Q. A shareholder in our building has listed their unit on a short-term rental platform (like Airbnb), causing a bunch of disruption and security concerns from unidentified guests entering and exiting the building. Is an active online listing that shows photos of the unit, availability, and guest reviews sufficient legal grounds on its own to serve a notice for illegal subletting or a breach of the proprietary lease? What can we do here? 

                              —Long Term Disruption  

A. “Yes,” says attorney Marc Schneider of managing partner at New York law firm Schneider Buchel, “an active short-term rental listing—especially one coupled with guest reviews which evidences prior rentals—can provide a sufficient basis for the board to investigate, and depending upon the language of the cooperative's proprietary lease, house rules, and subletting policies, serve a notice of default alleging an unauthorized sublet, improper occupancy and/or other violation of the proprietary lease.

“There is, however, an important distinction between having a sufficient basis to serve a default notice and having sufficient evidence to ultimately prove the violation in court and actually terminate the shareholder’s proprietary lease. If the proprietary lease prohibits subletting without board approval, and no approval was given, a listing identifying the apartment, displaying photographs of it, offering specific dates for rental and containing reviews from prior guests provides evidence that the shareholder is offering the apartment for occupancy by third parties.

“The board should gather and preserve as much evidence as possible before the listing disappears. This should include dated screenshots or PDFs of the entire listing, the photographs, the host's profile, advertised rates, available dates, minimum-stay requirements, guest reviews and anything identifying the apartment or building. The co-op should also preserve any and all relevant building access records, security camera footage (if available), doorman or staff observations, and any incident reports or complaints from residents concerning transient guests. You could also have someone respond to the listing and see what happens—of course preserving the responses and observations received from the inquiry.

 “This additional evidence can become important if the shareholder contests the default,” Schneider explains. “The goal is not merely to establish that an advertisement existed, but to establish where possible that the shareholder actually offered or permitted the apartment to be occupied in violation of the proprietary lease. 

 “Independent of any sublet provisions in the co-op's governing documents, the activity may also violate New York law. In that regard, most proprietary leases have a provision requiring compliance with local and state laws. As such, any violation of any laws affecting the sublet or short term rental would also serve as a default under the proprietary lease. 

 “Under New York Multiple Dwelling Law § 4(8)(a), a Class A multiple dwelling (which most co-op buildings are) is intended for ‘permanent residential occupancy.’ This generally means occupancy by the same person or family for 30 consecutive days or more. There are limited exceptions, including houseguests living within the permanent occupant's household, and certain incidental occupancy while the permanent occupant is temporarily away, provided no compensation is paid.

 “Accordingly, the typical arrangement in which a shareholder leaves the apartment and rents the entire apartment to tourists or other transient guests for a weekend, a week or another period of fewer than 30 days is generally prohibited in a Class A multiple dwelling. 

 “Additionally, NY Multiple Dwelling Law § 121 expressly prohibits advertising a dwelling unit in a Class A multiple dwelling for occupancy that would violate the permanent-residence requirements of § 4(8). The statute defines ‘advertise’ broadly to include marketing through websites and other media. Violations can result in civil penalties of up to $1,000 for a first violation, $5,000 for a second violation and $7,500 for a third or subsequent violation.”

 Schneider explains that “NYC also has laws that may be applicable to this situation. Local Law 18 of 2022, now contained principally in Chapters 31 and 32 of Title 26 of the New York City Administrative Code, created a registration system for short-term rentals administered by the Mayor's Office of Special Enforcement (OSE). A host generally must register with OSE, and booking platforms are subject to verification requirements before processing covered short-term-rental transactions.

 “However, Local Law 18 did not legalize short-term rentals that were already prohibited. Among other restrictions, an entire apartment generally cannot be rented to guests for fewer than 30 days. For a lawful short-term rental, the permanent occupant generally must remain in the apartment with the guests, the guests must have access to the full dwelling unit, and there generally may not be more than two paying guests.

 “Therefore, if a shareholder is advertising the entire apartment for a few days, or weekend- or week-long stays during which the shareholder will not be present, the issue is separate from an actual unauthorized sublet under the building’s proprietary lease. The activity likely violates New York State and New York City short-term-rental laws.

 “As a result of the foregoing NYS and NYC laws, the board does not necessarily have to wait until it catches a transient guest actually occupying the apartment before declaring the shareholder in default. Depending upon what it offers, the advertisement itself may constitute a violation of New York law.  

 “Based on the foregoing, your board should promptly provide the listing and all supporting information to its attorney. Assuming the attorney agrees that the governing documents support enforcement, the next step would ordinarily be to serve the shareholder with the appropriate notice of default and notice to cure, identifying the offending conduct and directing the shareholder to immediately cease the short-term rental activity, remove the listing, and comply with the proprietary lease.

 “If the shareholder removes the listing, the co-op should still preserve all of its evidence in the event the shareholder subsequently attempts to re-list and/or rent the apartment. If the shareholder fails to cure the default, the co-op typically can take the necessary steps to terminate the shareholder’s proprietary lease. 

 “As a side note, the cooperative should also consider placing the building on New York City's Prohibited Buildings List if it is eligible and has not already done so,” Schneider advises. “The Short Term Rental Registration Law permits building owners whose leases or other occupancy agreements prohibit short term rentals to notify OSE and have their buildings placed on this list. OSE is then required to deny short term-rental registration applications for units in the building.”