NYC Raids Illegal Hotels as New Law Takes Effect

On July 23, 2010, Governor David A. Paterson signed into law a bill prohibiting transient use in any “class A” multiple dwelling building. The law became effective on May 1, 2011, and it was created to crack down on “illegal hotels” that have proliferated throughout New York City.

Some owners may have been renting apartments as hotel rooms to get more money than the rent laws allow, or to empty out a building for a co-op or condo conversion. The new law makes it clear that operating a residential apartment as a transient hotel is illegal in New York City. Class A multiple dwelling units must be used only for permanent residence purposes, defined as occupancy by a person or household for 30 consecutive days or longer.

The law was created in response to a court decision that ruled that the transient use of a residential building is permissible if less than half of the units are being used for transient uses [City of New York v. 330 Continental LLC, January 2009]. In effect, the law clarifies ambiguities in state and city laws that made it difficult for government agencies to effectively crack down on illegal hotels just a year ago.

What the Law Says

The law prohibits the renting of even a single unit in a Class A building, whether it's a Class A hotel or an apartment building, for less than 30 days. The law even prohibits an individual tenant from subletting his or her unit for less than 30 days. However, individuals occupying the unit with the permanent tenant—such as roommates, boarders, or guests—are not subject to the 30-day rule.

Additionally, incidental or occasional occupancy—such as when the permanent tenant is on vacation or away for medical treatment—is allowed for less than a 30-day term, provided that no payment is received for the use of the unit.

Eligibility for Transient Use

Owners of Class A buildings that have apartments that are being rented on a transient basis should consult with an architect and attorney to determine whether the building is eligible for legalization for transient use.

The law affords two years, with limited extensions for cause, for a small number of buildings to legalize or, in other words, obtain a Class B Certificate of Occupancy. However, the vast majority of buildings are not eligible for the two-year moratorium.

To qualify for legalization, the building must:

• Have had 51 percent or higher transient occupancy on Jan. 1, 2009;

• Have been used as a hotel or for transient use on Dec. 15, 1961;

• Be of fireproof construction;

• Have two means of egress for each residential unit;

• Have operational exit signs and a fire alarm system as required for hotels on Jan. 1, 2009; and

• Be registered with the Department of Buildings within six months of the effective date of the legislation.

Included in the registration requirements is the submission of a certification signed and sealed by an architect or licensed engineer that verifies that each unit meets the fire and safety requirements stated above. In the event that the owner fails to obtain the new Certificate of Occupancy within the two-year time period, plus granted extensions, if any, then the law requires that all transient use discontinue.

Recent Raids

As of the effective date of the new law, the Mayor's Office of Special Enforcement has been busy cracking down on illegal hotels. As a result of recent raids, 15 illegal hotels have been shut down in Manhattan and Brooklyn, including the May 3rd raid on a building in Bedford-Stuyvesant that reportedly had more than 40 people staying in a three-bedroom home. In that instance, a full vacate order was issued and guests were left to fend for themselves. Penalties for these building owners ranged from $800 to $2,500 per violation.

The mayor's office reports that city inspectors found a large number of unsafe conditions, resulting in full and partial vacate orders as well as violations. Inspectors found overcrowding, inadequate egress, inadequate sprinkler and fire systems, and combustible materials throughout the buildings.

At one illegal hotel in Manhattan, building owners left clients specific instructions on how to try to subvert the new law, noting in a flyer that inspections may occur and “if you inform the public official that your stay is longer than 30 days, then the public official must leave your residence and should not bother you any further” and “don't give your receipt of payment to them.”