After a summer of discontent, New York Governor Andrew Cuomo signed the toughest restrictions on short-term apartment rentals in the country that are sure to cripple the operations of Airbnb in the state.
As discussed in many previous blogs here, Airbnb is an online marketplace where prospective guests look for a bed to stay in from hosts listing spare rooms and properties for short term rentals. They operate very much like a hotel where guests stay in the host’s property for a fee that is likely to be less than a hotel with concierge and other fringe benefits that the traveler may not need or want.
Under the new rules, which we discussed in an earlier posting here, the liability for advertising short-term rentals would shift from building owners to the renters in “Class A” multiple dwellings (buildings designed for three or more families) and those who place the advertisements on sites like Airbnb. Penalties range from $1,000 for a first offense to $7,500 for third and subsequent violations.
The stated intent behind the proposed bill is to protect New York’s hotel industry and owners of multiple dwelling properties by preventing illegal and unregistered hotels from popping up in residential apartment buildings. As we noted here, it was already illegal in New York City to rent out an entire apartment for less than 30 days before the state contemplated this legislation.
Airbnb has been very vocal in its opposition to the legislation. The company repeatedly characterized New York’s existing illegal hotel law as behind the times and refused to help regulators police its bookings. We have noted in the past that Airbnb argues that the language of the law does not distinguish between Airbnb and its users, thus violating the Communications Decency Act which prohibits legislators from sanctioning websites for the content of others. This argument worked in Anaheim, CA to successfully modify similar legislation.
Airbnb also argued that the proposed bill violates First Amendment rights and the Fourteenth Amendment due process rights because penalties are triggered automatically without Airbnb knowing of any non-compliant posting.
The issue became so hot at one point that more than three dozen signatories, including PayPal co-founder Peter Thiel, Facebook co-founder Chris Hughes and venture capitalist Marc Andreessen, drafted a letter in support of Airbnb.
The New York legislation was fought bitterly by Airbnb. The company even threatened to sue the state should Governor Cuomo sign it – a threat that published reports claim it followed through on, as the company filed claims against the City of New York and state Attorney General Eric Schneiderman in Federal court. Airbnb also requested a temporary restraining order against the implementation of the new law. The new law serves as a devastating loss for Airbnb, whose business is the subject of obstructive action across the U.S.
*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.
Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.
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