Guest Abuse in Manhattan Coops by "Faux Guests"

Sometimes a guest visits for dinner. Ordinarily, they go home after dessert. Occasionally, a guest visits for the weekend. Then they go home on Sunday or Monday. Once in a long while, a guest ripens into a roommate. And stays. And in the rare case, a roommate ripens into a permanent roommate (i.e. a spouse, or near-spouse).  And stays.

These 4 arrangements are common and generally are thought of as being consistent with the typical proprietary lease of many if not most Manhattan luxury coops. And these human interactions (meeting, socializing, dating and mating) are of course part of the fabric of life in the City.

What all of these 4 guests have in common is that the tenant-shareholder remains in occupancy the entire time. You would call them bona fide guests. It is difficult to define a guest, but generally speaking, you know it when you see it.

But what if, prior to or upon arrival of the guest, the tenant-shareholder exits the apartment, and gives sole possession of it to the guest, and then collects a fee from his “guest?” Is the fee-paying person still a “guest” within the meaning of the proprietary lease, or has this fee-paying person become something else? It is submitted that such an arrangement is either a sublease (without the benefit of Board approval), or worse, a transient occupant for less than 30 days in violation of New York City law as well as the “guest” provisions of the ordinary proprietary lease. See http://nypost.com/2013/11/04/turning-your-ny-apartment-into-a-hotel-is-illegal

And in such cases, fee-paying people are not “guests” in the ordinary understanding of the term. They are “faux guests.”

The advent of airbnb.com and other copycat apartment sharing websites (there is even a new one to share a private toilet for a fee, called airpnp.com) raises serious security issues for cooperatives, since they allow a parade of unknown persons having no investment in the community to come inside the security perimeter of the building without the normal safeguard of being chaperoned by the tenant-shareholder — since by definition — the tenant-shareholder is absent. This problem is not going away any time soon, since the leading site is rumored to be valued at $10 Billion. See http://www.reuters.com/article/2014/03/20/us-airbnb-financing-idUSBREA2J17Z20140320; http://www.bloomberg.com/news/2014-04-03/tpg-said-to-lean-against-airbnb-investment-at-10b-value.html

But most coop proprietary leases were written before the Internet was invented, so there is no need for coops to reinvent the wheel because of these new websites. The typical lease already prohibits such arrangements.

For cooperative owners, this type of transient apartment use is destructive of our housing stock. While such a rental may raise the immediate income of an individual tenant-shareholder, it is also a danger for residents to have strangers wandering the halls at all hours and this activity will undermine the safety, functioning, and quality of life of a cooperative building.

For the tenant-shareholder in need of revenue, all is not lost. A coop owner who needs extra income may seek to sublease his unit for an extended period or he may continue to reside in the apartment and may take in a fee-paying roommate. A coop owner, who wants to be in the business of affording transient lodging to strangers he e-meets on the Internet, needs to rethink his business model.

Solution 1 (for the tenant shareholder): For tenant-shareholders who want to monetize their apartment, the surest and best method is to sell it. In the current market, there is a dire shortage of good inventory. A well-located apartment in good condition which is properly priced will sell reasonably quickly. We will be pleased to meet with you to consider your selling options, and we will explain how we can successfully market your space. If you are already in trouble with your Board for a violation of this rule, your decision to list this for sale with a reputable real estate firm such as ours will go a long way towards reinstating your reputation within your building, and in creating an atmosphere in which an amicable resolution may be quickly achieved. And we can provide assurances to the powers that be that we are acting expeditiously.

Solution 2 (for the cooperative corporation): We would recommend that the listing websites be contacted and that the whole building be placed on a “do not rent” list. We have not seen this yet, but it will only be a matter of time before these websites chose to forego revenue from a segment of the Manhattan coop market, rather than face bigger issues.