Screenshot by Donna Tam/CNET

New York officials have determined that a man who rented out part of his apartment on Airbnb should pay $2,400 for violating the city's illegal hotel law, despite Airbnb stepping in on the host's behalf.

The city initially asked host Nigel Warren to pay $7,000 total in fees for violating a law that makes it illegal for property owners to rent out homes temporarily -- essentially mimicking hotel stays -- and for unrelated issues with building and zoning codes, according to the decision and order issued by the board. (See PDF below; it cites Abe Carrey, who owns Warren's condominium, and Warren's first name is misspelled.)

The city argued that the apartment "may only be used as private residences and may not be rented for transient, hotel, or motel purposes."

As Airbnb continues to shake things up for the hotel industry, it's increasingly running into issues with the law, particularly in areas where the law is not clear cut. It's not just in New York -- officials in the company's hometown of San Francisco are concerned about property owners potentially using its service to get around local tenant protections and land use codes.

The New York case is centered around a 2011 law that makes it illegal for New York residents to rent out a property for less than 29 days. It was originally aimed at landlords who bought up residential properties and turned them into hotels. Airbnb has been lobbying legislators to change the law so it clearly protects hosts, like Warren, who are not trying to turn their homes into hotels.

For Warren's case, Administrative Law Judge Clive Morrick dismissed the building and zoning code violations but agreed that Warren did violate the illegal hotel law. He lowered the fee total to $2,400.

"While breech of the condominium rules is not of itself a ground for sustaining this (notice), respondent was in breach (through Warren's acts) and the existence of the rule against rental for transient, hotel, or motel purposes is evidence that the unit owners were to restrict their use to permanent occupation," Morrick wrote.

Airbnb issued a statement to CNET, saying it was disappointed in Morrick's decision:

This decision runs contrary to the stated intention and the plain text of New York law, so obviously we are disappointed. But more importantly, this decision makes it even more critical that New York law be clarified to make sure regular New Yorkers can occasionally rent out their own homes. There is universal agreement that occasional hosts like Nigel Warren were not the target of the 2010 law, but that agreement provides little comfort to the handful of people, like Nigel, who find themselves targeted by overzealous enforcement officials. It is time to fix this law and protect hosts who occasionally rent out their own homes. Eighty-seven percent of Airbnb hosts in New York list just a home they live in -- they are average New Yorkers trying to make ends meet, not illegal hotels that should be subject to the 2010 law.

Warren's landlord has 30 days from May 14, the date the decision was mailed, to appeal the decision, according to the Environmental Control Board, which oversaw the case. The board reviews cases related to regulations that "protect the city's health, safety, and clean environment."

Warren told CNET he hasn't decided if he's going to appeal the decision:

While I'm disappointed with the ruling, I'm relieved the penalty is far less than what the original fines seemed to be. I'd say it's now a pain in the ass, which is much better than life-altering. I'm also glad that four of the five violations were dismissed. I plan to talk to Airbnb before making any decision on whether to appeal. I like what Airbnb does, and I don't want this ruling to stand in the way of what I think is, overall, a great startup.

The case started in September when Warren rented his condo to a woman for a three-day stay. His housemate was also living at the apartment at the time, according to the hearing testimony, outlined in the document. He's used Airbnb for rentals twice before.

Airbnb stepped in at Warren's hearing on May 9 to argue that his case should be an exception to the New York law. Airbnb argued that "allowing such transient use supports the city's desire to preserve living accommodations because it allows tenant the ability to bolster their income and pay rent."

Airbnb's statement refers to the 2011 illegal hotel law at the center of this case. There are several exceptions to this illegal hotel law -- one is for houseguests who intended to stay for 30 days but did not actually stay for that length of time, and one for shared spaces.

Morrick found the first exception didn't even make sense:

In summation, petitioner (City of New York) asserted that the intent of houseguests or lawful boarders, roomers or lodgers is at least a 30-day occupancy even though they may leave after a shorter time. Respondent (Warren, representing his landlord) disputed this interpretation. On this point, I find petitioner's position untenable.The statute clearly states occupancy can be fewer than 30 days. And if houseguests, lawful boarders, roomers or lodgers were staying beyond 29 days, there would be no need for the exception because they would be permanent residents.

Warren argued for the second exception for shared spaces, since his housemate was living at the apartment during the rental period. Morrick decided the exception didn't apply because the renter had to be considered a member of the "household," with "access to all parts of the dwelling. Warren said his room door doesn't lock, but Morrick noted that his renter did not go into Warren's housemate's room during her stay.

Now, this doesn't necessarily mean New York will crack down on all Airbnb hosts. The city enforces this regulation when a complaint is filed. It's not clear why officials zeroed in on Warren's situation. But this has to have Airbnb worried about concerned customers, particularly because the company can't formally do anything about Warren's case. Airbnb's only recourse is to change the law.

Decision and Order for NOV 35006622J