NYC Fines Hotel Operator $1.2M for Illegal Short-Term Rentals

New York City is putting some teeth behind its campaign to curtail illegal short-term rentals.

On Monday, the city filed suit against a Miami-based hotel operator, accusing the company of turning 67 apartments in more than two dozen buildings in Manhattan and Brooklyn into illegal short-term rentals between 2019 and 2022.

On the same day the lawsuit was filed, defendant LuxUrban Hotels reached a settlement with the city, agreeing to pay a $1.2M fine, according to a report in Gothamist.

In its lawsuit, the city said illegal rentals caused “serious safety risks for the transient occupants of those units, significant security risks in buildings that are not equipped to handle the security problems associated with transient occupancy, and a degradation in the quality and comfort of the surrounding residents and neighbors.”

The lawsuit alleged that LuxUrban used Booking.com and Expedia to list apartments in Hell’s Kitchen, Chelsea, the Upper West Side and Cobble Hill, among other neighborhoods, cumulatively renting the units 4,300 times and collecting nearly $4M.

LuxUrban’s business model involves signing leases for apartments or hotels in major cities and then subleasing them as short-term rentals, according to an SEC filing in 2022, when the company was known as CorpHousing Group, Gothamist reported.

In September, NYC began enforcing its tough new regulations for short-term rentals, known as Local Law 18 (LL18), after a legal challenge from Airbnb was dismissed by a state judge.

LL18, passed in January 2022, requires Airbnb and other home-sharing platforms hosts to register with a database overseen by the Mayor’s Office of Special Enforcement, to submit diagrams of their homes and a list of who resides there, and to prove they are abiding by zoning and safety regulations, among other requirements.

City officials said the law is aimed at landlords the city claims have been illegally collecting booking fees for their properties. The Office of Special Enforcement conducted an investigation that resulted in the complaint against LuxUrban.

After LL18 went into effect in September, short-term rentals listed on Airbnb in NYC dropped from 10,000 to fewer than 500 approved by the city.

In a lawsuit filed in June, Airbnb said the requirements amounted to a “de facto ban” of the home-sharing platform in NYC “by requiring extensive and intrusive disclosures of personal information and forcing open-ended agreement to labyrinthine regulations scattered across a complex web of laws, codes, and regulations.”

State Supreme Court Justice Arlene Bluth dismissed the complaint in August. In her ruling, the judge said NYC had provided the home-sharing giant with “a very simple way” to properly verify listings. The judge also chastised Airbnb for “making little or no effort” to make sure its NYC hosts registered with the city.

LL18 permits property owners and operators to place their units on a “do-not-register” list that is supposed to immediately flag an Airbnb registration application as prohibited by request of the building’s owner or management.

In October, an Upper West Side building owner filed a lawsuit against Airbnb and tenants it alleged were violating LL18. Canvas Property Group, which manages 207 Columbus Avenue, said in the lawsuit that Airbnb allowed tenants to list units of the building despite its inclusion on the do-not-register list.

Last June, LuxUrban inked 35-year master leases to take over operations at two distressed Time Square hotels, the Hotel 46 Times Square at 129 West 46th Street and the Hotel at Times Square at 59 West 46th Street.

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