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How can our building keep residents from renting out their apartments on Airbnb?
The best way to stop co-op and condo owners from illegally Airbnb-ing their units involves a mix of prevention and tough response, says Steven Wagner, a co-op and condo attorney with Wagner Berkow LLP and a longtime board member of his own 412-unit Manhattan co-op.
Below, a three-pronged approach to keeping your building's residents from getting into the short-term rental business—and if it's already too late for that, nipping the problem in the bud:
First up, if you're concerned about the possibility of residents renting out their apartments (or suspect it may be happening already), there are a couple of common-sense policies the building can put in place to make their Airbnb-ing more difficult.
"If there's a house rule prohibiting guests from entering or staying in an apartment in the absence of the owner or tenant shareholder, you can have a doorman or staff enforce that rule, to some limited degree," says Wagner. For instance, your building might consider enacting a new rule prohibiting doormen from holding keys for guests, or from allowing guests in who either haven't been approved or aren't accompanied by the apartment owner.
Similarly, it's smart to create a system wherein guests are required to register with the building, even if it's just confirming their names and asking for proof of identity. These relatively small measures make it far more difficult for residents to move a revolving door of anonymous guests in and out of the building.
If an owner or shareholder has gotten around the rules and is using their apartment as a short-term rental, says Wagner, "The first step is obviously to send a letter to the resident, essentially saying, 'You're breaking the rules, please stop.'" This first letter doesn't have to be a formal warning, and can come from an attorney or simply from the managing agent.
If that doesn't do the trick, it's time to check your proprietary lease (in a co-op) or bylaws (in a condo), which will likely have a provision against short-term rentals (or at the very least, requirements that resident follow the letter of the law), as well as rules about how residents must be given notice that they are in violation. Send the wayward resident a formal notice about their inappropriate "use of premises," and have it signed by the board president or secretary, whoever is authorized to send official notices.
This kind of formal notification will put your board in good legal standing if it becomes necessary to take legal action against the owner in question (more on that below).
One thing to note: in co-ops, the board is also required to notify the tenant-shareholder’s lender (and give the lender additional time to compel the shareholder to cure the behavior). It’s an extra hoop to jump through, but also potentially helpful, as the lender may also demand that the resident cease their short-term rental activities.
And for condos, you may have another option at your disposal: Many condo bylaws give the board the right to impose fines on residents for violating building rules. Meaning, then, that before you take the matter to court, you can simply fine the owner for their illegal activities and see if that puts an end to it.
Taking legal action
If the owner or shareholder is still breaking the rules 30 days after they've received written notice, a board is within its rights to take legal action. But your options here will vary depending on whether your building is a co-op or a condo. (In either case, now's the time to check the proprietary lease or bylaws for policies on recovering legal fees from a resident should you win your case in court.)
For a co-op, there's the option to start the process for what's known as a "Pullman case" to evict the shareholder based on "objectionable conduct" (Wagner has a full guide on the Pullman process here).
Condos, however, have to go to New York Supreme Court (rather than just housing court) to seek an action for declaratory judgment against the owner in question. (Co-ops have this option available to them, as well, though they also have the option of housing court, which is more lenient on the shareholder, but better if you simply want a quick probationary stipulation for the resident to “cure” the behavior). "Basically, you say that by violating the rules, the unit owner is, in effect, challenging the authority of the board to enforce the rules," says Wagner. "Ask the court to declare the board has the right to enforce the rule and to permanently enjoin the unit owner from violating rules in the future. And as long as you have the evidence, you should win."
Generally speaking, litigating the case in court should be a last resort, as it can cost tens of thousands of dollars, on top of untold hassle and stress. But the benefit of taking the issue to Supreme Court is that if the shareholder or unit owner fails to comply, they can be held in contempt of court, which could translate to fines or even jail time.
"You're not just violating the rule of the co-op or condo, you're now violating the rule of the judge," Wagner explains. "And no one wants to be in front of an angry judge whose order they've just violated.”
**This post originally ran on June 16, 2016.**
New York City real estate attorney Steven Wagner is a founding partner of Wagner | Berkow with more than 30 years of experience representing numerous co-ops, condos, and individual owners and shareholders. To submit a question for this column, click here. To ask about a legal consultation, send an email or call 646-791-2083.