The Real Deal New York

SRO owners to pay $600K for renting Upper West Side units to tourists

Settlement resolves 2007 lawsuit that gave rise to illegal hotel law

November 29, 2011 06:55PM
By Leigh Kamping-Carder

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David Satnick, a partner at Loeb & Loeb, 316 West 95th Street and 330 West 95th Street

The owners of three Upper West Side single-room-occupancy buildings will pay $600,000 in civil penalties to settle claims they violated housing laws by renting out some of their roughly 600 units to short-term tenants and tourists. The agreement, approved by a New York state judge on Nov. 22, resolves a longstanding legal dispute with the city that spurred legislation last year clarifying that SRO units must be used for permanent residents only.

For almost a century, tourists and other temporary occupants have rented units at the properties — the Montroyal at 315 West 94th Street, the Pennington at 316 West 95th Street and the Continental at 330 West 95th Street, all between West End Avenue and Riverside Drive — and the owners have advertised the accommodations on travel websites, according to court records.

But in September 2007, the Department of Buildings and the Department of Housing Preservation and Development sued the owners, claiming the short-term stays violated the city’s zoning code and the Multiple Dwelling Law. (The agencies also claimed the owners had committed building code violations, including performing work without a permit and failing to provide proper fire exits.)

City officials have argued that allowing property owners to rent out SRO units as hotel rooms deprives the city of affordable housing, and that the properties often lack the stricter fire safety protections required in buildings used for short-term accommodations. Last year, New York State passed a law that prohibited residential apartments from being rented out for stays less than 30 days, a widespread practice aided by websites like AirBnB.

The property owners contended that it was legal to rent some units to temporary occupants, as long as the buildings were used primarily for permanent residents.

In 2009, a state appeals court agreed, and overturned a court order that would have forced the property owners to immediately stop the short-term rentals. The decision was not the final say in the case, however, and the parties were set for trial when they settled.

The state passed the law partly as a response to that ruling, as well as complaints from the hotel industry and neighbors of illegal hotel rooms, as The Real Deal has reported.

“The law mooted the dispute that the parties had, and there was a recognition of that,” said David Satnick, a partner with Loeb & Loeb, who represents the owners of the Montroyal and the Pennington, which he said had been used solely for permanent residents since the law took effect in May.

“We’re pleased that we are now in good stead with the city and hope to remain that way for years and decades to come,” Satnick added.

As of February, the Continental and the Pennington were reportedly providing housing for homeless men.  

Under the settlement, the property owners agreed to ensure their units — 207 at the Continental, 200 at the Montroyal and 184 at the Pennington — are used solely for permanent residents and to correct outstanding building code, zoning and maintenance violations.

“This settlement is another step toward resolving these difficult issues for the city, communities and owners of residential buildings and ensuring that buildings intended for permanent residential uses are occupied in an appropriate and lawful manner,” Michael A. Cardozo, the top attorney at the New York City Law Department, said in a statement.

An attorney for the Continental did not immediately return a request for comment.

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