The Long and the Short of It

Short-term rentals – particularly in condos and co-ops – are hotly debated in the press, the courts, and legislative tribunals in urban centers throughout the country. In City of New York v. Abe Carrey, the New York City Department of Buildings (DOB) issued several violations to a condominium unit-owner, arguing that he was in violation of law because his tenant allowed a tourist to rent a room in the apartment on a short-term basis.

Abe Carrey owned a condominium apartment at 184 East 2nd Street. He rented the apartment to Nigel Warren and Julia Kodysh. Warren used Airbnb (which actually intervened in the proceeding) to find a guest to stay in the apartment while he was out of town.

The certificate of occupancy showed the apartment as a “Class A Multiple Dwelling,” that is, one that is zoned for permanent, rather than transient, occupancy. Further, the condominium declaration states that units may only be used as private residences and not be rented for transient, hotel, or motel purposes.

Let ’Em In

A DOB inspector visited the building and attempted to gain access to various apartments. When he knocked on the door of the Carrey apartment, two women answered, said they were from Russia and that they were living in the apartment for a few days. They also said they were not related to the owner, that they found the apartment through Airbnb and that they paid between $500 and $600 for the use of the apartment. The women received three keys upon arrival – one for the building entrance, one for the apartment, and one for the bedroom (Warren disputed that the bedroom had a lock).

From this, the DOB issued five violations to Carrey, all based on transient use:

• (i) occupancy contrary to certificate of occupancy;

• (ii) illegal use in a zoning district;

• (iii) failure to maintain a sprinkler system;

• (iv) inadequate exits; and

• (v) no fire alarm.

Warren – who had rented his room twice before – defended the action, in part by producing e-mails showing that Kodysh was living in the apartment during the time he had rented out his room to one of the tourists.

Stranger in the Night

The Environmental Control Board (ECB), which hears challenges to DOB-issued violations, explained that a Class A Multiple Dwelling requires occupancy for 30 consecutive days or more. An exception exists if another is “living within the household of the permanent occupant such as house guests or lawful boarders, roomers or lodgers.” The ECB parsed this language. It was clear to the ECB that the tourist was not a house guest – she was a stranger who had paid to live in the apartment for a few days.

The ECB then looked to the import of the words “living within the household of the permanent occupant.” The record did not show that Kodysh mingled with the visitor. And although “household” is not defined in the statute, the definition of “common household” required that all parties have access to “all parts of the dwelling unit.” The evidence adduced was that Kodysh had her own bedroom, which the tourist did not enter. The term “common household” was found within the definition of “family,” which is defined, in part, as a single person maintaining a common household with not more than two “boarders, roomers, or lodgers.”

The ECB determined that these definitions lead to the conclusion that the tourist was nothing more than a complete stranger – that she did not fall within the statutory definitions that allowed Carrey (through Warren) to claim the 30-day occupancy exception.

Holiday Inn

Airbnb argued that transient use supported the “city’s desire to preserve living accommodations because it allows tenants the ability to bolster their income and pay their rent.” The ECB wholly rejected this argument as speculation, noting that the city has also expressed its desire to maintain safe living quarters and prevent Class A dwellings from being turned into hotels.

Finally, the ECB noted that Carrey (through Warren and Kodysh) violated the condominium’s rules by allowing a short-term rental. While that was not a ground for sustaining the DOB violation, it was further evidence that apartments were to be used for permanent – and not transient – occupancy.

As to the other violations, the ECB found that they were building-wide and not applicable to a specific unit. As a result, they were dismissed because Carrey, and not the condominium, was the named party.

There’s No Place Like Home

The DOB and Carrey each appealed to the ECB appellate tribunal. After reviewing the statutes and arguments, the appellate tribunal determined that “occupancy of the cited Class ‘A’ apartment by a tourist for fewer than 30 consecutive days while a permanent resident was present in the apartment is consistent with using such apartment for permanent resident purposes.” It concluded that there was nothing in the statute that required a “boarder,” “roomer,” or “lodger” to have a personal relationship with the occupant of the apartment. As to “common household,” there was one kitchen and one bathroom. Although the DOB inspector was told there was a key to the bedroom (which Warren disputed), he conceded that he did not inspect the interior of the apartment. The appellate tribunal found, on these facts, that the tourist was living “within the household of the permanent occupant” and reversed the fine that had been imposed.

As a result of this ruling, the dismissal of the other violations was affirmed.

The Takeaway

Short-term rentals are an issue in all residential buildings in New York City, and cooperative and condominium residents anticipate that those living in the building are vetted by the board (perhaps to a greater degree in co-ops). Regardless of the ultimate determination here (which really turns on the fact that Kodysh was present in the apartment at the time of the short-term rental), this case raises an issue that is worth looking at.

To our knowledge, the DOB does not typically inspect for short-term rentals in Class A Multiple Dwellings. Indeed, it almost appears as if the inspector in this case met the tourists by accident while seeking to question occupants more generally. When the DOB did inspect, it not only issued a violation asserting transient use in an apartment zoned for permanent occupancy, it issued violations concerning what building-wide systems should have been in place if the apartment were in fact being used for short-term occupancy.

Those violations were dismissed, in part because they were asserted against the unit-owner when – the argument goes – they should have been asserted against the condominium. This is something boards should not ignore and serves as an additional reason why boards may want to be diligent in making sure apartments are not being used as short term rentals. Such use could have building-wide consequences (in addition to the general safety and security issues).

Another point worth noting: the condominium declaration had an explicit provision prohibiting short-term rentals. Although most modern condominium documents contain such a clause, some (and many older documents) do not. To the extent a board can obtain the necessary support to amend the condominium documents, it should probably do so.

However, the absence of such a provision should not necessarily be a deterrent to a board starting an action against an apartment owner if the board believes the owner is allowing short-term rentals. Class A multiple dwellings are designed for permanent residency. If engaged in hotel-type rentals (not, as here, where an occupant remained in possession), an owner would probably place the building in violation of the certificate of occupancy and law, although a building’s specific documents would have to be reviewed.

Josie Morris, an associate at Stroock & Strook & Lavan, assisted in the preparation of this article.

Attorneys
For DOB: Michael Burns
For Carrey: Nigel Warren,
as representative
For Airbnb: Christopher Muller