No Room at the Inn – New York Closes the Door on Illegal Hotels

On July 23, 2010, Governor David Patterson signed into law, legislation that amends the New York State Multiple Dwelling Law to define permanent and transient occupancy. The new illegal hotel law forbids most residential apartment units to be rented out for stays less than 30 days.

This legislation may be a reaction to City of New York v. 330 Continental LLC, a 2009 Appellate Division – First Department holding, which relied on the fact that the critical terms “transient” and “permanent” are not defined in either the Multiple Dwelling Law or the New York City Zoning Resolution. The ambiguity created by this omission has hindered the City of New York from taking enforcement actions against illegal hotels, a problem in New York City, where landlords have been able to convert vacant apartments into temporary housing for tourists, a practice made easier by internet advertising. According to the law’s co-sponsor, State Senator Liz Krueger, over 300 New York apartment buildings had such temporary rental rooms.

Mayor Bloomberg praised the new law, stating:

When housing designated for permanent occupancy is illegally converted into a hotel, unsafe conditions are created, the residential character of City neighborhoods is harmed and the supply of much-needed units of housing is depleted. The bill provides a clear definition of what constitutes transient and permanent occupancy, which will allow City agencies to issue summonses and initiate other enforcement actions against illegal hotels.

Governor Patterson also touted the new law, noting, “By removing a legal gray area and replacing it with a clear definition of permanent occupancy, the law will allow enforcement efforts that help New Yorkers who live in SRO units and other types of affordable housing preserve their homes.”

There was some opposition to the bill, including a demonstration. Those opposing the bill claimed that in a poor economy such rentals were the only way tourists of modest means could afford to visit the city and a source of needed income by desperate apartment owners.

Illegal hotels are widespread and highly profitable. Thus, it remains to be seen what practical impact this legislation will have on the industry. Only time will tell.