Airbnb Ruled Illegal In N.Y., User Hit With Four-Figure Fine

New York City Mayor Michael Bloomberg has made no secret of his hope that the city will become a high-tech hub. But local courts don't seem quite as fond of tech entrepreneurs.

Consider, earlier this month an appellate judge blocked Uber from rolling out an app that lets people hail yellow taxis in the city. Uber can continue to operate other services, but faces a potentially lengthy, expensive battle if it wants to roll out its yellow-cab app, which is opposed by groups representing livery car drivers.

And this week it came to light that New York Environmental Control Board Judge Clive Morrick fined East Village resident Nick Warren $2,400 for renting out his condo on Airbnb. If that ruling holds up on appeal, it could put a big crimp in Airbnb's business, at least in New York.

The Warren case dates to last September, when a city investigator went to Warren's apartment to investigate whether he was illegally running a hotel. The investigator testified that he interviewed two women who said they were visiting from Russia and had found the apartment through Airbnb, according to Morrick's opinion. The women said they were staying in the apartment from Sept. 9 through Sept. 14; one of them said her husband had paid between $500 and $600 for the place.

Morrick says that this type of arrangement violates a 2010 New York law saying that landlords can't rent out apartments for less than 30 days. That measure -- reportedly aimed at prohibiting landlords from getting around rent control laws by marketing vacant units as hotel rooms -- makes exceptions for guests, boarders, roomers and lodgers.

Warren argued that anyone staying in his apartment last September fell within that exception, but Morrick disagreed. “The record established that she was not a houseguest,” he said in the opinion, which was written as if there was one visitor. “She was a stranger and paid to occupy the apartment.”

Airbnb and Warren have indicated they will appeal. Airbnb also has said it intends to lobby to revise the law. In the meantime, the company could lose a significant portion of its New York business if Morrick's ruling scares people from renting out their apartments.

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