Superhero XIII: The Hazards and Happinesses of the Short Sublet

By Robert Kroll

Those of you, and I mean both of you, who regularly follow this series of columns on the meaning and essence of the co-operative ownership of residential apartments, know that I’ve tried to point out the pitfalls, the problems and the predators of co-op living in the Village.

There are probably no more serious threats to a co-op building, its occupants, board members and shareholders than the practice of sub-letting apartments.

Please bear with me and know that this is not going to be a screed against those people known as “renters” or “tenants.” They are clearly humanoid creatures. Many of them are mensches. Some of my best friends… This article is not a class-based attack on non-owners of real estate, or an attempt to place homeowners on a pedestal. Renters of cars, motorscooters and bicycles, on average, treat those vehicles differently than they would their own. That’s human nature.

There are material differences in the stake or perspective of a person who rents an apartment short term and one who has a “proprietary lease” and owns shares in a co-operative corporation. Full disclosure, I happen to be in the latter category, and have an 8% stake in my co-op corporation and am its resident manager and superintendent. If I were a renter, I would not view my home as any part of my retirement fund and would have all the insecurities and issues of handling the day-to-day problems of any renter of a New York apartment. There are slumlords and problem tenants, probably a minority in each category.

Yet, for better or worse, an owner-occupied building is worth more, and can borrow from a bank at lower interest rates than a building that is renter or subletter occupied.

One of the prodigious and controversial sublet types is the Airbnb online home and apartment sharing platform. No city in America took greater offense at the Airbnb system of very short term subletting or “apartment sharing” than New York. The practice was seen as a threat to neighborhoods, housing supply, and the temporary tenants of these rentals. The New York objection was to the short-term nature of these rentals and the lack of health, security and safety regulation and taxation to which hotels are subjected. At its peak, there were over 50,000 Airbnb hosts earning more than $650 million in rents in the five boroughs. The City of New York took a strong position against short term apartment sharing in the gig economy, defended a major action in court and ultimately settled the case lopsidedly in favor of the city’s position.

Now, Airbnb, meaning renting under 30 days, is “illegal”, with several loopholes, in the entire city of New York, all five boroughs, under city ordinance. Here are the particulars according to the City of New York website:

  • You cannot rent out an entire apartment or home to visitors for less than 30 days, even if you own or live in the building.
  • You must be present during your guests’ stay if it is for less than 30 days.
  • You may have up to two paying guests staying in your household for fewer than 30 days, only if every guest has free and unobstructed access to every room, and each exit within the apartment.
  • Internal doors cannot have key locks that allow guests to leave and lock their room behind them. All occupants need to maintain a common household, which means, among other things, that every member of the family and all guests have access to all parts of the dwelling unit. Internal doors with such key locks create barriers to escaping in an emergency and may result in the issuance of a temporary vacate order.

Under the NYC Administrative Code, property owners are responsible for ensuring their properties are maintained in a safe and code-compliant manner at all times. Property owners can and will be issued the violation for any illegal short-term rentals at their property—even if it is conducted by tenants.

New York State law also prohibits the advertising of an apartment in a Class A multiple dwelling, a building with three or more permanent residential units, for rent for any period less than 30 days. Fines for doing so range from $1,000 to $7,500 and will be issued to the person who is responsible for the advertisement.

The public is encouraged to submit complaints of “illegal hotels” and “home-sharing” in the city.

Harsh. Hard hearted. But an unequivocal statement of the NYC City Council that the gig economy in cribs will not be tolerated or permitted. The city’s rationale:
“In neighborhoods where homes are being used for short-term rentals illegally, the comfort and safety of permanent residents and visitors alike is at risk. In these neighborhoods, the stock of available housing diminishes, and the distinctive character of the community changes.”

Still, there are many hosts and guests who are breaking the short-term occupancy ban law. Some portion of those people will get caught and face the fine. In other words, it’s like petty theft and driving under the influence, only a problem for the perpetrator if she gets caught. Given the amount of potential income involved, these fines can be considered a part of doing business.

There are many good arguments on both sides of that policy question, but the issue is, for the moment, decided and set in stone.

This is but one of dozens of issues raised by subletting in its various forms. In next month’s WestView News, I’ll deal with the pros and cons of legally renting out apartments in co-ops and condominiums. And, in the following months I will go into some of the ways that skillful managers have dealt with the issues through house policies, rules and regulations of subletting. 

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