Oakland-based Kiki Club launched peer-to-peer subletting startup in New York in 2023 with a mission to help renters sublet their apartments while traveling for extended periods.
However, Kiki’s model ran afoul of local short-term rental laws, causing it to shut down last June. The New York City Mayor’s Office of Special Enforcement (OSE) announced Wednesday that Kiki agreed to pay more than $152,000 to settle the charges.
Backed by Blackbird, the Airbnb competitor aimed to simplify the subletting process and boldly promised a solution that would allow users to sublet their spaces for up to six months. The platform used a matching system similar to that of dating apps, connecting listings and renters based on their preferences.
However, the startup found itself on the wrong side of New York’s short-term rental laws. Especially, Local Law 18, which came into effect in 2022. This legislation imposes strict guidelines on short-term rentals, allowing them only if the host is registered with the OSE as a short-term rental host and meets additional criteria, such as living in the same unit as guests.
When the law was first introduced, many Airbnb hosts found the regulations too difficult to manage, leading to a dramatic 85% drop. in short-term rentals, according to Inside Airbnb, an organization that tracks the platform’s data.
In addition, by law, booking services must use the OSE’s verification system to confirm that hosts are registered or opt-out. Unverified transactions face a penalty of $1,500 or three times the revenue earned, whichever is lower.
According to the OSE, Kiki failed to submit quarterly short-term rental transaction reports for eligible listings and failed to verify nearly 400 short-term rental transactions.
“This settlement sends a clear message: If you’re a company that facilitates short-term rentals, ignoring city laws will be a costly proposition,” said Christian Klossner, OSE’s executive director. “The Kiki Club has acted as a secret conduit for unregistered and illegal short-term rentals, directly undermining the city’s efforts to protect renters and preserve permanent housing.”
While Kiki neither admitted nor denied the findings, she paid the fines. This was previously acknowledged by a representative of Kiki in an interview SmartCompany that the company knew it was operating in a “grey regulatory area.”
And, despite facing such major consequences in New York, Kiki doesn’t give up. In June the startup was announced its launch in London.
It is important to note that the UK also has regulations regarding illegal renting. Renting to someone who does not have the right to rent in the UK can lead to up to five years in prison or a heavy fine.
Hopefully, the startup learned a valuable lesson in New York so that its London-based platform doesn’t suffer the same fate.
