Ignorance May Be Bliss But It Is No Defense To Transient Occupancy Fines

The proliferation of tenants’ use of apartments as transient accommodations has not gone unnoticed by New York City’s Department of Buildings (“DOB”). The DOB has been issuing violations to the property owners of buildings where such practice is detected. The violations for transient occupancy are steep, running as much as $1,000 per day! Worse yet, the Environmental Control Board (“ECB”) has been sustaining such violations even where the building owner had no knowledge of such use.

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The reason for the stringent enforcement stems from the fact that, under recent statutory amendments, transient use of apartments that are intended for permanent occupancy is a violation of the Building Code, the City Housing Maintenance Code (“HMC”), and the State Multiple Dwelling Law (“MDL”). In addition, transient use triggers more stringent, hotel-like, fire protection requirements under the City Fire Code, which requirements generally do not apply in apartment buildings.

Under the Building Code and MDL, a permanently occupied apartment is known as a “Class A” apartment. Such apartments are designed for the housing of tenants on a permanent basis. Fire Code requirements in a building containing Class A apartments are less stringent since such permanent tenants are presumed to know the location of fire exits in the building where they live, in contrast with transient occupants, who normally do not.

The difference between transient and permanent occupancy was previously a gray area since the premises had to be “primarily” occupied for transient use before running afoul of the transient occupancy laws. However,the word “primarily” was deleted from the law when the City Council enacted Local Law 45 of 2012 to amend Section 28- 201.3 of the Building Code to provide that Class A apartments “shall only be used for permanent residence purposes.” Moreover, the MDL has been amended to provide that Class A apartments can only be used for “permanent residence purposes”, which is defined as occupancy for “thirty consecutive days or more” and a person so occupying a dwelling unit is known as a “permanent occupant”. (MDL Section 4[8] [a]). In addition, the HMC was amended to expand the word “occupied” to be construed as if followed by words “intended, arranged or designed to be used or occupied”. (HMC Section 27-2004. A[8][(a]) These statutory changes have made it easier for the DOB to issue violations for transient use.

With the growth of Airbnb and other similar internet-based transient occupancy placement services, transient use of Class A apartments has escalated greatly. The DOB (and the Mayor’s Office of Special Enforcement) have, in turn, ramped up their enforcement efforts by sending inspectors into the field to ferret out transient use, and to file violations based thereon. Notably, with the aforementioned changes in the law, there has been a substantial increase in the ECB sustaining such violations for transient use.

Since reporting such transient use to the DOB will not relieve an owner of financial liability for such infractions even where the owner had no knowledge of the violation, owners must be vigilant in policing their own buildings to make sure such transient use is not ongoing. Therefore, doormen, superintendents and other building employees should be instructed to advise management immediately where transient use appears to be ongoing. Turning a blind eye to the use because the tenant is otherwise paying rent on a timely basis can lead to substantial fines being imposed on ownership–ignorance is not bliss when it comes to transient occupancy.

An added potential practical issue is that, often, building employees stand to reap personal financial gain from tenants who allow their apartments to be used for transient purposes—many such tenants reward many such employees for “looking the other way” as transient occupants arrive for their short-term stays.

Notably, the Appellate Term (which hears appeals of Manhattan housing cases) in 42nd & 10th Assoc., LLC v. Izeki recently sustained the eviction of a rent stabilized tenant who “rented out the premises as if it was a hotel room”. The appellate court upheld the housing court’s ruling even though the building owner had not served a notice to cure, because, under the appellate court’s reasoning, an overcharge of an undertenant (such as a transient occupant) by a rent stabilized tenant is an uncurable offense. Thus, an owner’s vigilance can certainly pay off.

Robert Jacobs Robert Jacobs is a partner in the Administrative Law Department at Belkin Burden Wenig & Goldman LLP. This article originally appeared in BBWG’s monthly newsletter.