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New York Sues Smart Apartments Over Hotel Conversions

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Oct. 23 (Bloomberg) -- Smart Apartments, a provider of short-term accommodations for tourists, was sued by the city of New York for allegedly illegally converting residential units intended for permanent occupancy.

The complaint filed today in Manhattan accuses New York-based Smart Apartments of illegally booking, accepting and advertising short-term reservations in residential buildings, according to a statement from Mayor Michael Bloomberg’s office.

Illegal hotel operators convert residential units intended for permanent occupancy for stays of 30 days or less and “deplete the city’s housing stock, create hazardous conditions and harm the residential character of neighborhoods,” Bloomberg’s office said in the statement.

“Illegal hotel operators create hazardous conditions and place the lives of guests in danger,” Bloomberg said in the statement. The lawsuit is the first of its kind and follows a state law that took effect in May classifying transient occupancy as less than 30 days, the city said.

The mayor is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.

The lawsuit is directed toward situations that occurred in the past, said Jonathan B. Nelson, an attorney with Dorf & Nelson LLP in Rye, New York, who is representing Smart Apartments.

‘Remedy Violations’

“Smart Apartments is committed to remedy any violations that have occurred and to bring all the apartments under the management of Smart Apartments into full compliance with New York City housing and other regulations,” Nelson said in a statement. “Smart Apartments fully supports the efforts of New York City to maintain a safe environment for both residents and tourists visiting the city.”

The city said it obtained a temporary restraining order against the company, stopping it from advertising and operating residential apartments, and is seeking $1 million in punitive damages and a restitution fund for affected tourists.

The Office of Special Enforcement began probing the company after receiving complaints and found hundreds of apartments that had been illegally converted for short-term stays, according to the statement.

It’s unlawful to occupy units intended for permanent occupancy for short-term stays, and illegally converted buildings lack fire-safety precautions such as fire alarms, sprinkler systems and smoke detectors, according to the statement.

‘Chic and Temporary’

One resident of a location used by Smart Apartments said strangers entered the building at all hours with keys provided by management, while noise levels rose and property was destroyed, the city said in the statement.

Smart Apartments didn’t immediately return a phone message and e-mail seeking comment on the lawsuit. The company, started in February 2010, says on its website that it offers “chic and temporary” homes in more than 200 apartments in 13 neighborhoods.

The case is City of New York v. Smart Apartments, 402255/2012, New York State Supreme Court, New York County (Manhattan).

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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