New York City officials held onto their claim that a resident violated the city's illegal hotel law, which, in certain cases, makes renting out personal space within the city illegal if it's under 29 days. The man, Nigel Warren, rented his room using the Airbnb service.
The ruling set Warren back $2,400, but it could set Airbnb back even further: the company, still in startup mode, stands to make $1 billion in sales in New York City this year. That makes the city a crucial area for Airbnb to operate.
At the center of the issue is a new law, which took effect in 2011, effectively barring New York residents from operating illegal hotels in their places of residency. According to The Verge, the law makes an exception for those who rent out a room to a lawful boarders for less than 30 days.
The judge presiding over the case ruled this exception didn't apply to Warren because he was renting a room out to a complete stranger who had no contact with Warren or his roommate.
"This decision runs contrary to the stated intention and the plain text of New York law, so obviously we are disappointed and we are considering all appeal options as we move forward. Put simply, this decision is wrong on the law, and bad for New York," Airbnb said in a statement responding to the ruling. "The laws in New York and around the world are confusing and often contradictory, but we intervened in this case because this was the one area of the law that seemed most clear. This decision demonstrates how difficult is for hosts and even companies like ours to adequately understand laws that were not meant to apply to regular people hosting to make ends meet."
New York City officials said they won't go out of their way to raid Airbnb hosts, though they will have to respond to any complaints filed against such rentals.
The ruling could scare away prospective hosts from renting out excess rooms in the notoriously expensive New York City, where the average daily room rate for a hotel room is about $300 a night. Airbnb rooms, by contrast, cost anywhere from $85 to $300 and up, depending on where a renter is staying. In Warren's case, the renter paid $300 for three nights.
Warren said, in an interview with CNET, he isn't sure if he'll appeal the decision, which netted him a lower fee from the initial $7,000 fine he was hit with.
Airbnb, however, has its legal work cut out for it. The service faces additional battles where rental laws are unclear, including its hometown of San Francisco, where landlords are allegedly using the service to dodge local tenant protections, according to The San Francisco Bay Guardian.