BARRISTER'S BRIEFING: A Refresher on Illegal Rentals

Leon Cameron, Esq. | June 2018

While the vast majority of landlords are law-abiding, some continue to flout the law when it comes to renting out apartments that are not legally suitable for occupancy. These illegal apartments are typically, but not always, found in single- or dual-family homes. Undocumented immigrants are frequently preyed upon by this practice. This article is about what Licensees need to know to make sure that both they and their landlord clients are adhering to the law, avoiding liability, and hopefully keeping the public safer as a result.

According to New York’s Uniform Fire Prevention and Building Code, specifically 19 NYCRR §1202.3(b): “No change shall be made in the nature of the occupancy of an existing building unless a certificate of occupancy authorizing the change has been issued. The owner or occupant of such building must demonstrate that such change will conform with all applicable provisions of the Uniform Code before a certificate of occupancy will be issued.”

Moreover, Section 235-b(1) of the New York Real Property Law titled “Warranty of Habitability” imposes certain legal obligations upon landlords for rental contracts. It states:

“In every written or oral lease or rental agreement for residential premises the landlord or lessor shall be deemed to covenant and warrant that the premises so leased or rented and all areas used in connection therewith in common with other tenants or residents are fit for human habitation and for the uses reasonably intended by the parties and that the occupants of such premises shall not be subjected to any conditions which would be dangerous, hazardous or detrimental to their life, health or safety. When any such condition has been caused by the misconduct of the tenant or lessee or persons under his direction or control, it shall not constitute a breach of such covenants and warranties.”

The fact that prior tenants may have occupied the rental space in question without incident does not speak to its legality. The first step in the process for obtaining a Certificate of Occupancy (commonly known as a “CO”) for a proposed rental space that lacks the same is obtaining a building permit to make the necessary changes to ensure the space is legally suitable for occupancy. Only then can the CO be applied for. A renovated or finished apartment, although aesthetically pleasing, does not necessarily mean the apartment can be legally rented out. There may be ventilation, fire hazards, or other safety issues that can only be addressed by a building inspector from the local building authority who makes the decision to issue a new or amended CO.

When visiting a proposed rental space, the presence of padlocked doors, a lack of any windows, attic apartments and basement apartments are all red flags for Licensees to be aware of. Licensees should perform further due diligence and check their local Building Department in which the apartment is situated. They should read the Certificate of Occupancy on file carefully to see if their landlord’s proposed Apartment for Rent is covered by the Certificate. If it is not covered, the Licensee should immediately inform their Landlord client that they need to go through the process for obtaining a CO before the space can be rented. As much as Licensees should cultivate positive relationships with their landlord clients, they should not take a landlord’s word alone on this issue.

The legal consequences for you and your landlord client for renting out illegal apartments can be dire. In addition to criminal exposure for the landlord for the mere renting out of the space, a valid defense in court to a tenant’s non-payment of rent is that the rental space was illegal in nature. The landlord is also running the risk of government-imposed administrative fines being assessed against them.

The Realtor is also left vulnerable to an ethics complaint under the National Association of Realtors Code of Ethics. There is license vulnerability as well for Salespersons and Brokers since the advertising of an illegal apartment may run afoul of New York Department of State Advertising Regulations for Licensees. This is because it may be construed by DOS to be an inaccurate property description, 19 NYCRR §175.25. If there is a personal injury or a death that occurs in the illegally rented space, there is potential civil liability for both Licensees and landlords. In the case of a death occurring in an illegal apartment due to a safety hazard, the landlord may be charged with criminally negligent homicide.

In short, Realtors, and all Licensees, must perform their due diligence on any space that their landlord client is offering for rent, to ensure that it is legally suitable for occupancy. As Benjamin Franklin once said, “An ounce of prevention is worth a pound of cure.”

Editor’s Note:
The foregoing is for informational purposes only. For a legal opinion specific to your situation, please consult with an attorney-at-law in your jurisdiction.

Leon Cameron, Esq.
Leon Cameron, Esq., is Director of Legal Services & Professional Standards Administrator for the Hudson Gateway Association of Realtors.