City Wins Additional $1 Million Against Illegal Hotel Operators

March 29, 2018

The new judgment related to illegal hotels run out of two midtown buildings brings the total penalties to $2 million against operators and building owners

NEW YORK- The Mayor's Office of Special Enforcement has obtained a $1 million dollar judgment against the operators of illegal hotels in two rent-regulated buildings who marketed the units through Airbnb and other listing platforms. The judgment comes after the City already won a $1 million settlement from the buildings' owners in November 2017, bringing the total penalties for the illegal hotel operation to $2 million.

The case represents the first lawsuit under the nuisance abatement law brought by the City against landlords or operators of illegal hotels. In November 2017, the building owners agreed to forfeit $1 million, which included a $201,500 payment to the City plus a $798,500 credit for approximately three years of forgone rent.

Catherine Wan, Deputy Director of the Mayor's Office of Special Enforcement, said, "People will be held individually accountable for taking homes off the market that are intended for New Yorkers. This judgment makes clear that illegal hotel operators cannot hide behind LLCs or other commercial entities."

"These illegal hotel operators clearly don't care that they are draining our affordable housing supply, which is why judgements like these are necessary. We will use every tool we have to eradicate illegal hotels. This judgement is a great victory for the city and sends a clear message to the operators - stop or you will pay dearly," said Council Speaker Corey Johnson.

The individuals, doing business as City Oases, LLC, rented and operated at least seven units in the two buildings, a ten story building at 5 West 31st Street in Manhattan and a four story building at 59 Fifth Avenue. 

The City sued the two tenant operators and the two building owners in September 2014 as part of its ongoing efforts to combat the illegal conversion of permanent housing units into transient hotels, to ensure the accommodations for tourists are safe and not deceptively advertised, and to safeguard the livability of communities citywide. The day-to-day operations at the two locations, marketed as "the Contempo Design Suites" and "Urban Oasis" were managed by Mina Guirguis and Szilvia Patkos, respectively an architect and an interior designer, through City Oases, a limited liability company.

The City has brought 12 cases against building owners or operators for illegal hotel related activity.

State Senator Brad Hoylman said, "Illegal hotels threaten the affordability of our city and the safety of our neighborhoods. That City Oases was perpetrating this dangerous fraud at multiple sites in my district is deeply upsetting. I'm grateful to Mayor de Blasio and the Office of Special Enforcement for levying these historic fines and sending a message that New York City will not tolerate bad actors decimating our housing stock and flouting our laws." 

Assembly Member Richard N. Gottfried of Manhattan, Assembly sponsor of the 2010 State law on illegal hotels, said, "The multimillion settlement and fines imposed in these cases show that Mayor de Blasio's Office of Special Enforcement means business when it comes to cracking down on building owners seeking to profiteer off residential apartments by illegally renting them out as hotel rooms. All New Yorkers who care about protecting residents and housing should be grateful."

"This judgment sends a clear message to illegal hotel operators across the city: we will not tolerate greedy landlords unjustly enriching themselves off our precious affordable housing stock," said Assembly Member Linda B. Rosenthal. "As the city's homeless crisis continues to balloon, and as increasingly more New York families struggle to make ends meet, we must ensure our communities remain affordable for real New Yorkers and their families."

Council Member Keith Powers said, "We need more investment in long-term affordable housing for New Yorkers in my district, not short-term rentals disguised as permanent housing."

"This week's ruling in the NYC v. City Oases case is a powerful affirmation of the forceful actions being taken to stop illegal hotels from operating with impunity in our city. Holding individual building owners responsible, and the extent of the penalties imposed by the judge, send a very clear message to operators of illegal hotels. I want to thank Mayor de Blasio and Executive Director Klossner for all of their efforts to protect our housing stock from illegal conversion - which is of the utmost importance as New York City continues to undergo an affordable housing crisis. The OSE's precedent-setting actions will help us to turn the tide on illegal hotels," said Council Member Helen Rosenthal.

Council Member Jumaane D. Williams said, "Illegal hotels, and their unscrupulous operators, take advantage of the system, increasing their own profits by robbing the city of affordable housing opportunities. We must continue to hold them directly accountable in a meaningful way, and I applaud the Office of Special Enforcement for relentlessly pursuing justice on this crucial issue. With their efforts, and the work being done by myself and others to expand affordable housing opportunities, we can confront the affordable housing and homelessness crisis the city faces."

"Thank you to the Mayor's Office of Special Enforcement for continuing to hold accountable those who not only convert units into illegal short-term hotels but also ignore critical safety standards that keep building occupants safe," said Council Member Margaret S. Chin. "As our City faces a housing crisis, this decisive action delivers a strong message to landlords across our City who would rather prioritize profit over people."

"Housing Conservation Coordinators applauds the work of OSE in this case," said Jonathan Furlong, Director of Organizing at Housing Conservation Coordinators. "To single out and fine an individual behind a Limited Liability Company shows tremendous skill and dedication-we certainly hope this groundbreaking case becomes commonplace.

"The West Side Neighborhood Alliance applauds the City for holding everyone-operators and owners alike-personally responsible for their actions, which are often designed to force tenants to vacate their homes … With this case, the City is putting these individuals on notice that they will be held accountable," Tom Cayler, West Side Neighborhood Alliance.