REGULATED TENANTS BEWARE: AIRBnB MAY BE YOUR DOWNFALL
November 25, 2013 • By David Frazer
In recent months the media has been full of reports about the City and State's attempts to curtail the increasingly popular — and lucrative — practice of tenants renting out their apartments, or rooms in their apartments, to tourists through websites such as Airbnb or VRBO. Many tenants who engage in this practice were buoyed by a decision of the NYC Environmental Control Board dismissing a violation issued against a tenant who rented a room in his apartment to a tourist for less than 30 days. While this ruling saved the tenant from having to pay a fine, it will not necessarily save him — or you — from eviction. That's because a violation of the Building Code and a violation of a lease or the rent regulations are two different things. Even if a tenant's use of Airbnb or similar service is not a violation of the former, it may be a violation of the latter.
First, a brief explanation of why the tenant in the ECB case prevailed. The tenant had been charged with using the apartment in violation of the certificate of occupancy, which allowed only for use as a permanent residence. The ECB dismissed the violation because of two things: 1. he rented the second room in his apartment for less than 30 days; and 2. his co-tenant remained in occupancy. The ECT ruled that under the NYS Multiple Dwelling Law, occupancy of the apartment by a paying lodger for less than 30 days while the tenant is also in occupancy was not inconsistent with the status of the apartment as a permanent residence.
The takeaway from the ECB decision is that, for Building Code violation purposes, it is not unlawful for a tenant to rent out a room for less than 30 days so long as the tenant is also residing in the apartment. But, regardless of the Building Code, these rentals may run afoul of lease restrictions and/or the Rent Stabilization Code and Loft Board Rules.
As a threshold matter, any regulated tenant who uses Airbnb or similar service to rent out her apartment when she is not present has engaged in an unauthorized sublet. If the tenant has collected more than the legal rent, she is subject to eviction without the right to cure. See Continental Towers LP v. Freurman, 128 Misc.2d 680 (App.Term 1st Dep't 1985). This includes loft tenants who rent out a subdivided portion of their space. See BLF Realty Holding Corp. v. Kasher, 299 AD2d 87 (1st Dep't 2002). In other words, occupants of free-standing subdivided units are subtenants, not roommates.
Most residential leases restrict occupancy to a tenant and the tenant's immediate family. The "Roommate Law", allows a tenant to have a roommate notwithstanding such restrictions. While the Rent Stabilization Code bars a prime tenant from charging a roommate a "disproportionate share" of the rent, none of the rent regulatory schemes allow a landlord to evict a tenant for overcharging a roommate. See First Hudson Capital LLC v. Seaborn, 54 AD3d 251 (1st Dep't 2008) [rent stabilization]; 270 Riverside Drive LLC v. Braun, 4 Misc3d 77 (App.Term 1st Dep't 2004) [rent control]; Giachino Enterprises LP v. Inokuchi, 7 Misc.3d 738 (Civ.Ct. NY Co. 2005) [Loft Law].
Nevertheless, courts have gone out of their way to avoid finding that short-term paying occupants are "roommates." If the court senses that the tenant is "profiteering" or using the apartment for "commercial exploitation," it will find a way to evict the tenant even if the tenant remains in occupancy. Some courts have simply held that "short-term transient" occupants are subtenants, not roommates. See, e.g., 220 West 93rd St LLC v. Stavrolakes, 33 AD3d 491 (1st Dep't 2006). Other cases have found that operating a bed-and-breakfast changes the character of the apartment into a commercial premises. See, e.g., West 148 LLC v. Yonke, 11 Misc.3d 40 (App.Term 1st Dep't 2006); Peck v. Lodge, 2003 NY Slip Op 30230(U) (Sup.Ct. NY Co.). These restrictions likewise apply to Mitchell-Lama apartments. Padilla v. Levy, 300 AD2d 62 (1st Dep't 2002).
Peck is a cautionary tale. The tenant in that case was an elderly woman who claimed she required the income from her "roommates" to pay her rent and otherwise support herself. The court, however, was not amused and granted the landlord a judgment of possession and warrant of eviction.
The bottom line is that a rent-regulated tenant who uses Airbnb or similar service is placing their home at risk.
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