Protect Vacation Rentals

In January 2011, Senator Krueger introduced a new bill (S2127-201).

This bill, if passed into law, would impose criminal penalties for individuals who violate or assist in the violation of any provision of the Multiple Dwelling Law (“MDL”) where such a violation has resulted in the death of another as well as impose increased penalties for persons who violate or assist in the violation of any provision of the MDL where such violation has resulted in serious physical injury.

The accompanying memo further provides: “the problem of illegal apartment conversions is persistent and pervasive, and places residents of the State in danger of physical harm or death, and puts tremendous strains on community resources, including building, fire and emergency medical services personnel. An illegal conversion is the creation of one or more additional dwelling units within a building without first receiving the necessary building permits.”

Only illegal apartment conversions are mentioned in the accompanying memo of the bill.  The bill however provides that increased penalties would be imposed on individuals violating or assisting the violation of any provision of the MDL where such violation has resulted in serious physical injury.

Note:  Multiple Dwelling Law (Chapter 713 of the Laws of 1929) was enacted to set standards to maintain proper housing and to guarantee living conditions essential to the safety, morals, welfare and reasonable comfort of the residents of New York State[1].

Examples of MDL violations:

1. Come May 2011, any unit in a class A multiple dwelling rented for less than thirty days will be in violation of Article 1, Section 4 (a) of the MDL.  Bill 6873B amended Article 1, Section 4 (a) of the MDL to provide: “ A class A multiple dwelling shall only be used for permanent residence purposes.  For the purposes of this definition, “permanent residence purposes” shall consist of occupancy of a dwelling unit by the same natural person or family for thirty consecutive days or more […].”
2. Converting a two family dwelling into a three unit multiple dwelling.
3. Failing to make fireproof a multiple dwelling exceeding six stories etc.

The full text of the bill may be found at: http://open.nysenate.gov/legislation/bill/S2127-2011

The penalties for violations are set forth in Article 8, Section 304 of the MDL.  The next article to be posted on Protect Vacation Rentals (“PVR”) will discuss these various penalties.

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[1] Article 1, Section 2 of the MDL provides: “[i]t is hereby declared that intensive occupation of multiple dwelling sites, overcrowding of multiple dwelling rooms, inadequate provision for light and air, and insufficient protection against the defective provision for escape from fire, and improper sanitation of multiple dwellings in certain areas of the state are a menace to the health, safety, morals, welfare, and reasonable comfort of the citizens of the state; and that theestablishment and maintenance of proper housing standards requiring sufficient light, air, sanitation and protection from fire hazards are essential to the public welfare. Therefore the provisions hereinafter prescribed are enacted and their necessity in the public interest is hereby declared as a matter of legislative determination.”

New York City short-term rental ban to come into effect in May 2011
Explaining the lodgers exemption
(also misleadingly referred to as the B&B exemption)

A1000-B/S6873-B, signed into law in July 2010 but coming into effect in May 2011, amended the New York State Multiple Dwelling Law (“MDL”) to prohibit some New York City owners to rent their homes for less than thirty days.

This ban will apply to all “class A multiple dwellings,” which the MDL defines as dwellings occupied as the residence or home of three or more families living independently of each other.

The MDL, however, provides that boarders or roomers may still rent for less than thirty days provided that they live within the household of the permanent occupant(s). [1]

How many boarders or lodgers one is allowed to have in one’s home without being in violation of the MDL?

Four.  [2]

Section 4 of the MDL provides as follows:
A family is either a person occupying a dwelling and maintaining a household, with not more than four boarders… or two or more persons occupying a dwelling, living together and maintaining a common household, with not more than four boarders… A boarder residing with a family shall mean a person who pays a consideration for such a residence and does not occupy such space within the household as an incidence of employment therein.

What does “living within the household of the permanent occupant” mean?

Section 27-2004(4) of the Housing Maintenance Code provides, in pertinent part, that “[a] common household is deemed to exist if every member of the family has access to all parts of the dwelling unit” [emphasis added].

Evidence the DOB will look at to determine whether the unit is occupied in compliance with section 27-2004(4) include:

-Are some of the rooms locked?
-Do the occupants share a bathroom or a kitchen? etc.

Please note that some (not all) administrative law judges may have a very strict interpretation of this requirement and may infer from the existence of locks on individual rooms that the unit was illegally altered for occupancy (in other words, some administrative law judges may see individually locked rooms as separate residences).

Are there any other requirements I should be aware when renting my extra bedroom or room(s) to lodgers?

Yes.

Section 248 of the MDL states, “[t]he letting by a family of one or more rooms within their apartment to not more than a total of four boarders, roomers or lodgers provided, however, that every room in such apartment shall have free and unobstructed access to each required exit from such apartment [….]” [emphasis added].

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[1] Please note that the permanent occupant can either be a tenant or an owner.
[2] Housing Maintenance Code has a more restrictive requirement. Section 27-2004(4)  states “[a] family may rent one or more living rooms in a private to no more than two boarders […].”  Section 12-10 of the Zoning Resolutions defines a family as “either (a) a single person occupying a dwelling and maintaining a household, including not more than one boarder… or (c) not more than four unrelated persons occupying a dwelling living together and maintaining a common household.”

The opening of a homeless shelter in the Upper West Side: an unintended consequence of the New York City’s short-term rental ban?
Gottfried and Kruger, sponsors of the illegal hotel bill, blamed.

A SRO building (formerly the Alexander Hotel) located in the Upper West Side is to be rented to the non-profit organization Samaritan Village and turned into a 200-bed homeless shelter for single men.

The owner explained that the layout of his building limits its use and that absent the revenue stream brought in by tourists, the rents generated by long-term residents were not sufficient to cover costs [1].  “I just need a tenant who can lease the building from me so I can pay my bills,” he said during an interview given to DNAinfo [2].

Last Sunday, Congressman Charles Rangel, City Councilwoman Gale Brewer and local residents rallied against the plan to convert the Hotel Alexander into a transitional housing facility.

What other unintended as well as unexpected consequences do you think the New York short- term rental ban will have come May 2011?

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[1] http://www.nytimes.com/2011/01/15/nyregion/15homeless.html
[1] http://www.dnainfo.com/20110117/upper-west-side/gale-brewer-charles-rangel-rally-against-uws-homeless-facility

Some residential buildings that have historically operated as hotels prior to the enactment of the Multiple Dwelling Law [1], or were legally operating as hotels under the pre-1961 zoning can register their units for other than permanent residence purposes with the Department of Building.  Applicants that register by January 12, 2011 will have until July 16, 2012 (with possible extensions) to comply with relevant building codes for transient use.

The other criteria to satisfy in order to convert a class A dwelling (for permanent residential use) into a class B dwelling (for transient use) are the following: (a) the dwelling is of a fireproof construction and was of fireproof construction on 1/1/2009; (b) the dwelling units have at least two lawful means of egress and had them on 1/1/2009; (c) the dwelling has operational exit signs and a fire alarm system that comply with local law for existing transient occupancies and had the signs and alarm system on 1/1/2009.

The relevant registration form and other documents to be submitted can be accessed on the New York City Department of Building Website:

http://www.nyc.gov/html/dob/html/forms/forms_permits.shtml

The MDL1 Form: http://www.nyc.gov/html/dob/downloads/pdf/mdl1.pdf

The MDL1 Instructions: http://www.nyc.gov/html/dob/downloads/pdf/mdl1_instr.pdf

The MDL1 form, satisfactory supporting documentation as well as the PW1, PW3, and ASB4 forms must be submitted to the Department by January 12, 2011.

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[1] The Multiple Dwelling Law was enacted in April 1929.

An interesting ruling from the Circuit Court in Sarasota County, Florida
Martha L. Gwynn vs. City of Venice Code Enforcement Board

Background

In the summer of 2009, the City of Venice, Florida, issued an ordinance banning rentals for less than thirty (30) days in residential neighborhoods. The ordinance defined a legal non conforming resort dwelling as a dwelling in a residential zoning district “which is rented to guests more than three time in a calendar year for periods of less than 30 days […] or which is advertised or held out to the public as a place regularly rented to guests for periods of less than 30 days […].”

This was the City’s second attempt at prohibiting vacation rentals in single-family districts. The first attempt was thwarted by a group of homeowners led by Steve Milo — in 2007, Steve Milo et al. brought a lawsuit against the City of Venice claiming it had infringed on their property rights.

In August 2009, Milo et al. reached a settlement with the city after a judge ruled in their favor, finding that the City of Venice had acted “erroneously” in interpreting their existing code to ban short-term rentals. The city agreed to pay Milo’s group $300,000 and allowed them to continue renting their properties on a short-term basis.

A month prior to this settlement being reached, the City of Venice passed the above-mentioned ordinance banning short-term rentals.

As stated in a press release, “[w]hile Milo and his group of property owners recovered money and retained their rights to rent their properties on a short term basis for 15 more years, other Venice property owners lost their rentals rights. On July 17, the Venice City Council passed a new ordinance that banned the practice of short term rentals in single-family residential neighborhoods.”[1]

Property-owner Martha L. Gwynn

Martha L. Gwynn had been renting her property on a short-term basis prior to the ban taking effect. In August 2009, she was cited for violating the new ordinance.

The main claims brought by Martha L. Gwynn against the City of Venice Code Enforcement Board

(1) The Ordinance was facially unconstitutional

She argued that the ordinance is unrelated to any legitimate objective of the city and therefore violates the due process clause of the state and federal constitution. The court disagreed stating, “the United States Supreme Court has recognized that the protection of a residential neighborhood is a legitimate objective of a land use ordinance.”

Her second argument was that this ordinance discriminates against certain persons who rent property. The judge rejected this claim noting that courts in Florida and elsewhere have upheld numerous ordinances regulating short-term rentals.

She also alleged that the ordinance was a regulatory taking restricting a homeowner’s freedom in the use of his or her property and enjoyment of the proceeds. The court disagreed.

The court refused to find the ordinance facially invalid and to strike it down in its entirety but instead ruled that it was unconstitutional as applied to her.

(2) The Ordinance was unconstitutional as applied to her.

The court stated that the ordinance (i) has a significant economic impact on her, by restricting the duration and frequency of rental periods; (ii) interferes with her expectation that she could rent to seasonal visitors.

The court added that because she was renting her property on a short-term basis prior to the ban coming into effect, the ordinance could not be enforced against her as written.

Conclusion

Courts are very reluctant striking down ordinances banning short-term rentals. However, when a homeowner brings a lawsuit challenging an ordinance, courts are often willing to find it to be unenforceable against him or her as long as he or she can prove that the ordinance interferes with his or her reasonable investment-backed expectations.

It is time for New York City property owners to let go of the mistaken belief that they need not be concerned about the short-term rental ban to be implemented in New York City in May 2011 as some other property owners will likely bring their own legal challenge to declare it unconstitutional. We should all keep in mind that the legal victory of individual property owners may remain their victory alone.

[1]  http://www.prleap.com/pr/139147/

Non-profit organizations such as the West Side Neighborhood Alliance and Housing Conservation Coordinators contributed to the passage of the short-term rental ban in New York City by launching an effective PR campaign to discredit short-term rental owners and managers.

Proponents of the short-term rental ban have among other things alleged that “illegal hotels” (a misnomer for short stay accommodations in residential buildings) have damaged New York City’s reputation among tourists and that short-term renters do not care about security and building upkeep.  Needless to say, very little data were collected by the ban’s supporters to substantiate their claims.

It is important to turn the tide around and show our local politicians how New York City has been and is benefiting from the short-term rental industry.

We are currently designing questionnaires to evaluate (1) the economic impact of the short-term rental industry on New York City; (2) the public perception of the short-term rental industry; (3) the motivations behind renting on a short-term basis.

We welcome your ideas on how to create these questionnaires.  Please email us your suggestions at info@protect-vacation-rentals.com

Cover page for the June 2008 Report prepared by the Illegal Hotels Working Group to describe the impact of short-term rentals in residential buildings on New York City residents, the City’s economy and the City’s housing stock.  The Report was sponsored by, among others, Assemblyman Richard Gottfried, Senator Liz Krueger, Housing Conservation Coordinators and the West Side Neighborhood Alliance.

The Vacation Rental Managers Association Annual Conference Oct. 31-Nov. 3 at the San Antonio Marriott Rivercenter will offer several resources for property managers to learn what they can to do protect their businesses before, during and after zoning restrictions are imposed.

With three general sessions, forty concurrent sessions, dozens of exhibiting suppliers and opportunities for both facilitated and informal discussions with your peers, the Annual Conference will leave you with concrete take-aways you can implement immediately to protect your business. Hear from the top minds in the business, including property managers who have successfully fought restrictions in their own communities. Sessions addressing restrictions include:

- Rental Bans and Restrictions are Spreading: Act Now or Forever Lose Your Business

Vacation rental restrictions continue to spread across the country and threaten to regulate your business out of existence. Rental managers can no longer ignore this issue and hope that zoning restrictions or regulations only apply to unfortunate peers in other markets. In this session, we will highlight the real threat of vacation rental bans and the need for managers in every market to be proactive and work together to stay ahead of rental restrictions. Hear from managers and industry leaders about successful programs to protect your business before, during and after zoning restrictions, bans and regulations are imposed.

Presenters: Jeremiah Gall, Co-Founder and COO, FlipKey.com, Amy Gaster, Co-Owner, Tybee Vacation Rentals, Steve Milo, President & CEO, Vacation Rental Pros, Rick Rumrell, Attorney; Rumrell, Costabel, Warrington and Brock, Carl Shepherd, Co-founder & Chief Strategy and Development Officer, HomeAway.com

- Untaxed Rentals: How You Can Help Level the Playing Field

Underground “untaxed” rentals occur through RBO sites and in rental programs where homeowners hide rentals as “owner” weeks. Through lower rents, untaxed rentals divert renters from tax-compliant homes. In this session you will hear about the not-so-obvious ways that underground rentals evade detection, the financial incentives for listing sites to protect underground rentals, why the nation’s most successful tax compliance systems today rely on vacation rental managers, and what new solutions can be employed by all vacation rental managers to eliminate underground rentals and restore an even playing field by removing both the incentive and the opportunity for homeowners to advertise lower rents by not charging tax.

Presenter: George T Volsky, Director of Research, Instant Software, Inc.

- Building Bridges with Local and State Tourism Bureaus to Promote Your Business and Elevate Vacation RentalsProactively engaging with local and state tourism bureaus not only can boost your business, but can protect it in times of crisis. In this session learn from VRMA’s PR committee members how to get your foot in the door with destination marketing organizations. Learn how to take advantage of these opportunities to help your company become a leader in your region, and to build recognition for vacation rentals as a viable lodging segment for the travel industry.

Presenters: Amanda Drake, Account Executive, Ypartnership, Amy Gaster, Co-Owner, Tybee Vacation Rentals, Sara Moore, Vice President of Marketing, ALL STAR Vacation Rentals, Tristan Webb, Owner and General Manager, Utah Vacation Homes

Additionally, the VRMA Annual Conference will offer two opportunities for “Collaboration Tables,” specifically addressing rental restrictions during the Conference. Join a small-group discussion with other managers and industry leaders led by Carl Shepherd, Co-founder and Chief Strategy and Development Officer for HomeAway.com.

Online registration for the VRMA Annual Conference ends Friday, Oct. 22; after this date, attendees must register on-site. To register online or to learn more about Annual Conference programming, visit http://www.vrma.com/?AnnualConference