Scott Smiler, Partner, Gallet Dreyer & Berkey in Legal/Financial
Short-term rental platforms, such as Airbnb and VRBO, are a thorn in the side of many co-op and condo buildings in New York City. With the recent passage of Local Law 18, often referred to as the short-term rental registration law, boards are getting some welcome relief. The law primarily targets three key entities: the hosting platforms where listings for short-term rentals are advertised, hosts who rent out their apartments, and building owners, including co-op and condo boards. The prohibited building list is the primary tool for boards seeking to ban short-term rentals in their buildings. To register your building, boards must complete an application to the city’s Office of Special Enforcement (OSE) and show evidence of specific provisions in the governing documents that prohibit short-term rentals. Without these provisions, you will not be able to add your building to the list.
Reviewing governing documents. These provisions are typically in the proprietary leases of co-ops and the bylaws of condo buildings. When governing documents lack explicit bans, it makes sense to pass a house rule expressly prohibiting short-term rentals. Adding to the house rules is an easier administrative move than changing the proprietary lease or bylaws, which typically requires a supermajority of votes from shareholders or unit-owners. Although house rules may carry less weight than proprietary leases or bylaws, they serve as a temporary measure and can be implemented with the majority of board members’ approval. Changing the house rules can involve some complex decision-making, because it affects shareholders’ rights and their ability to rent their apartments. Boards need to strike a balance between quality of life and the need for rules that reflect the building's demographic and politics.
The registration race. If a building is on the prohibited building list and someone continues to advertise their apartments, boards can report it to the OSE. The penalty for hosts ranges from $100 to $5,000. However, if an individual has successfully registered their apartment before the building is added to the list, the process becomes more complicated. In these cases, the building must file a complaint with the OSE and may need to attend a hearing to argue their case. The decision-making process is still evolving as New York City adapts to these new regulations.
The impact. Local law 18 significantly alters the short-term rental landscape. Not only does it introduce the prohibited buildings list, it also limits the number of people that can be hosted in a short-term rental to just two guests. Hosts must also be living in the apartment at the same time as the unit is rented and must maintain free access to all areas, meaning you can’t place certain rooms off-limits to guests unless they’re being used or for reasons of privacy. These changes make short-term rentals less attractive to both hosts and renters. It’s even possible these regulations could reduce the short-term rental market in the city by up to 95%.
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