For several years, the City and State of New York have adopted a variety of legal measures in increasing attempts to curtail the use of Airbnb and the proliferation of short-term rentals the platform has facilitated throughout New York City. Airbnb has been the subject of extensive controversy and litigation in New York. While Airbnb and its users have touted the benefits of the supplemental income for hosts and different benefits of the home-sharing economy, lawmakers, activists, and others have cited the worsening shortage of affordable housing as well as concerns including safety, zoning, and tax collection surrounding the use of Airbnb and the presence of frequent transient renters in residential buildings and neighborhoods. This article provides an overview of some of the laws and issues related to short-term rentals and the use of the Airbnb platform by New York residents.
The primary New York State law that prohibits short-term occupancy, and in turn the use of Airbnb, is the New York State Multiple Dwelling Law (MDL). The MDL applies to residential buildings with three or more units; it does not apply to single-family or two-family homes. Section 4 of the MDL was revised in 2010 in response to the rise of Airbnb and the proliferation of short-term rentals, and currently states in part:
A ‘class A’ multiple dwelling is a multiple dwelling that is occupied for permanent residence purposes… ‘Permanent residence purposes’ shall consist of occupancy of a dwelling unit by the same natural person or family for thirty consecutive days or more and a person or family so occupying a dwelling unit shall be referred to herein as the permanent occupants of such dwelling unit.
Section 4 of the MDL expressly permits “incidental and occasional occupancy” for less than 30 consecutive days by persons other than the “permanent occupants” for personal reasons, though “[P]rovided that there is no monetary compensation paid the permanent occupants for such occupancy.” For example, if a tenant goes away on vacation for a week and the tenant’s mother stays in her apartment for that week and the daughter does not take money for the stay, the mother’s temporary occupancy would not violate the short-term rental law.
Sublets, Roommates, and ‘Short-Term’ Occupants
The legal issues surrounding Airbnb bring up the distinction between roommates, sublets, and “short-term” or transient occupants.
A sublet, also known as a sub-lessee, is an individual who leases from the primary tenant, and who acquires exclusive use of the apartment while the primary tenant is absent. A sublet may be either a short-term occupant who stays in an apartment less than 30 days, or may become a resident of an apartment once (s)he occupies the apartment for at least 30 consecutive days.
Under New York Real Property Law (RPL) §226-b, tenants residing in buildings with four or more residential units have a right to sublease their apartments if they follow the specific procedures set forth under §226-b, and in turn receive written permission from their landlords in advance. Landlords cannot ‘unreasonably’ withhold such consent provided tenants follow the procedures set forth under §226-b.
However, regardless of whether landlords permit primary tenants to sublease their apartments, sublets in Class A dwellings who rent for periods of less than 30 consecutive days run afoul of the short-term renting restriction in the Multiple Dwelling Law discussed above.
In contrast to a sublet, a roommate is someone who resides in an apartment together with the primary tenant, and who does not have exclusive use of an apartment. New York RPL § 235(f) is often referred to as the “Roommate Law” because it prohibits landlords from restricting the occupancy of an apartment to person named in a lease or his/her immediate family; it thereby generally permits a lease-holding primary tenant in New York State to have one additional non-relative occupant residing in the apartment together with the leaseholder, i.e., a roommate.
However, while it is generally permissible for an additional individual to reside with a primary tenant under RPL §235(f), the tenant’s presence in the apartment while a short-term occupant is there does not eliminate the issue of the transiency of an additional occupant’s stay given the definitions and restrictions in the Multiple Dwelling Law noted above. Even if an individual rents a room on a very temporary basis while the tenant of record is present, the short-term or transient occupant is not a true roommate because (s)he is not a “resident” per the definition of “permanent resident” provided in the Multiple Dwelling Law if (s)he does not occupy or reside in an apartment for 30 consecutive days or longer. Thus, short-term occupants of Class-A dwellings may still be running afoul of the Multiple Dwelling Law even if they are staying in an apartment with the primary tenant and do not have exclusive use of the apartment, if they are paying the primary tenant for such occupancy and if they stay in the apartment for less than 30 consecutive days.
The Greater Risk of Using Airbnb and/or “Profiteering” by Rent-Stabilized Tenants
Tenants in rent-stabilized apartments may face serious consequences for renting out their stabilized apartments to short-term occupants, and/or from “profiteering” by such rentals, even if they rent just a portion of their units. Recent cases in New York have upheld the evictions of rent-stabilized tenants who have “profiteered” from renting to short-term occupants. A NY Appellate court further held that a tenant in a rent-stabilized apartment who hosted short-term occupants through Airbnb, even while she concurrently resided in the apartment, violated the aforementioned restriction on short-term rentals because the supposed ‘roommates’ were not ‘permanent’ occupants[i]
The court moreover noted that, because rent stabilization laws limit the rent landlords can charge for apartments that are under rent-regulation, tenants who are beneficiaries of such rent limitations cannot in turn “profit” from their rent-regulated lessee status by renting out their apartments to others and thereby earning income at or above market rates by more than their landlord-owners are permitted to collect under the Rent Stabilization Code.[ii] Thus, when tenants in rent-regulated apartments sublease their apartments and/or have otherwise lawful co-occupants who contribute to their rent, the primary tenants cannot charge more than a “proportionate” share of their regulated rent amount to their co-occupants or sub-tenants. The case law indicates that tenants in rent-stabilized apartments who run afoul of the laws governing short-term occupancy and/or restrictions on “profiteering” are at heightened risk of facing eviction and losing their rent-stabilized apartments from such violations.
Advertising Short-Term Rentals on Airbnb or Elsewhere
A new law enacted by the New York legislature and signed by Governor Cuomo in late 2016 expressly prohibits the advertisements, including but not only through such websites and platforms such as Airbnb, of short-term rentals that would violate the short-term occupancy restrictions of the aforementioned New York Multiple Dwelling Law. This law further provides that any individuals who advertise short-term rentals on Airbnb, and/or otherwise violate the prohibition of advertising such rentals, face civil penalties of up to $1,000 for initial violations. The penalties increase to $7,500 for a third or subsequent violations. While this law took effect over a year ago, the extent and effects of its implementation are still unclear and are being watched.
Some Additional Considerations
The use of residential properties for short-term, transient occupants raises a variety of additional legal issues, the specifics of which are beyond the scope of this brief article. Hotel operators have special obligations to keep their guests and neighbors safe that go beyond the requirements imposed on landlords of regular residential buildings. In part due to their heightened safety-related requirements and such factors as special tax requirements, hotel operators must obtain several specific licenses permits to maintain their businesses. The use of the Airbnb platform to effectively convert private residences into alternative, ‘illegal hotels’ for short-term guest stays circumvents many of the rules and burdens placed on those who operate lawful hotels. This not only has generated significant opposition from hotel operators as well as from neighbors in some residential buildings frequented by Airbnb guests. It moreover gives rise to a variety of potential legal consequences by Airbnb hosts and even their landlords for violations of multiple dwelling and Airbnb advertising laws, as well as for safety and tax implications, among others. One such additional consideration is that, should a loss occur that involves an unlawful transient occupant, the host tenant and/or the landlord may not be covered by insurance and could be liable for covering any such losses directly.
The information above is intended to provide limited information only and is not legal advice. The laws relating to apartment sharing, sublets, and/or the use of Airbnb in New York are complex. If you are a party to a matter concerning the use of Airbnb or short-term rentals, or otherwise need further guidance in this or a related area of law, Singh & Rani, LLP can assist you.