NYS Law Passed to “Put an End to Airbnb” in NYC; Airbnb has Rushed to Sue for a Preliminary Injunction

–by Carlie Roman

Citations: https://www.nysenate.gov/legislation/bills/2015/S6340/amendment/A; http://www.wsj.com/articles/airbnb-in-talks-to-settle-new-york-lawsuit-1477959169 ; http://www.nytimes.com/2016/10/22/technology/new-york-passes-law-airbnb.html?_r=0 ; http://www.nydailynews.com/new-york/nyc-marathon-runners-race-airbnb-new-state-law-article-1.2859787

Abstract: Last month, Governor Andrew Cuomo signed a law that can impose up to $7,500 in fines for advertising illegal short-term apartment rentals in New York City (“NYC”). One common example is rentals listed on Airbnb. Before the law could be enforced, Airbnb filed a lawsuit seeking a preliminary injunction.

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In June, the New York State (“NYS”) Senate passed a bill (Senate Bill S6340A) to prohibit advertising of illegal-short term rentals in NYC. Governor Cuomo signed the bill into law in October. Apartment rentals in multiunit buildings within NYC for fewer than 30-days had been a violation since 2010, but this new law will make enforcement more effective by targeting the advertising of said rentals. The NYS Senate says that the purpose of the bill is “[t]o make unlawful advertising for the use or occupancy of dwelling units in class A multiple dwellings for purposes other than permanent residence, to create civil penalties for violations of this prohibition, and to define the term ‘advertise’ in such context.”

The Senate justified the passage of this bill by explaining that, despite the fact that it had been illegal to rent for less than 30-days in NYC since 2010, people were still advertising over the Internet. The Senate explained that this type of advertising was contrary to the public interest because it promoted illegal activity, it aided the business of illegal hotels, and it implicated concerns regarding building safety codes. Advocates of the new regulation also argued that preventing these short-term rental schemes —that take long-term rental options off the market, driving up housing prices— will help to promote more affordable housing.

Airbnb, a company that facilities online short-term rentals, has opposed the new legislation from the start, asserting their belief that it was passed in response to pressure from hotel lobbyists. The same day this new law was signed into effect, Airbnb brought a federal suit against State Attorney General Eric T. Schneiderman, Mayor Bill de Blasio, and the City of New York (“The State”), seeking to enjoin the act from being enforced. Airbnb argues that the language of the statute is broad and vague in such a way that it may be construed to allow fines against Airbnb for third-party listings on their website that are in violation of the statute. Airbnb contends that if they were fined under this new statute it would violate the Federal Communication Decency Act, which protects websites from sanctions relating to third-party content posted to their websites. Furthermore, Airbnb contends that banning these advertisements for short-term rentals violates the First Amendment Freedom of Speech protection. The litigation process is currently at a standstill while the parties negotiate for a settlement.

The State maintains, however, that their goal is not to go after individuals renting their apartments while they go out of town for the weekend, but rather to target the big players. According to the Attorney General’s Office, the State plans to enforce the statute against the illegal hotel operators and the landlords who are taking their units off the market and using their buildings exclusively for things likes Airbnb rentals. Furthermore, the State explains that they are not looking to fine Airbnb itself, but the individuals who are hosts on the site.

As a result of this lawsuit, enforcement of the statute has been delayed for several weeks. Enforcement of this new regulation is entrusted to the Mayor’s Office of Special Enforcement and they have confirmed that they will not enforce the new regulations until Federal District Court Judge Katherine Forrest issues a decision regarding the preliminary injunction. Melissa Grace, spokeswoman for the Mayor did, however, urge, “We are taking the steps necessary to enable us to enforce the State law. Our focus has and will continue to be operators of illegal hotels who put people in unsafe conditions and take affordable homes off the market. We will continue to apply current State law to hold bad actors accountable.”

In the meantime, Airbnb usage is still soaring and the company reported that for the NYC Marathon, over 34,000 visitors used Airbnb during their stay, generating over $25 million dollars in revenue for the company and their hosts.

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