Lawsuit Filed Against Major Operator of Illegal Hotels
By NYC.gov - OCT. 23, 2012
Mayor Bloomberg, Chief Policy Advisor John Feinblatt and Director of the Mayor’s Office of Special Enforcement Kathleen McGee today announced the filing of a lawsuit against Smart Apartments, which has been operating illegal and unsafe short-term tourist accommodations in nearly 50 residential buildings in Manhattan and Brooklyn. In May 2011, a new State bill – initially proposed by the Bloomberg Administration and sponsored by State Senator Liz Krueger and Assemblyman Richard Gottfried – went into effect that clarified ambiguities in the law and codified transient occupancy as being less than 30 days. Illegal hotels unlawfully convert residential units intended for permanent occupancy for short-term stays of fewer than 30 days – and in the process, deplete the City’s housing stock, create hazardous conditions and harm the residential character of neighborhoods.
As part of its continued efforts to curb dangerous illegal hotels and ensure safe, lawful accommodations for more than 50.5 million visitors, the City filed the first of its kind lawsuit against Smart Apartments for deceptive trade practices against tourists in the State Supreme Court. In the lawsuit, the City alleges that Smart Apartments is booking, accepting and advertising short-term reservations in illegally-converted and unsafe apartments in residential buildings. Moreover, illegal hotels violate stringent fire safety laws, as well as disclosure and consumer protection guidelines that are required of legal hotels. The City, which obtained a temporary restraining order barring Smart Apartments’ deceptive advertising and prohibiting the operation of residential apartments for illegal short-term use, is seeking substantial penalties for Smart Apartments’ deceptive advertising, $1 million dollars in punitive damages and the establishment of a restitution fund for tourists affected by its misleading practices.
“Illegal hotel operators create hazardous conditions and place the lives of guests in danger,” said Mayor Bloomberg. “Since its creation, the Office of Special Enforcement has continued to build upon its comprehensive enforcement efforts against unsafe illegal hotels. With this lawsuit, we are sending a clear message to operators of all illegal hotels: our Administration will remain vigilant in its commitment to combating this public safety problem.”
The Office of Special Enforcement – in response to multiple complaints received from 311, letters, emails and other sources – commenced a wide-ranging investigation into Smart Apartments’ operations and conducted inspections on numerous occasions. In the course of its nearly yearlong investigation, the Office of Special Enforcement discovered hundreds of permanent residential apartments being illegally operated by Smart Apartments for short-term stays. In some instances, follow-up inspections uncovered no change in the use of illegally-converted residential apartments, and residents and guests continued to be endangered due to fire safety hazards –despite the issuance of violations by the Fire and Buildings Departments. The City’s lawsuit is based on Smart Apartments repeatedly committing deceptive trade practices against visitors and tourists seeking short-term accommodations in New York City.
“Illegal hotels pose serious quality-of-life and safety concerns, and enforcement efforts against these unscrupulous operators benefit both city residents and tourists visiting New York,” said Chief Policy Advisor Feinblatt. “This lawsuit – which includes a restitution fund for those adversely affected – will help safeguard against any more guests and tourists falling prey to Smart Apartments and their dangerous illegal hotels.”
“The Office of Special Enforcement is committed to ensuring that residential apartments and tourist accommodations remain safe and that those who come to visit our city are not deceived into staying somewhere inherently illegal and dangerous,” said Office of Special Enforcement Director McGee. “Today’s lawsuit is just another step in the City’s ongoing efforts to do all we can to enforce against illegal hotel operators and protect the quality-of-life of residents and tourists.”
“We applaud Mayor Bloomberg, John Feinblatt and Kathleen McGee for their continued efforts to protect our residents and visitors,” said NYC & Company CEO George Fertitta. “As we near another record-breaking year for tourism, it is imperative that we are responsible in how we promote our City and welcome our visitors. Illegal hotels are unsafe and unregulated and it is our duty to raise awareness and protect consumers.”
“Smart Apartments’ use of deceptive advertising to lure tourists into unsafe conditions, such as showing pictures of luxurious accommodations that actually were not available, further underscores the deliberateness with which they broke the law,” said Department of Consumer Affairs Commissioner Jonathan Mintz. “We will aggressively enforce New York City’s strong local Consumer Protection Law, and urge anyone who finds that they have been misled by an advertisement to file a complaint with the Department directly online or by calling 311.”
Under State Law, it is illegal to occupy units intended for permanent occupancy in residential buildings for short-term stays of 29 days or less. Moreover, unlike legal hotels, permanent residential buildings illegally-converted for transient occupancy lack the necessary fire-safety safeguards that are required by law to protect occupants who are unfamiliar with their surroundings. These essential protections include fire alarms, sprinkler systems, smoke detectors and emergency lighting; notices and diagrams to orient transient occupants; and adequate means of egress. Inspections of Smart Apartments locations found violations of all of these requirements.
“Illegal hotels endanger the health, safety, and quality of life of New Yorkers. At the same time they take apartments off the market for actual residents and exacerbate our affordable housing crisis,” said State Senator Liz Krueger. “Legislation passed by the State in 2010 provided the City’s enforcement agencies the tools they need to actively investigate and take action against illegal hotel operators. Now with passage of increased penalties at the City level, government has the ability to charge fines large enough to finally discourage such bad business practices. Without a doubt, crackdowns such as this, and the closing of illegal hotel operations, significantly improve the security and quality of life for city dwellers, increase the number of apartments available for actual residents and ensure that tourists have safe accommodations.”
“Illegal hotel operations are a serious and growing problem. They deprive New York of desperately needed housing and disrupt life for building residents,” said Assembly Member Richard N. Gottfried. “People who do this as a business should be shut down, and Mayor Bloomberg and his Office of Special Enforcement are working effectively to do that.”
“I lived in a building containing several of Smart Apartment’s illegal hotel rooms,” said Chris Kelly, a former resident at a location illegally used by Smart Apartments. “I speak for all my former neighbors when I say that our safety was constantly in jeopardy. Strangers entered our building at all hours with keys provided to them by our building’s management company. Noise levels increased, property was destroyed and our well-being and personal property were at risk.”
Examples of locations of illegally-converted permanent apartments operated by Smart Apartments include:
- 808 Driggs Avenue, Brooklyn
- 203 East 14th Street, Manhattan
- 44 West 37th Street, Manhattan
- 338 East 55th Street, Manhattan
Examples of conditions found at Smart Apartments include:
- Inadequate sprinkler and no fire alarms.
- Occupancy contrary to Certificate of Occupancy
- Additional safety violations: inadequate smoke detectors and emergency lighting
The lawsuit is also based on the public nuisance caused by illegally renting permanent residential dwelling units to numerous short-term occupants without those dwellings having the more stringent fire and safety features required, creating significant security risks in buildings not staffed to handle the security issues associated with short-term occupancy and a degradation in the overall enjoyment, safety and comfort of the surrounding permanent residents. The lawsuit notes that the conditions in these illegally-converted buildings – including excessive noise and traffic from unknown guests and constantly changing individuals – negatively affect the health, safety, security and general welfare of the residents of the City of New York, particularly those in surrounding units and buildings.
The illegal conversion of residential buildings into unsafe hotels presents serious problems for permanent residents and limits the supply of available housing – and in particular, rent-regulated and low-income housing – on the market. By lacking the necessary fire-safety measures that legal hotels are required to have by law, illegal hotels present also severe safety hazards and often serve as dangerous firetraps. Last year, the Office of Special Enforcement issued nearly 1,900 violations against illegal hotels, including for lacking fire alarms and adequate sprinkler systems, and vacated an additional 51 locations for posing immediately perilous conditions for occupants.
The Office of Special Enforcement, created in November 2006 through the expansion of the former Office of Midtown Enforcement, is a multiagency taskforce overseen by Chief Policy Advisor Feinblatt and led by Director McGee. The Office of Special Enforcement maintains citywide jurisdiction to coordinate and enhance enforcement across City agencies concerning quality of life issues, including illegal hotels, in the five boroughs.