The Real Deal New York

NYC wins ruling in short-term rental operator case

February 21, 2013 08:30AM

A New York state judge ruled in the city’s favor Friday on a lawsuit that it had brought against Smart Apartments, barring the large scale-operator of short-term rentals from operating or advertising residential apartment units as limited-occupancy hotel rooms, Law360 reported.

In an October suit, the city alleged that Smart Apartments, by booking and housing visitors in illegally-converted apartment buildings, was indulging in deceptive trade practices against tourists. On Friday, Justice Arthur Engoron ruled that Smart Apartment’s practices were indeed a public nuisance and put visitors and building residents at risk.

“Whether or not, in our cynical age, most people would consider engaging in illegal activity as a plus, minus or neutral, they have a right to know whether it is or is not [illegal],” he said. He added that buildings that operate as short-term residences had by necessity much stricter fire safety standards, and since residential apartment units are not required to adhere to these standards, it was dangerous to operate them as short-term rentals.

Smart Apartments and its parent company Toshi Inc. argued that they were being singled out for harsh treatment, as Airbnb, an even more notable alleged offender, hasn’t been slapped with a lawsuit.

The number of violations issued against residential landlords who illegally house temporary occupants in their apartment buildings has more than doubled in the wake of 2011 state legislation curbing illegal hotels, as The Real Deal previously reported.  [Law360]  —Hiten Samtani

  • Eric Uzzo

    I commend the city for their crackdown on illegal rentals. And chuckled a little when I read their argument… “Airbnb does it”…. sort of like telling your Mom… well everyone else is doing it…. and her obligatory reply… well if they jump off a bridge would you jump too… Two wrongs do not make a right Mr. Chan. As we discussed in our blog the city is doing a good job of curbing the amount of illegal rentals, however until they begin to regulate the abundance of websites offering these private apartments and homes as rentals, this will be an uphill battle. Sites such as these are the catalyst for this type of illegal housing and thorough inspections should be done prior to being able to list any apartment on these aggregate sites and regular audits of their inventory should also be performed.