RENT STABILIZED APARTMENTS AND AIRBNB

What Landlords and Tenants of Rent-Stabilized Apartments Need to Know About Airbnb

What Landlords and Tenants of Rent-Stabilized Apartments Need to Know About Airbnb

*Update: On August 6, 2015, a similar decision was issued by Judge Phyllis Saxe at New York County Civil Court, awarding a final judgment of possession against Tracy Steele, a tenant who rented a three-bedroom apartment in New York City’s West Village… In addition to addressing commercial concerns, the court placed an equally strong emphasis on the safety issues that come with “illegal hoteling,” namely, the number of unverified guests who know the building’s access code, the increased risk of injury, theft and fire damage

Airbnb is an Internet platform that connects individuals offering accommodations to those seeking to book accommodations. All terms, including price and length of stay, are agreed upon in advance and the transaction is completed online.1

As one can imagine, Airbnb has caused quite a stir in New York City, one of the top tourist destinations in the world.2

A New York County Civil Court recently evicted a tenant who rented out his rent-stabilized Hell’s Kitchen apartment via Airbnb.3 In 42nd and 10th Associates, LLC v. Ikezi, Judge Jack Stoller held that it is a violation of the Rent Stabilization Code for tenants to profiteer4 off of their rent-stabilized apartments.5

After testimony from various employees of the landlord, the court found that the tenant, Henry Ikezi, was renting out his apartment via Airbnb at a rate three times the regulated rent.6

One of the landlord’s witnesses, an employee of the subject premises, testified to meeting one of Ikezi’s guests and to finding an advertisement for Ikezi’s one-bedroom apartment on Airbnb.7 The advertisement was admitted into evidence.8

Another witness, a concierge who is stationed in the lobby of the apartment building five days per week, testified to seeing Ikezi only five times in the four months preceding trial. The concierge also testified to helping another one of Ikezi’s guests who needed assistance with a key.9

Ikezi denied remembering any details regarding Airbnb transactions.10

The court found that Ikezi’s evasive answers constituted an attempt to withhold information and that Ikezi did not present a defense because, under the circumstances, there was no defense to present.11

Accordingly, the court found that Ikezi engaged in profiteering by renting out his apartment on Airbnb, and that using a residential apartment as a hotel room is an incurable ground for eviction, as it undermines the New York Rent Stabilization Code.12

In addition, because such a violation is incurable, the court held that the landlord was not required to serve Ikezi with a notice to cure.13

The court cited various cases that held that the commercial exploitation of rent-stabilized apartments is an incurable violation, which requires eviction pursuant to the Rent Stabilization Code, and that absolved landlords from serving notices to cure as such violations are incurable.14

In a similar decision issued on August 6, 2015, Judge Phyllis Saxe, New York County Civil Court, awarded a final judgment of possession against Tracy Steele, a tenant who rented a three-bedroom apartment in New York City’s West Village.15

Steele began subleasing the extra bedrooms in her apartment to guests she found via Airbnb at a rate of $215.00 per night, 2.5 times the rent-stabilized rate.16 Judge Saxe classified the ongoing act as “commercial exploitation, which threatens the integrity of the rent stabilization scheme and deprives the landlord of making the same profits.”17

Steele argued that her guests were “temporary roommates” and, as such, the petitioner had no right to terminate her lease.18 However, this argument was of no avail to the court, which found that said guests, who wrote “customer reviews,” were provided fresh linens and food, and were charged a $76.00 cleaning fee, were hotel guests.19

In addition to addressing commercial concerns, the court placed an equally strong emphasis on the safety issues that come with “illegal hoteling,” namely, the number of unverified guests who know the building’s access code, the increased risk of injury, theft and fire damage, as well as risking termination of the building owner’s residential insurance policy.20

Like Judge Stoller, Judge Saxe found that Steele’s violations of the Rent Stabilization Code were incurable, thus, the landlord was not required to serve tenant with a notice to cure.21

While Judge Stoller and Saxe’s opinion unequivocally states the consequences of profiteering from the benefits of rent stabilization, it is important to note what the court did not address. The court did not address situations in which tenants use Airbnb to rent out market-rate apartments, nor did it address rent-stabilized tenants who charge rental rates comparable to their own.

However, Judge Saxe’s discussion regarding building safety should put all tenants on notice that the use of Airbnb to rent out their apartments are potentially violating their lease agreements and the city’s illegal hotel laws, both of which are grounds for eviction.22

After Judge Stoller’s ruling, New York State Senator Liz Krueger and New York City Council Member Jumaane D. Williams applauded Judge Stoller’s ruling in a joint statement addressing the negative effects that Airbnb has on New York City’s housing market.23

Landlords’ opinions are split regarding the use of Airbnb to rent out New York City apartments. Many landlords want nothing to do with the accommodations platform because of the liability that comes with hosting a revolving door of tourists, while others are looking for a way to legally cash in on its popularity.24

Most landlords agree, however, that the legislature must take some action to addressthe city’s growing “illegal hotel” culture.

Both landlords and tenants of rent-stabilized apartments should be wary of jeopardizing their coveted regulated rental rates by exploiting, or allowing the exploitation of, such rates for personal gain. Landlords who suspect their tenants are in violation of their lease agreements and/or the law should immediately contact an attorney to discuss their options for addressing such violations.

Similarly, tenants seeking to rent out their properties via Airbnb or another platform, as well as those threatened with eviction, should contact an attorney who can advise them of their rights under their lease agreements and vigorously defend their case.

1 About Us, Airbnb, http//www.airbnb.com/about/about-us; see Airbnb, Inc., v. Schneiderman, 44 Misc. 3d 351, 989 N.Y.S.2d 786 (Albany Co. 2014). 2 Lilit March, Top 20 Cities for Tourists, TRAVELER, Dec. 23, 2014, available at http://www.cntraveler.com/galleries/2014-12-01/top-20-cities-for-tourists. 3 See 42nd and 10th Associates, LLC v. Ikezi, 46 Misc. 3d 1219(A), 2015 N.Y. Slip Op. 50124(U) (Civ. Ct., N.Y. Co. 2015). 4 MERRIAM-WEBSTER DICTIONARY (11th ed. 2009) (defining profiteer as one who makes what is considered an unreasonable profit especially on the sale of essential goods during time of emergency). 5 42nd and 10th Associates, LLC, 2015 N.Y. Slip Op. 50124(U), *6. 6 Id. (the court compared the daily rate tenant paid [which was calculated by multiplying tenant’s monthly rent by twelve and dividing the product by 365] and the daily rate tenant charged guests). 7 Id. at *1 (the employee testified that the pictures on the Airbnb advertisement showed an apartment with the same layout and décor as Ikezi’s apartment). 8 Id9 Id. at *2. 10 Id. at *3. 11 Id. at *4. 12 Id. at *6. 13 Id14 Id. (citing West 148 LLC v. Yonke, 11 Misc. 3d 40, 812 N.Y.S.2d 735 [App. Term, 1st Dept. 2006]; Matter of 151-155 Atl. Ave. v. Pendry, 308 A.D.2d 543, 764 N.Y.S.2d 852 [2nd Dept. 2006]; Hudsa Realty Corp. v. Padien, 136 Misc. 2d 92 [Civ. Ct., N.Y. Co. 1987]). 15 335-7 LLC v. Steele, 77007/2011, NYLJ 1202736933498, at *1 (Civ., N.Y., Decided Aug. 6, 2015). 16 Id. 17 Id. 18 Id. 19 Id. (citing Brookford LLC v. Penraat, 2014 WL 7201736 [Sup. Ct. N.Y. Co. 2014]). 20 Id. 21 See id. 22 See Donna Tam, NY Official: Airbnb Stay Illegal; Host Fined $2,400, CNET MAGAZINE, May 20, 2013, available at http://www.cnet.com/news/ny-official-airbnb-stay-illegal-host-fined-2400/. 23 Ben Yakas, Airbnb Host Evicted from Rent-Stabilized Hell’s Kitchen Apartment, GOTHAMIST, Feb. 20, 2015, available at http://gothamist.com/2015/02/20/court_evicts_rent-stabilized_hells.php. 24 Polly Mosendz, Landlords Speak Out: What They Want from Airbnb, THE NEW YORK OBSERVER, May 1, 2014, available at http://observer.com/2014/05/landlords-speak-out-what-they-want-from-airbnb/.

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