City Sues Landlord For Converting Rent Stabilized Units Across Multiple Buildings Into Illegal Hotel Rooms

June 6, 2018

Hell's Kitchen apartments continued to be illegally listed on Airbnb and other home-sharing platforms despite enforcement and major fines

NEW YORK-The Mayor's Office of Special Enforcement is bringing a lawsuit against Manhattan landlord and building managing agent, Big Apple Management, LLC ("Big Apple"), for turning at least seven walk-up buildings into an illegal hotel through, and other platforms, that operated for years despite persistent complaints, enforcement and fines against the operation.

"This is about protecting housing meant for New Yorkers, and preserving a sense of safety and community in a residential neighborhood," said Christian Klossner, Executive Director of the Mayor's Office of Special Enforcement. "The message of this action is clear-if landlords turn a blind eye to rampant illegal short-term rentals, then we will see them in court."

"Every day, tenants in New York City are being forced out of their homes due to landlord harassment and skyrocketing rents, and illegal hotel operators like Big Apple Management are emblematic of this crisis. For too long, Hell's Kitchen residents have had to watch the buildings they call home transformed into transient hotels that lack the basic safety and security features that any legal hotel would be legally required to provide. I want to commend the tenant activists who helped the City identify this illegal hotel operation and I want to thank the City for taking aggressive action to enforce the law," said Council Speaker Corey Johnson.

Illegal transient use in seven rent stabilized buildings on 47th Street between 8th and 9th avenues has persisted for years. The buildings have been the subject of at least 50 illegal hotel complaints since 2011, and received approximately 150 building and fire violations, four building and fire criminal summonses, and five advertising summonses. Currently, more than $120,000 in penalties for building and fire violations have been imposed, with nearly $90,000 remaining unpaid.

In addition, Big Apple Management is currently on the Public Advocate's "Worst Landlord List", and has not addressed the almost 400 open violations issued by the New York City Department of Housing Preservation & Development ("HPD") for specific repairs and maintenance in the Subject Buildings. Yet, it appears fixups were being carried out for short-term visitors. Six of the seven buildings have been equipped with smart reader devices that accommodate frequent tourist turnover by allowing purely electronic entry via smart phone, keycard, or numeric code.
This is the thirteenth illegal hotel lawsuit the City has brought against landlords or operators for illegal transient use, and involves the highest number ever of buildings in such a case.

In December 2017, a landlord paid a $1.2 million lump sum, the largest settlement with the City in an illegal hotel nuisance abatement case, involving four buildings. In November 2017, another building owner who illegally converted dozens of housing units in two buildings into hotel rooms agreed to forfeit $1 million, which included a $201,500 payment to the City plus a $798,500 credit amount for approximately three years of rent forgone.

The neighborhood of Hell's Kitchen has been particularly hard-hit by illegal short-term rentals and the depletion of rent stabilized apartments. According to the defendant's required reporting to the State Division of Housing and Community Renewal, the number of rent-stabilized dwelling units in the Subject Buildings has fallen since at least 2009, and at least seven dwelling units in the Subject Buildings that have fallen out of rent stabilization protection have been converted to illegal short-term rentals, based on the City's inspections.

The defendants in the suit include Big Apple Management, the seven Subject Buildings, the owners of the seven buildings (321-3 West 47th Street Associates, L.P., 328-30 West 47th Street Associates, L.P., 332-34 West 47th Street Associates, L.P., 348-58 West 47th Street Associates, L.P.) and Flavio Rausei, a host who used Airbnb to offer illegal rentals in two buildings.

"Housing is housing. We have an affordable housing crisis in this city, and we can't allow scofflaw profiteers to worsen it by arbitraging residential homes as unsafe, illegal transient rentals. I thank the team at the Office of Special Enforcement for the important work they do to keep New Yorkers and visitors safe and to return housing units to the residential market where they belong. Every little bit helps in our fight for a more affordable city," said Manhattan Borough President Gale A. Brewer.

"Illegal hotels threaten the security and wellbeing of everyday New Yorkers in their own homes, and exacerbate our affordable housing crisis. The building owner and management company that are the subject of today's lawsuit have a long history of harassing rent regulated tenants and flouting the law. Today's lawsuit by the Mayor's Office of Special Enforcement should give hope to tenants around the city, and give pause to unscrupulous landlords trying to replace real New Yorkers with illegal short-term rentals. I thank OSE for their work on these buildings, and for their continuing efforts to crack down on illegal hotels and protect public safety," said Senator Liz Kruger.

"Exploitative and illegal behavior has no place in my Senate district and our city as a whole. By holding Big Apple Management accountable for its wrongdoings, the Mayor's Office of Special Enforcement makes it clear that repeated offenses that compromise the quality of life for New Yorkers will not be tolerated under any circumstances. I thank them for their attention to the scourge of illegal hotels in the city, and hope today's announcement serves as a strong model of deterrence for future fraudsters," said Senator Brad Hoylman. 

"Airbnb may view the law as little more than a set of floating suggestions, but this does not pass in New York City. If for every action, there is an equal and opposite reaction, Airbnb's flagrant disregard for our short-term rental laws will time and again be met with robust enforcement. I commend the city for once again hitting illegal Airbnb operators in the only place that makes them listen: their pockets," said Assembly Member Linda B. Rosenthal.

"The action taken by Mayor de Blasio's Office of Special Enforcement serves as a strong deterrent to those who would profiteer off residential apartments by illegally renting them out as hotel rooms. Illegal hotel operators deprive New Yorkers of desperately needed affordable housing, endanger public safety, and reduce tax revenue, and today's action offers a timely reminder that they risk severe consequences," said Assembly Member Richard N. Gottfried, who sponsored the 2010 State law on illegal hotels and whose district includes the buildings cited in the lawsuit filed by the City today.
"Enforcement against illegal hotels is necessary, particularly when infractions include safety and sanitation. This activity takes rent regulated apartments away from New Yorkers and contributes to the City's ongoing affordable housing crisis. We cannot allow landlords to get away with one violation, never mind hundreds of them. I applaud the Mayor's Office for making it clear that this is unacceptable," said Council Member Keith Powers.

"The lawsuit filed today against Big Apple Management and seven buildings under its purview is an excellent example of the Office of Special Enforcement's precedent-setting efforts to rid our city of illegal hotels. These buildings have been the subject of dozens of illegal hotel complaints, hundreds of violations, and even criminal summonses-putting all New Yorkers at risk. I want to thank Mayor de Blasio and Executive Director Klossner for their ongoing efforts to maintain safety standards and protect our housing stock from illegal conversion-of profound importance as New York City continues to undergo an affordable housing crisis," said Council Member Helen Rosenthal.

"Buildings that operate as illegal hotels, and the unscrupulous companies that profit off of them, are not only depleting affordable housing in New York City and skirting regulations, they are dangerous. As a member of the Illegal Hotels Working Group and former Chair of the Committee on Housing and Buildings, I have fought against these bad actors who contribute to the affordable housing and homelessness crisis. The buildings in this suit, in addition to their illegal hotel operations, are in blatant violation of fire and building code, creating even greater potential for harm, and I applaud the Office of Special Enforcement in pursuing consequences on behalf of the people of New York City in need of safe, affordable housing," said Council Member Jumaane D. Williams.

"One of the main reasons New Yorkers continue to endure a severe housing affordability crisis is because of some bad actors in the real estate industry who abuse the communities where they own property. Whether it is operating illegal hotels or ignoring over 100 violations from City agencies like FDNY and HPD, there is no question Big Apple Management needs to change their behavior and begin to operate in good faith. I hope this lawsuit forces them to rethink their approach and change their business model," said Council Member Ben Kallos.

"The members of the West 47th Street Tenants' Association are pleased by the actions taken by the Mayor's Office of Special Enforcement today. We hope that the long abuses by Big Apple Management, in their unlawful use of apartments as illegal hotels, will come to a quick end through these legal proceedings," said Christopher A. LeBron, President, West 47th Street Tenants' Association.

"This is a classic case of a landlord making so much money off of their illegal hotel operations that paying fines was merely a very small part of the cost of doing business. This is why NYC needs platform transparency and aggressive enforcement. The money behind commercialized illegal hotels is so vast that fines are chump change for these big operators," said Tom Cayler, West Side Neighborhood Alliance.