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