Airbnb Rentals Hit Legal Turbulence

A tenant of a rent-stabilized Manhattan apartment listed the unit on the Airbnb website at nightly rental rates starting at $200. Entered into more than one dozen separate rentals totaling 79 nights in 10 months, with up to 5 guests per rental. And collected as much as $366.00 per night, more than four times tenant's daily rent of $90.00. Landlord started an eviction proceeding.

The trial court concluded that tenant commercialized her apartment, an incurable violation of the Rent Stabilization Law. And also found that the illegal, de facto hotel operation showed complete disregard for the legitimate security concerns of landlord and other tenants of the residential building. The fact that other tenants were subjected to dozens of transient strangers illegally staying for short periods in the tenant's apartment warranted termination of the lease.

The appeals court held that the tenant was not entitled to a notice to cure or any further opportunity to cure. "Once substantial profiteering has been established, the tenant is subject to eviction without any right to cure, as a matter of law." And the Court concluded that it was doubtful that a cure would be possible. "In this context, `cure' does not mean simply the termination of the illegal subletting, but also the refund to the subtenants of the overcharges." Given the number of individuals tenant hosted via Airbnb, with whom she had no direct financial dealings, it appeared that the overcharges tenant collected "could not practicably be refunded".

The appellate court rejected the tenant's claim that the landlord treated the apartment as a market rate, unregulated unit. "In determining whether a dwelling unit is subject to rent regulation, what the parties think might be its status or even what they agree to be its status is not dispositive; what is controlling is whether the premises meet the statutory criteria for protection under the applicable regulatory statute." And the Court summarily dismissed tenant's argument that she did not know the premises were stabilized when she engaged in the challenged conduct. Ignorance of relevant law is not a defense to complying with legal obligations.

Tenant sought to avoid the burdens of rent stabilization by claiming she was unaware that the apartment was stabilized at the time of her Airbnb subletting. It certainly did not help her case that she nevertheless sought to reap the benefits of stabilization through a rent overcharge action against the landlord in Supreme Court in which she sought treble damages for alleged rent overcharges collected by the landlord during the same period of time.

Courts in Manhattan are traditionally sympathetic to residential tenants and are reluctant to evict them.  This case demonstrates that such sympathy can have sharp limits insofar as illegal Airbnb activities are concerned. Not only conventional landlords but owners of “unsold apartments” in cooperative buildings should keep in mind that they may have an effective means of evicting tenants who seek to profit through Airbnb.

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