How to Keep Your Building From Becoming a Hotel

This article appears in the special November issue of Habitat, “Governing Documents Through a Legal Lens.” 

Short-term apartment rentals are causing many problems in co-ops and condos today. Aside from the fact that short-term renters are given access to apartments without going through a co-op or condominium board’s established procedures for renting or subletting, the practice can lead to quality-of-life, health, and safety issues for the community. Following are a few potential problems: 

Transient population. Should a transient renter commit a crime or cause damage or injury in a building, the board could be sued by the victim for alleged negligence, even if the board was not aware of the short-term rental, or if the board was aware but did not take steps to address the issue. Short-term renters can also be interfere with resident’s use and enjoyment of their apartments. 

Bed bugs. This is every board’s worst nightmare. We’ve had a number of clients report bed bug in units that were adjacent to apartments suspected of being used for short-term rentals. This can result in litigation and costly remediation procedures. 

Violation of the law. The use of a residential dwelling as a hotel is in violation of New York’s fire safety codes, the Multiple Dwelling Law, and the New York Administrative Code. 

Insurance. Boards should be aware that the building’s insurance company may deny a claim if an incident occurs that’s associated with the use of an apartment as a hotel, which is not the insured use. This could affect the co-op’s or condo’s insurance premiums, or require out-of-pocket payment to cover costs or damages. 

What can a board do to address issues caused by illegal short-term rentals? First, call the Mayor’s Office of Special Enforcement. In 2016, the New York State legislature enacted a law making it illegal to advertise a short-term rental. Violators face civil penalties ranging from $1,000 for a first offense up to $7,500 for a third violation. Based on this law, the violation – and fines – will accrue to the apartment owner, or person doing the advertising, not the co-op or condo association, a very important point. Prior to calling, check with your managing agent to ensure that there are no known code violations in the building, because calling the mayor’s office brings code enforcement to the building. 

The board may also want to confer with its attorney to commence legal action against a repeat offender. Doing so will certainly get the attention of the rule-breaker. If the governing documents include the necessary provisions, a default notice can be issued against the offending owner. Additionally, a notice should be sent to the apartment owner’s lender, if the owner has taken out a mortgage or share loan. Both steps may be sufficient to prompt the rule-breaker to stop the short-term rental practice. 

The board can also begin an injunction action in New York State Supreme Court or, in the case of a co-op, a summary holdover proceeding in the New York City Civil Court, for breach of the governing documents and of law. However, a board will need to have a fair amount of documentary evidence to support its legal claim, and the court process can be lengthy and costly. 

A board should take other practical steps, such as educating building staff and residents about the dangers of transient renters, and urging staff and residents to keep an open eye for unfamiliar visitors or unusual incidents, and then report any observations immediately. Take note of homeowners who make repeat requests for extra keys for guests or visitors. If your suspicions are aroused, search Airbnb and other sites for listings in your building, or hire a private investigator. Review your governing documents, or instruct your attorney to do so, to ensure they contain language that is sufficient to permit legal action against transient tenancies. And finally, implement a protocol and controls as to who can enter your building. Include fines for a breach. 

Remember, your co-op or condo is first and foremost for owners. Short-term rentals are against the law, and boards need to be on the lookout for those who think they are above it. 

Karol S. Robinson is a shareholder in the law firm of Anderson Kill.