LuxUrban
[Credit: The Blakely by LuxUrban, Trademark Collection by Wyndham]

LuxUrban Hotels ordered to pay $1.2m over “illegal” NYC rentals

US: Miami-based short-term rental and hotel operator, LuxUrban Hotels, has been ordered to pay a $1.2 million fine to New York City authorities after being accused of operating almost 70 units illegally in Manhattan and Brooklyn. 

The fine came as part of a settlement reached in the state Supreme Court on Monday this week.

LuxUrban Hotels, previously known as CorpHousing Group, was sued by the city after it was alleged that the company had earned almost $4 million from converting 67 apartments in more than 20 buildings into illegal short-term rentals over a three-year period between 2019 and 2022.

According to the lawsuit, LuxUrban had rented out short-term rental units in Manhattan and Brooklyn for less than 30 days 4,300 times, after having listed them on Booking.com and Expedia. That is despite city and state laws requiring property owners to rent out entire apartments for more than 30 days at one time, with lawyers acting on behalf of New York City suggesting that illicit rentals would pose a risk to guest safety and security and “degrade” the quality and comfort of surrounding residents and neighbours.

Founded in 2017, LuxUrban Hotels utilises a long-term lease, asset-light business model to acquire and manage a growing portfolio of short-term rental properties in major metropolitan cities.

As per Gothamist, an investigation was first pursued by the Office of Special Enforcement under the Mayor’s Office of Criminal Justice over claims that LuxUrban Hotels was signing leases for apartments in New York City and subletting them as short-term rentals, albeit for more than 30 days.

LuxUrban Hotels had already been the subject of multiple lawsuits in New York City in 2022 over the alleged lease violations and unpaid rent, coming to more than $1 million. It was alleged at the time that CEO Brian Ferdinand and the company, which went public that year via a $13.5 million initial public offering [IPO], owed around $1.5 million in unpaid rent and other expenses accrued from units rented out in Manhattan and Brooklyn.

Guests are currently unable to book properties via the company’s website, with listings shown as “unavailable”.

The Supreme Court settlement was reached six months after new rules on short-term rentals in New York City came into effect, with thousands of listings disappearing from the market.

The new legislation strengthens enforcement of existing rules on how short-term rentals are allowed to operate. Passed in January last year, the measure known as Local Law 18 mandates that short-term rental hosts register with city government and they cannot rent out for less than 30 days except for very specific circumstances.

Legal short-term rentals are properties with no more than two people hosted. The host has to reside in the dwelling unit, and guests must have access to all parts of the home.

Under the tighter regulations, eligible hosts must prove they live in the dwelling they are renting out and that the home meets municipal safety codes and other regulatory requirements. Hosts in violation of the new legislation could face fines from $1,000 to $5,000.

Platforms such as Airbnb and Vrbo are required to make sure anyone using their platform in New York follows city rules.

STRz has approached LuxUrban Hotels for comment on the matter.

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