Illegal Subletters Fined $1 Million

Apartments occupied by their owners are the dream of every co-op and condo board. To that end, most boards regulate subletting. Earlier this week, we told you about steps boards can take to prevent illegal sublets from turning a co-op or condo building into a hotel.

Today we tell you the cost of turning a building into an illegal hotel: $1 million.

That’s the amount of a settlement the city has reached with two property owners it sued for operating illegal hotels listed on such home-sharing websites as Airbnb, the Daily News reports.

"Landlords who turn homes into illegal hotel rooms face high costs – in this case $1 million in penalties,” said Christian Klossner, head of the Mayor’s Office of Special Enforcement. “This city will aggressively enforce the law to protect our housing stock and the safety of New Yorkers.”

But the landlords, Majid and Hamid Kermanshah, will actually have to fork over just $201,500 in cash. The city will credit another $798,500 in rent they couldn’t collect during the proceedings toward the $1 million amount. The settlement also permanently bars the duo from operating or advertising such illegal hotels in the city. It is against the law in New York to rent out an apartment for fewer than 30 days if the owner is not present – or even to advertise such a short-term sublet. That has put sites like Airbnb, built on people renting out their own homes, in a bind.

The Kermanshahs, who are brothers, were listing units in two residential buildings, 59 Fifth Ave. and 5 W. 31st St., for nightly bookings on websites including Airbnb. The addresses were marketed under the names "Contemporary Design Suites" and "Urban Oasis Hostel.”

“My guys are small landlords,” says their lawyer, Thomas Harvey. “I don’t think they appreciated, or understood really, the consequences.”