REBNY Allowed To Sue City Over Hotel Conversion Law

Image credit: Real Estate Board of New York.

New law would hinder hotel conversions to residential use. On June 2, 2015, New York City adopted Local Law 50, placing a prohibition on owners of hotels with 150 or more sleeping units from converting more than 20 percent of their hotel space to full-time residential uses. The law is based on City findings that such conversions were adversely impacting the City’s multi-billion-dollar tourism industry, as well as hotel employment. The purpose of the prohibition is to allow the City to conduct a study of the impacts that such conversions have on these industries. Although the law provides that affected hotel owners can apply on an individual basis for waivers with the Board of Standards and Appeals (BSA), under the law the BSA can award waivers only to “the minimum extent necessary” to afford relief.

The Real Estate Board of New York (REBNY), a nonprofit organization comprised of approximately 17,000 members, brought two actions against the City on behalf of its member hotel owners who were adversely affected by this law. The two-part action consisted of an article 78 petition to have the law invalidated and a separate action in the supreme court seeking an injunction against the City from enacting similar legislation in the future. The supreme court dismissed both claims by REBNY for lack of standing, finding that REBNY lacked a personal stake in the case.

On August 23, 2018, the Appellate Division of the First Department held that REBNY had sufficient standing to bring a suit on behalf of its members. The Appellate Division held that because REBNY had shown that at least 29 of its members who owned hotels were negatively affected by the law and that this was an interest shared by REBNY and those members, it was an appropriate representative for the members in these actions.

The court noted that although the law provided affected property owners with an ability to seek waivers from the Board of Standards and Appeals, because of the wide-spread impact on hotel owners affected by the law, an action brought by an organization to challenge the law was appropriate as individual waivers would only be granted to the minimum extent necessary.

The claims will go back to the supreme court for decision on whether the law should be invalidated and whether an injunction should be granted to eliminate the prohibition on hotel conversions.

Matter of Real Estate Bd. of N.Y., v. City of New York, 2018 N.Y. Slip Op 05906 (Aug. 23, 2018)


By: Viktoriya Gray (Viktoriya is a CityLaw Fellow and NYLS Graduate, Class of 2018)


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