The city has filed its first lawsuit under New York City’s short-term rental law. This marks a new phase in the city’s campaign against illegal Airbnb-style operations. The case targets Incentra Village House, a property in Greenwich Village, that officials say has been operating illegally as a boutique hotel despite repeated warnings. The lawsuit is the first legal test of Local Law 18, a sweeping ordinance that redefined the rules for short-term rentals in the city and sharply curtailed their availability.

City officials claim that Incentra Village House transformed from a residential apartment building into an unlawful short-term rental operation. Despite presenting itself as an historic inn with antique furnishings and rooms named after neighborhood landmarks, the property was never licensed to operate as a hotel. One room, referred to in city filings as the “Stonewall Room,” was allegedly created illegally in the cellar and accessible only by what the city called a “rickety staircase.” That room lacked proper fire exits and, according to guest accounts cited in the suit, presented serious safety concerns.

What the law says. This case comes nearly two years after Local Law 18 was adopted and almost a year after its enforcement provisions took effect. The law, which went into effect in July 2023, is the most aggressive attempt to date to curtail the spread of unregulated short-term rentals across the five boroughs. It requires all hosts offering stays of fewer than 30 days to register their units with the Mayor’s Office of Special Enforcement. But not all units are eligible. A host must live in the unit and be physically present during the guest’s stay, and the rental must involve no more than two guests at a time. Importantly, the entire unit cannot be rented out, and buildings that are part of public housing, subject to rent regulation, or listed on the city’s Prohibited Buildings List are categorically ineligible.

What the lawsuit claims. According to the city’s complaint, Incentra not only ignored the registration requirement but also violated fire safety codes and operated without a hotel license. The building, which once consisted of residential apartments, was never granted the necessary approvals to function as a Class B multiple dwelling, the designation that permits transient hotel use. Officials are seeking to shut the operation down, collect financial penalties, and require the owner to correct building code violations.

While hosts and some homeowners have pushed back on the new rules, arguing that they are overly burdensome and limit personal property rights, the city has maintained that Local Law 18 is necessary to restore order in the rental market. Housing advocates have welcomed the reduction in short-term listings. But some observers note that the law, while effective at curbing illegal rentals, hasn't yet translated to a meaningful expansion of long-term housing availability.

Owners who want to ensure compliance have tools at their disposal. Local Law 18 allows owners to petition the city to add their buildings to the Prohibited Buildings List. This option gives owners more control over how units in their buildings are used and can help protect tenants from the disruption often associated with transient guests. As the case unfolds, it may serve as a precedent for future enforcement. City officials have signaled their intent to pursue similar actions against other operators that flout the law.