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The Year-Round Battle Against Illegal Sublets

Jennifer V. Hughes in Legal/Financial

New York City

Illegal Sublets

Now that summer’s here and many New Yorkers are leaving town on vacations, you might think it’s time for your board to focus on whether unit-owners or shareholders are breaking the rules by subletting their apartments via Airbnb and other short-term rental services.

On one count, you’d be wrong.

“It’s not just a summer thing,” says Alex Kuffel, president of Pride Property Management. “It’s a weekly exercise, year round. On a regular basis we monitor the sites like Airbnb and we put in locations of our buildings. We would not need to be as aggressive if we didn’t hear the outcry from the residents who follow the rules.”

When short-term rental scofflaws are caught, Kuffel says, fines are stiff. Typical house rule violations for, say, a noise complaint can be $100. Fines for short-term sublets can be $1,000 for a first offense, $2,000 for a second.

New York state law bans rentals that last fewer than 30 days if residents are not present. Last week the state legislature passed a law that fines people who post short-term rental listings.

In some buildings, staff members’ contracts include clauses that make it a firing offense to ignore infractions like short-term rentals. At other properties, staff members are offered a “bounty” to report scofflaws. That’s to counteract the practice of prospective hosts slipping cash to staffers to look the other way, Kuffel says.

There are companies that will do the detective work for you. SubletSpy uses proprietary software that cross-references Airbnb listings with the addresses of its 40 clients. The service costs $99 a month for buildings with up to 100 units, with variable pricing for larger portfolios. Another company, LeaseAbuse, also uses its own database to ferret out potential illegal sublets, says Justin Hill, the company’s chief technical officer, adding that the company’s data collection is also helpful if a board decides to take legal action. LeaseAbuse charges $3 per unit per month, but there are volume discounts as well.

Michael Mintz, CEO of MD2 Property Group, has used both companies – and was so impressed with SubletSpy that he invested in the company. One building in his portfolio is being monitored by SubletSpy, and so far one short-term renter has been caught. “We addressed the situation with the resident and it has not been a problem since then,” Mintz says, adding that managing agents can track illegal sublets themselves, but it’s “an incredibly time-consuming task.”

Paul Brensilber, president of Jordan Cooper & Associates, encourages neighbors to bring illegal sublets to the attention of board members or managing agents. “A lot of times what happens is that it’s not the first instance of a neighbor renting out their apartment that’s the problem,” he says. “People are like, ‘Oh look, Ms. Smith made $1,200.’ But after a while they start to worry and think about security. What if people are breaking house rules, smoking in the hallways?”

With potential profits so high, Brensilber believes the temptation to offer illegal sublets is here to stay. “This is a seismic shift,” he says. “It’s not going away.”

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