How to Handle Profiteering Tenants' Short-Term Rental Businesses

In the past few years, we've seen the rise of Web sites designed to meet the demands of creative tenants looking for ways to make some extra money. Popular Web sites such as,, and allow tenants to become short-term landlords, providing them with a quick and easy way to list their rent-regulated apartments and earn extra money while residing elsewhere.

In the past few years, we've seen the rise of Web sites designed to meet the demands of creative tenants looking for ways to make some extra money. Popular Web sites such as,, and allow tenants to become short-term landlords, providing them with a quick and easy way to list their rent-regulated apartments and earn extra money while residing elsewhere.

This underground industry to provide lodging to tourists has become so pervasive that in May 2011 a new law was enacted that sought to combat the rental of New York City apartments for less than 30 days. The law drew a clear 30-day line that differentiated permanent from transient occupancy. By defining and banning transient occupancy for Class A residential apartments, the law prevents owners and tenants from entering into short-term tenancies with out-of-town guests who are prone to create noise, safety, and security hazards in areas zoned for residential communities.

In Stuyvesant Town, the transient housing situation has escalated to a point that a new neighborhood watch dedicated to rooting out tenant-landlords has been established. This group doesn't patrol the complex's vast grounds at night, but rather, it peruses Internet listing sites that facilitate illegal hotel-like rentals, looking for listings in their buildings. When a Stuyvesant Town apartment is discovered, the group alerts the management, which then sends “cease-and-desist” letters.

We'll discuss under what circumstances the new law applies to tenants who rent out their apartments on these Web sites, how to identify them, and different approaches to recover possession of the apartment from the profiteering tenant.

Illegal Hotels Law

The law prohibiting transient use in any “Class A” multiple dwelling building became effective on May 1, 2011, and it was created to crack down on “illegal hotels” that have proliferated throughout New York City. The law was created in response to a court decision that ruled that the transient use of a residential building is permissible if fewer than half of the units are being used for transient uses [City of New York v. 330 Continental LLC, January 2009].

In effect, the law clarifies ambiguities in state and city laws that made it difficult for government agencies to effectively crack down on illegal hotels. The law made it clear that operating a residential apartment as a transient hotel is illegal in New York City. Class A multiple dwelling units must be used only for permanent residence purposes, defined as occupancy by a person or household for 30 consecutive days or longer.

The law also prohibits an individual tenant from subletting his or her unit for less than 30 days. However, individuals occupying the unit with the permanent tenant—such as roommates, boarders, or guests—are not subject to the 30-day rule. Additionally, incidental or occasional occupancy—such as when the permanent tenant is on vacation or away for medical treatment—is allowed for less than a 30-day term, provided that no payment is received for the use of the unit.

Building a Case Against Profiteering Tenants

The first step in building a case against tenants who rent out their apartments is to identify those tenants. “It's important to monitor who is coming in and out your building. If you notice different people coming in at different times carrying luggage and who appear to be checking in as if they are hotel guests as the tenant is leaving the apartment, you have a situation that raises warning flags and requires further investigation,” says attorney Todd Nahins.

Once you suspect a tenant of profiteering, you should start gathering evidence that the tenant is engaging in the business of unlawful, short-term rentals. Strong cases will show that money is being made and that the tenant named on the lease is profiting.

The following are some guidelines to be mindful of when building a case against these tenants:

Utilize building staff and surveillance systems. Alert your building staff to be on the lookout for illegal short-term rental schemes. The building employees are the monitors, and they should be generally aware of the lawful occupants and those who appear to be short-term hotel guests. “A tenant may greet a person whom he calls guest, give the guest a key, then leave and not return until the guest is gone or new people come,” adds Nahins. Note how often this happens. If your building has legal video surveillance systems in the hallways and entry, start making a log of out-of-town visitors who occupy targeted apartments.

Check popular Web sites for listings. Popular Web sites for short-term rentals include,,,,, and Check these Web sites for your apartments and note the user reviews and the prices charged if you find them.

These sites offer ways to communicate with the tenant and offer photographs of the accommodations to be rented. You can ask questions anonymously of the tenant and compare the photographs on the sites to confirm that the apartment listed is in fact in your building.

Try to obtain access to the apartment. Nahins suggests trying to obtain access to the apartment to discover if modifications have been made to accommodate more guests and bring in higher rental fees. For example, some tenants will build bunk beds and use the apartment as if it's a hostel.

Ask guests for more information. In some luxury apartment buildings “guests” may attempt to utilize the gym, business center, and other tenant amenities. “You can also approach the transient and ask how much he's paying a night, or say that you're interested in short-term rentals, to obtain further proof,” says Nahins. Sometimes transients will give you a copy of their reservations or tell you the Web site where they found the apartment.

Grounds for Eviction

If you suspect a tenant of running a business of renting out the apartment, you should consult an attorney about the best way to proceed. Depending on the circumstances, an attorney may advise a few different ways to pursue an eviction.

Breach of lease. Check to see if your lease prohibits the apartment from being used by any person on a transient basis, such as use as a hotel, motel, dormitory, or rooming house. If you've built a strong enough case, this may be your best rationale for an eviction. Under NYS Real Property Actions and Proceedings Law (RPAPL) Section 753(4), a tenant has 10 days to cure the breach of a lease provision.

If you're able to prove that a vibrant rental business that goes against the residential requirements of the lease has been established, the tenant won't be able to fix the violation within 10 days.

Illegal subletting. “Where a tenant is engaged in subletting for a substantial profit, it can be held to be a noncurable breach of the tenancy, entitling the owner to evict,” says attorney Niles Welikson. Section 2524.3(h) of the Rent Stabilization Code permits termination in the event of a sublet in violation of Section 2525.6 of the Code. Thus, if the tenant sublets without complying with Real Property Law 226-b, it's a ground for eviction.

With regard to the 10-day cure period for breach of the tenancy, the concern is that the tenant will be able to say that the violation has been cured as soon as the weekend tourist goes back to his home country. In some cases, profiteering can be a ground for eviction without providing the usual 10-day cure period, says Welikson.

According to one case in which a tenant violated the anti-subletting provision of her lease and overcharged the subtenants for the use of the premises, the court ruled that “RPAPL 753(4) is not to be mechanically applied to defeat the purpose of the rent stabilization provisions. The integrity of the rent stabilization scheme is obviously undermined if tenants, who themselves are the beneficiaries of regulated rentals, are free to sublease their apartments at market levels and thereby collect the profits which are denied the main landlord” [151-155 Atlantic Ave. Inc v. Pendry, Sept. 2003].

Nonprimary residence. If you can show that a tenant is living less than 183 days a year in the apartment and making money on short-term and long-term rentals on those absent days, your attorney may advise you to pursue a nonprimary residence holdover proceeding to obtain possession of the apartment.

Non-regulated tenancy. If a non-regulated tenancy is involved, and there's a year or less left remaining on the lease, Welikson advises that the owner should consider waiting until the lease expires and then bringing a holdover proceeding. This is because it's less expensive and quicker to litigate a holdover based upon lease expiration than one based upon illegal sublet or occupancy.