NYC Fines Hotel Company $1.2M for Illegal Short-Term Rentals

by joeheg

A hotel company in New York City has been fined $1.2 million for renting out almost 70 illegal short-term units in Manhattan and Brooklyn between 2019 and 2022. The city has recently become stricter with short-term rentals by enforcing Local Law 18, which outlines specific guidelines:

  • No more than 2 paying guests can stay in any short-term rental at any time, regardless of the size of the dwelling or the number of bedrooms.
  • Hosts must be physically present while their properties are being rented.
  • Hosts and visitors must leave all doors inside the dwelling unlocked, so occupants can access the entire unit.

Enforcement of these rules went into effect on September 5th, 2023 and resulted in a massive purge of properties from websites like Airbnb. A Gothamist article says:

Just three weeks after enforcement began in September 2023, the number of short-term rentals listed on Airbnb, the largest such platform, plummeted from around 10,000 to fewer than 500 approved by the city.

While NYC is now actively enforcing Local Law 18, city and state laws have always prohibited property owners from renting out entire apartments for less than 30 days. They just didn’t usually enforce the laws—that is until a company blatantly flaunts the rules.

LuxUrban Hotels

LuxUrban Hotels, previously known as CorpHousing, leased apartments and then sublet them. This is not illegal, but it becomes so when the agreements are for less than 30 days.

The city’s investigation found LuxUrban used the websites and Expedia to advertise apartments in Hell’s Kitchen, Chelsea, the Upper West Side, Cobble Hill and other parts of Manhattan and Brooklyn — and rented the units out illegally 4,300 times, according to the lawsuit.

The interesting thing about this story is that the infractions happened before the stricter enforcement of Local Law 18. In addition, LuxUrban Hotels is no longer operating in the apartment subletting business. They have divested their apartments and transformed into a hotel company.

You may have seen LuxUrban properties advertised on the Wyndham website. The companies formed a partnership in 2023, and LuxUrban’s hotels are now part of the Trademark Collection.

a screenshot of a hotel

LuxUrban has hotels in New York City, Washington, D.C., Miami, and New Orleans. Its new business model targets hotels with financing issues and offers the owners a long-term lease to operate the properties.

It secures long-term leases for urban hotels that are distressed financially. The hotels themselves don’t require revisions and are more turnkey conversions, and the hotel owners are incentivized to stick with the asset to make their money back.

Final Thoughts

I had been watching LuxUrban since I saw their hotels when I was searching for a place to stay in New York City. The partnership with Wyndham Rewards opens up several new places to stay using Wyndham points. That’s how I found the story about the settlement.

Interestingly, LuxUrban made a strategic move to step out of the sublet business just as cities began to tighten regulations on short-term rentals. Instead, they shifted their focus towards hotels, which turned out to be a wise decision in light of the rising interest rates that made it difficult for some hotel owners to refinance their loans. LuxUrban stepped in and provided a unique option that allows owners to hold onto their properties until they become profitable.

Settling this case with New York City could be the company’s way of closing the previous chapter and focusing on the new business of running hotels.

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1 comment

Stephen T. March 21, 2024 - 6:01 pm

BEWARE when booking a Wyndham property in NYC. I am a Wyndham Diamond member. When attempting to book a reservation in NYC using points most properties require 30,000 points a night. There are a few that require 15,000 points that aren’t a one star property. Last time I stayed a the Wyndham Garden Laguardia South in Rego Park, Queens. OK property. Booked it again for arrival in April. Two weeks after booking the property by sheer luck I checked other dates. Nothing available. Called the hotel and they told me “Glad you called we are now a homeless shelter. Had you shown up we would not have honored your reservation. You would be SOL. Cancelled and checked out the BeHome by LuxUrban. Trying to call the hotel. Phone number was disconnected. Wyndham reservations provided me another number, also disconnected. Wyndham reservations told me I could book the hotel on their website, but reservations was unable to reach the hotel. Sent an email to the hotel no response. One reviewer stated the hotel does not exist, yet still appears on the Wyndham website for reservations. ( and Travelocity don’t show availability).
Next choice was the Club Wyndham for 15,000 points per night. However this property is used to sell Wyndham timeshares although you can use points for a free reservation. Only problem according to those who revied the property was that pushy salespeople hound you to buy a timeshare. Not fun.
Only choice left was the Ramada in Flushing. Not my favorite choice but how else can I redeem 60,000 points for four nights.


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