The New York Law Journal
By Todd E. Soloway and Bryan T. Mohler
08.15.2017
Settlement Agreements With Airbnb Violate Separation of Powers
Depending on who you ask, Airbnb either poses a significant threat to cities across the country—to residents, hotel owners, and hotel employees alike, or is a innovative disruptor to the lodging market. Home sharing is proving to be wildly popular, but it is not without risks and legal issues. Aside from health, security and life safety concerns raised by the illegal short-term rental of apartments and homes to transient guests, the use of apartments for short-term rental use is damaging the available stock of affordable housing, driving up rents, forcing residents from their neighborhoods, and taking significant business away from hotels, in turn threatening the jobs of hotel employees.
These issues are particularly significant in New York City, where lack of affordable housing is a constant issue and tens of thousands make their livelihoods in the tourism industry. To address those concerns, in early 2016, an Act was introduced in the New York State Senate and Assembly to curtail the advertisement of short-term rentals in New York, and drafted to amend both New York state and New York city law to allow for the punishment and fining of offenders for the advertisement of illegal, short-term rentals. That act passed the Assembly and the Senate in June 2016, and was signed into law by Governor Andrew Cuomo on Oct. 21, 2016.
However, in settling subsequent litigation with Airbnb, Governor Cuomo and Mayor Bill de Blasio have, in an effort to protect Airbnb, undercut the express language of the statute. In so doing, the executive branch has usurped the power of New York’s legislature, in direct violation of the separation of powers doctrine. This article explores this situation and potential avenues for aggrieved parties to enforce the law against Airbnb.
The New Law
Under New York’s Multiple Dwelling Law §120, it is illegal to rent out an apartment in a Class A multiple dwelling (nearly all residential apartments fit into this category) for less than 30 days without the owner being present. N.Y. Mult. Dwell. §120 (2011). For various reasons including fire and life safety concerns, this law recognizes that apartments are not to be used like hotels.
The recently passed law supplements and amends New York Multiple Dwelling Law Section 121 and New York City Administrative Code Section 27-287.1 making it “unlawful to advertise occupancy or use of dwelling units in a class A multiple dwelling for occupancy that would violate [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][the Multiple Dwelling Law’s definition of] a ‘class A’ multiple dwelling as a multiple dwelling that is occupied for permanent residence purposes.” N.Y. Mult. Dwell. §121(1) (2016); N.Y.C. Admin. Code. §27-287.1(1). The law defines “advertise” to include, among other avenues, “websites [such as Airbnb]…intended or used to induce, encourage or persuade the public to enter into a contract for goods and/or services,” and provides for the enforcement of fines up to $7,500 for violations, assigning the responsibility for that enforcement to the Mayor’s Office of Special Enforcement. Id.
When the legislation was presented in the New York State Senate in January 2016, the justification was, among other things, that:
While it is already illegal to occupy a class A multiple dwelling for less than 30 days, this legislation would clarify that it is also illegal to advertise units for occupancy that would violate New York law. However, online home sharing platforms still contain advertisements for use of units that would violate New York law.
N.Y.S. Senate Bill S6340A, Jan. 6, 2016, available at www.nysenate.gov/legislation/bills/2015/s6340/amendment/a.
Thus, on its face, the law applies to Airbnb.
On the very same day Cuomo signed the legislation into law, Airbnb filed suit in the Southern District of New York to enjoin and declare unlawful the enforcement of the law against Airbnb by the state of New York and the city of New York. See Airbnb v. Schneiderman, Case No. 1:16-cv-08239-KBF (S.D.N.Y.). Airbnb filed this lawsuit to leverage its resources and curtail the enforcement of the law against Airbnb, without regard to the detriment its advertising is causing to the New York City housing market.
Less than one month after the law was enacted and Airbnb initiated its action, on Nov. 18, 2016 the state of New York entered into a settlement agreement with Airbnb. The settlement provided, among other things, that:
[I]n consideration of the act’s express provision that any enforcement shall be carried out by the mayor’s OSE [Office of Special Enforcement], defendant Eric Schneiderman, attorney general of the state of New York (AG), sued herein in his official capacity, hereby agrees that he, and his agents, servants, employees, officers or attorneys, will refrain from taking any action to enforce the act, including retroactively and/or under any theories of direct or secondary liability, as against Airbnb.
Stipulation of Settlement and Dismissal as Against Defendant Eric Schneiderman, Airbnb v. Schneiderman, Case No. 1:16-cv-08239-KBF (S.D.N.Y. Nov. 22, 2016), ECF No. 28 (emphasis added).
New York City soon followed suit. On Dec. 5, 2016, Airbnb entered into a settlement with the city of New York and Mayor de Blasio, which provided, among other things, that:
The city [and Bill de Blasio], and its agents, servants, employees, officers and attorneys, will permanently refrain from taking any action to enforce the Act, including retroactively and/or under any theories of direct or secondary liability, as against Airbnb.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]