- Condo owners can’t forbid leasing completely but the bylaws require minimum and maximum lease terms and have complicated rules against vacation rentals.
- Single-family homes are restricted by zoning laws and likely require modifications to their Certificate of Occupancy and/or architectural changes in order to be lawfully rented out.
What kinds of penalties are issued for unlawfully sub-leasing a short-term rental unit?
The primary violation of short-term rentals in most units is an occupancy violation for transient use. From there, it can snowball into loads of other issues and violations, leading to huge fines and even eviction in extreme cases. Tenants and building owners might mistakenly think they are following the rental laws, but are unaware that they are non-compliant with countless NYC building and zoning laws.
The Class of the violations being issued depends on how many units are proven to be rented out on a transient basis.
If only one unit is found to be rented out transiently, the owner will be issued a Class 2 violation which includes a base penalty that can be mitigated by proof of correction before the first scheduled hearing.
If two or more units are found to be rented illegally, a Class 1 violation will be issued, which includes a base penalty of $15,000 plus $1000 per day up to 45 days, for a total of $60,000 in fines.
In addition to those massive fines, a unit that is rented out on a transient basis, now falls into the class of a hotel and has loads of other building codes and zoning laws in place which the owner might not even be aware of. In both a Class 1 and Class 2 violation, noncompliance with hotel laws can trigger additional and hefty fines and violations.
These laws include:
- A fire escape is not deemed a second means of egress for hotels.
- Fire alarms in hotels must be code issue.
- Hotels must have proper sprinkler systems in place.
To make it even more troubling, the courts have ruled that owners with a Class 2 occupancy violation can still be hit with Class 1 code violations. You can also move from a Class 2 to a Class 1 violation if you are found to be a repeat offender.
Plus, if the inspector who raids your building has extra time on their hands, they may vey likely find more code violations to slap onto your building.
Don’t think you are safe from these penalties and violations if you never post any of your units on Airbnb and similar sites. You are responsible for every tenant in your building, and if one of them is unlawfully renting out a unit on a temporary basis this summer you’ll be the one who winds up paying all the associated fees and penalties.
How can I determine whether my tenants are renting out their units?
In recent violations at the 500-unit Atelier Tower, the owners themselves became aware of the illegal rentals and notified the proper authorities.
Here are some clues that helped them identify the illegal activity which you can look for within your own units:
- Suitcases frequently rolling down hallways
- Individuals who are not residents of the building constantly coming and going
- Tourists in full vacation gear crowding the common areas
- The absence of the regular tenant from the building for extended periods of time
Don’t let an illegal rental ruin your summer. Make sure you are aware of everything that is going on in your rental units so you don’t get slapped with heavy fines and penalties. Wishing you a happy, healthy and violation-free summer from all of us here at Jack Jaffa & Associates.