City settles two Airbnb rental lawsuits for $1.2 million

Cases filed several years ago net $700,000 and $516,203 from landlords

New York /
Aug.August 11, 2021 08:00 AM
Airbnb CEO Brian Chesky, 536 East 14th Street, Mayor Bill de Blasio and 412 West 49th Street (Getty, Google Maps)

Airbnb CEO Brian Chesky, 536 East 14th Street, Mayor Bill de Blasio and 412 West 49th Street (Getty, Google Maps)

Landlords Rose King and Maxine Gilbert don’t know each other, but according to their lawyers, they have something in common: ignorance of illegal Airbnb rentals in their buildings.

King was orchestrating the rentals, but claims she did not know they were illegal. Gilbert says she didn’t know the rentals were going on at all.

City officials are dubious of those claims, but point to the bottom line: The city is getting six-figure settlements in each case.

The de Blasio administration sued King in 2017 and entities tied to Gilbert in 2018 and is to receive $516,203 and $700,000, respectively. It’s the city’s latest mallet strike in a painstaking game of Whac-a-Mole against whole-home rentals shorter than 30 days, which are banned by state law.

The city and affordable housing advocates argue that the illegal rentals remove crucial units from the city’s already lean housing supply, raising costs for tenants, and compete with legitimate hotels.

The Office of Special Enforcement sued King and her affiliates for allegedly advertising and operating short-term rentals through Airbnb in three East Village buildings. And it sued the ownership entities of seven Gilbert buildings in Hell’s Kitchen and their property manager, Big Apple Management, for failing to stop such rentals.

Although short-term rentals of apartments designated for permanent residency have been banned under the state’s Multiple Dwelling Law since 2010, the city has struggled to curtail them. But the lawsuits build case law against various schemes, laying a legal foundation for future cases no matter what method people use to try to beat the system.

Maxine Gilbert’s lawyer, Adam Leitman Bailey, said Gilbert is paying the settlement with the city even though she was not aware that tenants were running an Airbnb business at her properties.

“These were professional operators who did this throughout the city and ran these gambits unbeknownst to my client,” said Leitman Bailey.

City officials said she could have figured it out.

“The owners have an obligation to ensure the buildings are operated lawfully, and the lawsuit was brought only after the owners and their management company received multiple rounds of violations for allowing the rentals,” said Christian Klossner, executive director of the Office of Special Enforcement, in a statement.

King, for her part, was actively renting out units in her apartment building through Airbnb, but her lawyers, Todd Spodek and Jeremy Feigenbaum, said she did not know she was breaking the law. In court transcripts, King said she thought it was legal because Airbnb never stopped her.

But King had made an arrangement with a man named Bryan Chan, who set up 34 different host accounts in an apparent strategy to evade Airbnb’s policy of not allowing users to list multiple addresses. The settlement payout of $516,203 amounts to all the revenue reaped from the illicit rentals.

Her lawyer blamed the tech platform.

“The reality is that Airbnb profits while the individual landlords are forced into protracted litigation with the city,” Spodek and Feigenbaum said in a statement. “Airbnb continues to skirt responsibility and forces the litigation costs on their hosts.”

Airbnb’s website includes information on the laws of a host city, but does not prevent hosts from posting listings that violate them. Federal law protects technology companies from liability for these and other actions that customers take on their platforms.

Since last year, Airbnb has been required to share with the city information about short-term rental listings, which includes the address and nights booked. Airbnb did not respond to requests for comment.

Both lawsuits involved hosts who utilized false identities to list Airbnb rentals, but Airbnb has recently updated its identity verification program. The company says that 97.9% of its U.S. bookings are between a host and guest who have completed the identity verification process.

Still, rentals of fewer than 30 days when the owner or tenant is not present still happen routinely, city officials acknowledge, often to the dismay of landlords. Last month the Brodsky Organization sued a tenant who they allege rented out an apartment on Airbnb using a false identity.

Not all short-term rental violations end in litigation with the city. Some only result in fines.

“Most of our lawsuits are brought after at least two rounds of inspections have determined that not only are they breaking the law but that they aren’t stopping once they have been told to,” said Klossner.

King’s properties were peppered with violations and she paid more than $113,0000 in administrative penalties prior to litigation and owes the city $80,000, according to the Office of Special Enforcement.

Similarly, Gilbert paid more than $46,000 in administrative penalties prior to litigation and owes the city more than $300,000.

The city is still litigating against two tenants who operated a short-term rental business in two of Gilbert’s Hell’s Kitchen buildings.





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