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In late October, New York City made the unprecedented move of filing suit with the State Supreme Court against a company for its alleged deceptive trade practices against tourists to the Big Apple.

The Mayor’s Office is charging that a large purveyor of short-term rentals known as Smart Apartments, has been booking accommodations for visitors to the City in illegally-converted apartment buildings.

For a year, the City’s Office of Special Enforcement investigated over 300 hundred calls and complaints, culminating in the legal action which is seeking $1 million in punitive damages and restitution for the tourists who were affected.

A restraining order has also been procured, prohibiting Smart Apartments from advertising or operating in New York City.

In its statement, the Mayor’s Office alluded to a bill enacted in May 2011. It sought to clarify ambiguities in the law regarding short-term rentals versus hotels, defining “transient occupancy” as residence of 30 days’ duration or less in an apartment intended for long-term occupancy.

It has been reported that, since the law took effect, violations have more than doubled.

Mayor Michael Bloomberg has said that illegal hotel operators create hazardous conditions and imperil guests’ lives. He was quoted as saying, “With this lawsuit, we are sending a clear message to operators of illegal hotels: our Administration will remain vigilant in its commitment to combating this public safety problem.”

Unfortunately, the demand for short-term rentals in Manhattan and Brooklyn has never been higher. With the City cracking down, the outlook for supply doesn’t seem promising.

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