Kiki Subletting Startup Settles NYC Short-Term Rental Violations

Kiki Club's New York Subletting Venture and Legal Settlement

Kiki Club, a startup originating in Auckland, initiated its peer-to-peer subletting service in New York City during 2023. The company’s core objective was to assist renters in subleasing their apartments during periods of extended travel.

Violation of Short-Term Rental Regulations

However, Kiki Club’s operational model was found to be in conflict with existing local short-term rental regulations, ultimately resulting in a shutdown in June of this year. The New York Mayor’s Office of Special Enforcement (OSE) publicized on Wednesday that Kiki has consented to a payment exceeding $152,000 to resolve the associated charges.

Platform Functionality and Backing

Supported by Blackbird, the company positioned itself as a competitor to Airbnb. It aimed to streamline the subletting process and offered a system allowing sublets for periods of up to six months.

The platform employed a matching algorithm, reminiscent of those used in dating applications, to connect individuals listing properties with prospective renters based on shared preferences.

Conflict with Local Law 18

The startup encountered legal difficulties due to non-compliance with New York City’s short-term rental laws, specifically Local Law 18. This law, enacted in 2022, establishes guidelines for short-term rentals.

These guidelines stipulate that hosts must be registered with the OSE and fulfill specific requirements, including remaining present in the rental unit during the guest’s stay.

Impact of Local Law 18

Following the implementation of this law, Inside Airbnb, an organization dedicated to monitoring Airbnb data, reported an 85% decrease in short-term rental listings from Airbnb hosts.

Furthermore, the law mandates that all booking platforms utilize the OSE’s verification system to confirm host registration or exemption status. Transactions lacking verification are subject to penalties of $1,500 or three times the revenue generated, whichever amount is lesser.

OSE Findings Against Kiki Club

The OSE determined that Kiki Club failed to submit required quarterly reports detailing short-term rental transactions for eligible listings. Additionally, the company did not verify approximately 400 short-term rental transactions.

Statement from the OSE

“This settlement delivers a definitive message: companies facilitating short-term rentals will face substantial financial consequences for disregarding city regulations,” stated Christian Klossner, the executive director of the OSE. “Kiki Club functioned as a surreptitious channel for unregistered and unlawful short-term rentals, directly hindering the city’s initiatives to safeguard tenants and maintain permanent housing availability.”

Kiki Club's Response and Expansion

While Kiki Club neither admitted to nor denied the allegations, the company fulfilled the penalty payment. A company spokesperson previously acknowledged to SmartCompany that they were operating within a “gray regulatory area.”

Despite the significant repercussions experienced in New York, Kiki Club has continued its operations. In June, the startup announced its expansion into the London market.

U.K. Regulations Regarding Renting

It is crucial to recognize that the U.K. also maintains regulations concerning illegal renting practices. Renting property to individuals lacking the legal right to rent in the U.K. can result in imprisonment for up to five years or a substantial financial penalty.

Looking Ahead

It is hoped that Kiki Club has gained a valuable understanding from its experience in New York, ensuring that its London-based platform avoids a similar outcome.