The Mayor’s Office of Special Enforcement, known as OSE, is reportedly investigating a network of allegedly illegal short-term rentals at the Atelier, a Midtown condominium building, according to the Wall Street Journal.
This investigation is just one way Mayor Bill deBlasio is trying to address a misuse of home sharing platforms, like Airbnb, to develop large-scale lodging businesses. New York City has been stepping up its pursuit of "large illegal hotel operators" right around the same time as Airbnb is preparing for an IPO.
A spokesperson for Airbnb said that it "wants to work with New York City on legislation to protect hosts so that the city can focus enforcement resources on large-scale illegal hotel operators."
In New York City, it is illegal to advertise and rent entire apartments for less than 30 days. Offenders face civil penalties for building code violations, which range from $1,000 to $25,000 per violation.
City inspectors raided the Atelier in October and New York issued notices of violation to owners of 27 apartments there. The notices said that the condos had been “used/converted for transient use”.
Dani Schwartz, a lawyer for Atelier’s condo board, said: "[The Atelier’s condo-board president, Daniel Neiditch] offered his services as a broker to unit owners, that is doubtless true" and that "any short-term leases involving Mr. Neiditch were for 30 days or more and were legal."
Massimo F. D’Angelo, a lawyer representing a group of Atelier condo owners demanded that the condo board shut down its "illegal hotel enterprise". Schwartz responded: “The board denies any ‘illegal hotel enterprise’ which is a colorful exaggeration.”
Many units managed by Neiditch's company, River 2 River Realty, were provided to a travel agency, Primos NYC Inc. Primos then rented the apartments by the night. Mr. Schwartz said Mr. Neiditch “had no leases with Primos.”
D'Angelo filed a complaint with the New York Attorney General and OSE asking them to take action on the owners' behalf. He requested that Neiditch be removed from the board and for an injunction barring further illegal rentals in the building.
Schwartz said: “If tenants subleased their units illegally, [Neiditch] was not aware or involved.”
Neiditch has been board president of the Atelier since soon after it opened in 2007.
And the WSJ confirmed there was "a financial relationship between Primos and River 2 River Realty", pointing out a $402,000 payment to River 2 River from Primos in April 2018 and a $302,000 payment made in June. Schwartz said Mr. Neiditch’s companies get “thousands of wires per year.”
“So long as the accountants reconcile the numbers, he generally does not investigate who authorized whom to send what where,” Schwartz continued.
Guests who stayed at the Atelier said they would meet with guides that Primos called "greeters" who would help them get into the building through a side door or back entrance.
Perry Chan, a travel-technology consultant who said he worked with Primos, said they started with 3 condos at the Atelier in April 2016 and then expanded. Chan said that Primos listed the condos as per-night rentals on Booking.com and Airbnb.
By last summer, Primos was reportedly leasing 70 apartments and providing cleaning services to about 30 additional units used as short term rentals by two other operators. Primos even set up a concierge service at the building:
Primos set up a concierge service at the Atelier, known as Eclat, that provided cleaning services and restocked apartments with coffee and tea, former Eclat employees said. About a dozen maids dressed in black trousers and white T-shirts with the Eclat logo, the former employees said.
Eclat stored shrink-wrapped towels and sheets and spare lamps and pillows from IKEA in several utility rooms in the building, while a key box in an electrical closet was set up to hold keys for the rentals, former Eclat employees said.
Mr. Schwartz confirmed that Eclat worked in the building, saying “it stands to reason” that Eclat would need keys for its concierge business.
Neiditch said that, as board president, there was "very little he could do to stop illegal rentals in the Atelier".
“I would love to get anyone who is doing Airbnb illegally," he said.
Primos paid River 2 Realty an average of about $5,000 per month, per apartment, in addition to security deposits. Chan said that Primos was usually able to maintain an 80% occupancy rate.
Meanwhile, the condo board also issued fines against owners who had complained about the visitors, following them around and noting condo numbers to gather evidence of the alleged wrongdoing. The board even imposed a $1,500 fine on one owner who the board said "incited violence". Neiditch's lawyer had also threatened several owners with $25 million lawsuits for defamation.
Schwartz said fines issued to owners were for “intimidating or menacing individuals in the building.”
Some unit owners that were working with River 2 Realty said they didn't know their units were being rented on a per night basis until they got violation notices.
Jung Soo Suk, an assistant professor of ophthalmology at Johns Hopkins University School of Medicine in Baltimore who owns a 30th floor apartment said: “I was kind of shocked by it. I assumed everything was done in the proper way.”