MMI: Welcome to L&Tea Time, the show where we give you real information on real estate from the owners and managers with the boots on the ground. Today we’re happy to have JP Rutigliano from J & L Holding Corp. JP – 600 units.
JP Rutigliano: Correct
MMI: More than two dozen buildings.
MMI: Mostly Manhattan, a little bit of Queens.
MMI: You’re a second generation owner and manager.
MMI: Ok, and you have a lot to say about short-term rentals?
JPR: I might not stop talking.
MMI: Alight, let’s go do it. I’m Michelle Maratto Itkowitz, and I’ll be serving the tea.
MMI: JP, thanks for being here.
JPR: Thanks for having me.
MMI: Let me start with this – there are a lot of people out there that love short-term rentals, so if there's younger people watched the show, and they’re like, “When I go home to my parents’ in Philly for the weekend, it's good for me to put my apartment on Airbnb or One Fine Stay or any of the other 12 or have a dozen sites out there.” Why from building management’s point of view and other tenants’ point of view it is this not a good thing?
JPR: Building security, mostly. As the owners and managers we are responsible for maintaining the security and everybody else living in the building is expecting that the people that are living there are people that we've checked out or that are supposed to be in the building, and when tenants to the short term rental thing they're circumventing the procedures and the security methods that we’ve put in place.
MMI: So when someone walks through that front door, every tenant expects that that person is someone you that that have vetted.
JPR: That somebody a leaseholder and should be there, yes.
MMI: Alright, so how do you even - well let's just talk a little bit more about do you see any liability there from your point of view?
JPR: Well that's the biggest concern because if anything happens in the building it's not the tenant that’s leasing an apartment that's going to be held responsible.
MMI: It might be.
JPR: Maybe, but you know with the owner and the managers – the guys with the insurance policy and the asset – we know how it is in today's day and age that's who they’re going to hold responsible.
MMI: How do you know if your tenants are short term rentals?
JPR: There are two ways mostly: either the neighbors complain because they're not happy with the activity and the traffic in the building or by going to the website itself and just doing searches in the general area where these properties are.
MMI: So, how do you do that on Airbnb’s website? Can you search by your building’s address?
JPR: Not specifically by the building’s address, but it’s got a mapping location, a little device where you can drill to the location where your buildings are located within that little circle?
MMI: So, it’s like a tourist wants to go to Nolita.
JPR: You can drill down to that area. If you have a building there, you can get a little circle around your property, and then all the listings within that circle are gonna show up on the other side of the screen.
MMI: Are you talking about you having to look through 300 listings or 30?
JPR: Potentially. It depends on how many apartments are available for rental in that area at that time.
MMI: So is this something you have somebody in your office doing regularly, checking?
JPR: When things are slow, when we have time, we check it on a regular basis.
MMI: So what you're seeing if it doesn't have an address, then how do you know that it’s your building?
JPR: As an owner and a manager, you need to know what your apartments look like specifically. That’s how we know. We know our apartments well enough when we see pictures online, a few little details that we do that are different than other owners. There’s plenty of times when you’re looking and you see apartments that you think are yours that aren’t, but still, you’re going to check them out.
MMI: The host name – is that your tenant?
JPR: That’s how we confirm that that’s the person that’s doing it. So, if you’re looking, every listing has a host, and that’s usually the tenant of record that’s doing it. Once you see the pictures online, you see the host, and you check out who’s doing it. If that apartment matches up with somebody that’s listed on the lease, that’s how you know that’s your person.
MMI: That’s very interesting. What are you doing to educate the tenants of the building that this is not something that management is going to tolerate.
JPR: We send out email blasts to let the tenants know that Airbnb, and short-term rentals are strictly prohibited. All of our leases now – lease renewals and new leases – have clauses that state it’s strictly prohibited, and we have been posting notices in the building as well.
MMI: You’re actually putting clauses into your leases now.
MMI: What happens when you catch somebody? How many people have you caught?
JPR: I couldn’t even tell you – it’s been that many unfortunately.
MMI: And so, what happens?
JPR: It depends.
MMI: Do you evict? Do you move to not renew?
JPR: I’ll evict. I’ll move to not renew. I’ll send them non-renewal notices, but usually I’ll address the situation by contacting them, usually through email or written letter, just telling them that they need to pull the listing down. I want proof that the listing is pulled down, and depending on the situation, I’ll not renew their leases, or in one case recently, I handed it over to our attorney to address the issue.
MMI: Tell the story of the young woman, the tenant, who, while her father was pleading on her behalf for a rent reduction, you find her online.
JPR: Yeah, about 3 weeks later, listing her apartment for about $300 a night, while complaining that the rent was too high and she couldn’t afford it.
MMI: So, you haven’t had any litigation go the full way on this yet?
JPR: Through an eviction, no.
MMI: But you have not renewed people.
JPR: Yes – the majority of them.
MMI: You’re not a second-chance guy?
JPR: It really does depend on the tenant.
MMI: How long they’ve been there. How well you know them.
JPR: When you’ve been doing this this long, you know who’s honest and who’s not.
MMI: I can’t thank you enough for this information. It’s extremely valuable, and thank you for being here.
JPR: Thanks for having me.
MMI: In today’s legal segment, we’re going to be talking about what you can do legally when you find out your tenants are violation the leasing law. Now, earlier, you heard JP Rutigliano tell us all about how you can detect whether or not your tenants are engaging in short-term leasing, and what you could do in a very practical manner about dealing with your tenants, preventing it. That’s great information, but sometimes you just need to go legal on these situations. So first, let me tell you about what the short-term leasing law is. We find that there is a lot of misinformation around this. We’re talking about Multiple Dwelling Law § 4(8)(a), and what it prohibits is this: in a building with three or more units, you cannot rent to someone for less than 30 days, while the tenant is not there, and take money for it. That’s what you can’t do. So, what can you do? It would be allowable for a tenant to take money from someone, and have them stay with them, like a class B&B situation. You make them breakfast, whatever. The point is someone’s coming and hanging out with you in your apartment – you can take some money for that. That is not a violation of the short-term leasing law. Also, your cousin Sophie can stay in your apartment while you go to Europe and she feeds your cat, but you don’t pay her. So no money changes hands, you let somebody come and stay as a favor, something like that. That is not a violation. What you can’t do is, in a building with three or more units, take money from someone coming into your apartment for less than 30 days, while you are not there. That is a violation, and as JP pointed out, it brings up all kinds of security problems. So, let me just clarify because this also seems to be a source of a lot of misinformation. A lease can also further prohibit this, and we’re seeing more and more lease clauses that say you can’t do this. Occasionally you get tenants who say, “I have a right.” You don’t have a right to do that. There is the roommate law, which we’re going to talk about in a separate legal segment. That’s a totally different thing, and has nothing to do with this “less than thirty days, while you’re not there.” That is not a roommate, does not come under the roommate law. It’s further prohibited under the Rent Stabilization Law. If we’re talking about a rent-stabilized premises, there’s even more problems for the tenant because rent-stabilized tenants are not allowed to profiteer on their apartments. Think about it – it’s an artificially depressed rent, the last thing you could is go out and start making a whole bunch of money on your apartment as a hotel. That’s not the intention of the Rent Stabilization Law. These are the things that are prohibited. Guys, we’re seeing more and more things every day in the New York Law Journal, where rent-stabilized tenants are losing their apartments over abusing the short-term leasing law. Now JP gave us some great tips about how to collect proof in this area. He told us how we can find the ads, and he’s got a superintendent who’s very engaged and other tenants. I’ve also had great success using private investigators, and surveillance cameras to help garner proof. Really, the key to winning these cases is having a lot of proof – not innuendo – but actually having proof. Remember, guys, legal knowledge is real estate power.