The Real Deal New York

New illegal hotel law draws ire from SROs

July 26, 2010 04:00PM
By Barbara Thau

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From left: David Satnick, the Continental, Mount Royal and the Pennington

(Updated 2:42 p.m., July 27) Politicians cheered Governor David Paterson for signing into law an illegal hotel bill last Friday — but not everyone is celebrating.

The new law aims to help New York City agencies clamp down on illegal hotels, apartments designated as permanent residences that are improperly rented out on a nightly basis, by providing a clear definition of what constitutes transient and permanent occupancy.

It forbids residential apartments to be rented for stays less than 30 days.

Housing advocates estimate that there are at least 300 such buildings
in New York City, representing many thousands of units. But Senator Liz
Krueger and Assembly member Richard Gottfried, who sponsored the
legislation, said no formal list exists.

David Satnick, a partner with Loeb & Loeb, who represents the
Manhattan single-room-occupancy hotels the Pennington, Continental and
Mount Royal, located on West 94th and 95th streets — which have been
in the spotlight for renting rooms on a nightly basis — called the law
“fundamentally unfair, misguided and unconstitutional.”

Satnick said the bill unfairly penalizes SROs, which until now have
been in compliance with the law and have not been operating illegal
hotels. That’s because the New York State Supreme Court Appellate
Division’s First Department ruled in January 2009 that SROs could
legally operate apartment units for transient use, as long as most of
the building was used for permanent use, which they have been, he said.

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But, a section in the new law calls for building owner/operators who
have used their building predominantly for transient use, which have
been “in clear violation of the law,” to be granted a two-year grace
period to convert their units, while SROs, which have been in
compliance with the law, will not be.  

“In effect, they’re shutting [SROs] down,” Satnick said. “This bill
would make these legal hotels illegal, and make those illegal hotels
legal. It’s topsy-turvy.” 

The governor is making the bill effective May 1, 2011, to give building
owners time to adjust the uses of their properties. 

If he can’t convince legislators to amend the law, Satnick said he will
turn to the courts as he has done in the past. Satnick and his partner,
Helen Gavaris, handled the case at the Appellate Division that declared
SROs legal so long as they were predominately permanent.  

“Unfortunately, many of these hotels will, through the loss of rental
income, deteriorate and revert to the urban blight of the past.
Then everyone — the permanent tenants, owners, neighbors, and the city
itself — will suffer and lose, not to mention the thousands of
employees who will lose their jobs.”

Krueger
and Gottfried pressed for the legislation, because as Krueger said, the
new law gives the city “the enforcement tools it needs to ensure that
residents will no longer see their apartment buildings overrun by
tourists, and visitors will no longer have to worry about arriving to
find that their ‘hotel’ is actually an apartment building.”

NYC
& Company, the city’s official tourism marketing organization, said
the new law will help the city combat the proliferation of illegal
hotels.

“This reform is great news for New York City’s 8.4
million residents, 46 million annual visitors [and] 304,000 jobs in the
hotel industry that are directly affected by these illegal
establishments,” said George Fertitta, CEO of NYC & Company.

The Hotel Association of New York City, which has a membership of 250
hotels with more than 70,297 rooms, is happy with the new law, said
Joseph Spinnato, president of the association. 

In response to criticisms that the legislation was designed to protect
the interests of the big city hotels, Krueger said: “While the Hotel
Association of New York [City] ultimately supported the legislation,
the organization was not consulted until after the bill was introduced
and had to be convinced that it would not harm its members.” 

The mayor’s office has, and will continue, to handle enforcement actions against violators.

“The
Mayor’s Office of Special Enforcement has handled illegal hotel
enforcement for years, there is nothing in the bill that changes that,”
said Jason Post, a mayoral spokesperson. “The enforcement will be
exactly the same, only now, because of the clear definition of
permanent and transient occupancy, our summonses will withstand legal
challenge and thus have teeth.”

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