Tenants' Profiteering Results in Incurable Breach of Lease

“Such brazen and commercial exploitation of a rent-stabilized apartment significantly undermines the purpose and integrity of the Rent Stabilization Law and Code and is therefore incurable.”

Quote from decision of Judge Laurie Lau, BPark, LLC v. Durena , L&T Index No. 100145/2014 (4/1/15), attorneys for the owner, Sidrane & Schwartz-Sidrane, LLP.

The explosion in popularity of Airbnb and other similar online short-term rental websites has left too many landlords scratching their heads wondering why there are confused-looking visitors with suitcases standing in the foyers and lobbies of their buildings. The price gouging that occurs when tenants rent out their rent-stabilized apartments creates an inequity that the courts are addressing in the sternest of ways–treating such tenant actions as incurable.

As stated by the Appellate Term in West 14 LLC v. Yonke, “Using a residential apartment as a hotel room and profiteering off of it is ground for eviction and is incurable...” [11 Misc.3d 40, 41].

The concern is not just related to the fact that owners are subject to strict rent ceilings, hence the tenants themselves should not be taking advantage of subtenants and visitors, but there is a concern about the safety and well-being of regular tenants, who do not have any assurance of stability from unvetted short-term renters, but also for these “guests” who are not protected by the same regulations that govern hotels, motels, and single room occupancies (SROs).

The participants in Airbnb are usually violating the Multiple Dwelling Law (MDL), which designates Class A dwellings for permanent tenants and Class B multiple dwellings for transient use. The distinction is that Class A dwellings need not meet the same requirements of stringent egress and fire safety requirements required for hotels and places designated for short-term stays (less than 30 days).

In a recent case that our office handled, BPark, LLC v. Durena [L&T Index No. 100145/2014], the prime tenant had removed himself from the premises and his children were using the apartment as an Airbnb location for the sum of $44 per night, plus a $45 cleaning fee and a $43 Airbnb fee, for only one of the bedrooms. 

The monthly rent-stabilized rent was half that amount, and the tenants were charging $398 per week/room: a clear case of profiteering.

At the recommendation of our office, the owner booked seven nights for one room at the apartment. He received a booking confirmation by email for a total of $398, and that email confirmation was admitted into evidence at trial. He subsequently cancelled his stay as he had sufficient evidence of the tenants’ illegal use to testify in court.

The property manager also researched the Airbnb website and found 59 reviews of “guests” and that one of the tenant’s children had been a member of Airbnb since December of 2013. The tenants had posted an eight-page listing with nearby attractions, shopping, and photographs, which showed rooms without any personal effects.

If an owner is suspicious that an apartment is being used for Airbnb, the following actions should be taken:

• Research and maintain records from the Airbnb website
• Book a “stay” at the apartment, keeping receipts
• Document visitors in the building
• Conduct a legal inspection of the apartment, and take pictures

• Is there food in the refrigerator?
• Is there clothing in the closets?
• Are the bedroom and closet doors locked from access?
• Are there no toiletries in the bathroom?

• Install a camera at the door to the apartment

Once prepared with the evidence, an owner can bring this documentation to its attorney and a proceeding can be commenced, with a 10-day notice to cure.

The courts make the distinction between “curable” and “incurable” and view tenants’ use of their rent-stabilized apartments for Airbnb as an egregious breach of their leases that cannot be cured. The court in Graham Ct. Owners v. Taylor [2015 N.Y. Misc. LEXIS 2833 (8/7/15)] held:

“Unlike situations involving rent gouging or profiteering in relation to a sublet, conduct which undermines the integrity of the rent stabilization system... constitutes an incurable ground for eviction...” [cites omitted; emphasis added]

The courts have carved out an exception to the many instances where a tenant can cure a situation he or she has created. But when a rent-stabilized tenant enters the world of Airbnb and charges a market rent, this conduct cannot save the tenancy.