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Inside Miami Beach’s war on short-term rentals

March 15, 2019

MIAMI BEACH, Fla. (AP) — In apartment 9A of a two-story 1920s Miami Beach building, a sunburned couple from Charlotte was staying the weekend after booking the apartment on Hotels.com. In 6A, three generations of women from Argentina were visiting via Despegar.com. In 4B, two young women from Amsterdam were celebrating a 21st birthday; they found the listing on Booking.com. In 9B, a young woman from Colombia insisted she had rented the place from a friend for the long weekend.

The apartment building — 1518 Drexel Ave. — is in an area of the city where short-term rentals of six months or less are illegal. Yet two years after the city enacted steep fines to prevent owners from renting apartments to tourists — $20,000 for the first violation, $40,000 for the second, and so on — a thriving short-term rental market persists.

The city’s fines have been enough to deter some owners and to scare others who said they were unaware that their tenants were subletting short term. But still others, like the owners of some of the units at 1518 Drexel, continue to rack up hundreds of thousands of dollars in fines — and the city often can’t collect them.

Dressed in her code compliance uniform with a body camera on her chest, Vijma Maharaj spotted Michael Simmer, 54, approaching the front door of 1518 Drexel Ave. on the evening of Feb. 22. Her office, Miami Beach code compliance, constantly receives complaints that people staying in the building are tourists, not tenants, but city inspectors are rarely able to get inside.

Simmer, from Charlotte, explained how he and his wife paid $600 for a three-night stay at a different apartment building — 1619 Jefferson Ave. — and were directed to go to a “welcome center” at a hostel at 236 Ninth St. when they arrived from the airport. There, he said, someone told them the apartment they booked had a plumbing problem so they would be staying at 1518 Drexel Ave. Apt. 9A instead, which was not nearly as nice as the apartment they’d been promised. Simmer spent his first day of vacation fighting with Hotels.com, which eventually offered him a refund.

After collecting evidence — Simmer’s booking confirmation, photos of the sign on the wall with the Wi-Fi password for guests — Maharaj spotted lock boxes on three more apartments, a telltale sign of short-term rentals, she said.

A grandmother in 6A said that she, her daughter and her granddaughter were staying for nine nights. Upstairs, the two young women from Amsterdam said they paid $1,029 for a week at 1512 Washington Ave. on Booking.com, but were rerouted to the Drexel apartment through the same hostel Simmer was directed to. Across the hall, the young woman from Colombia insisted that she was staying at a friend’s apartment for the long weekend. Maharaj called the “friend,” and it quickly became clear the two did not know each other.

As Maharaj was getting ready to leave the building, a man named Luis who said he works for a property owner in the building stopped her and insisted that none of the apartments was rented illegally. He also demanded that the reporters accompanying Maharaj leave the building, accusing them of trespassing.

Maharaj issued violations to the owners of apartments 9A and 4B. It wasn’t the first time.

Miami Beach code compliance has issued 17 violations to 13 units at 1518 Drexel Ave. over the past two years, including apartments 9A and 4B. Property records show that units 9A and 4B are owned by a company called Sweet House 2016 Inc., which has been fined a total of $420,000 for violating the city’s short-term rental laws, according to city records. The company’s president and vice president, Alessandro Zara and Michele Santinato, appear to live in Italy and could not be reached for comment.

The company’s registered agent, Francesco Cecchini, said he manages the properties but refused to put the Miami Herald in touch with the owners or answer any questions about the short-term rentals. He said most of the tenants at 1518 Drexel Ave. are long-term renters.

Cecchini’s name is associated with more than 30 short-term rental violations in Miami Beach totaling more than $1.2 million in fines, according to information provided by the city in response to a public records request. Cecchini is also listed as the registered agent for SDMH International LLC, which is listed in city records as the contact for the hostel where Simmer and the other guests said they were misled. The hostel has an open violation for operating without a business license. Cecchini, a Realtor who owns a Miami Beach company called Miami Dreams Realty, according to his LinkedIn page, said he does not own any of the properties that have been fined.

“I’m just a registered agent for the corporations,” Cecchini said. He said the companies are owned by multiple people.

As of Monday morning, 1518 Drexel Ave. was still listed on Hotels.com, Despegar.com and Expedia.com.

The apartments at 1518 Drexel Ave. are just a few of the more than 300 properties Miami Beach has busted for violating the city’s short-term rental rules since 2016. The fined properties stretch from South Pointe through the posh Palm and Hibiscus islands all the way up to North Beach.

TOUGH TACTICS

Cities across the U.S. are battling illegal short-term rentals, which they argue negatively impact the quality of life for homeowners and renters living next door. Miami Beach has some of the most aggressive short-term rental policies in the country. Over the past five years, the number of short-term rental investigations has nearly tripled, from roughly 600 during the 2013-14 fiscal year to more than 1,700 last year.

Short-term rentals of six months or less are prohibited in most residential areas. In addition to the hefty fines, repeat offenders can lose their certificate of occupancy or get their water and electricity cut off.

And that’s not all. The city reports owners to the county, which can revoke their homestead tax exemption.

Short-term rentals have been illegal in Miami Beach for years, but the fines started out small. In March 2016, the city raised them to $20,000. Since then, Miami Beach’s code compliance department has issued 431 violations and levied nearly $8 million in fines. Although city law allows code compliance to fine property managers, real estate brokers and tenants illegally subletting their apartments, the vast majority of the violations have gone to property owners. That’s because it’s nearly impossible for the city to enforce fines against tenants unless the tenant operates a business or owns property elsewhere in Miami Beach.

It’s not always easy to enforce fines against homeowners, either.

The city initially levied $13.3 million in fines for the 431 violations, but some property owners have successfully appealed or negotiated a lower payment with the city attorney’s office. By early February, the city had been able to collect only $463,000 of the nearly $8 million in fines, which amounts to just 6 percent. Miami Beach expects to collect the outstanding fines through liens placed on the properties, which prevent owners from selling or refinancing their homes until they’ve paid up.

But Hernan Cardeno, the director of the city’s code compliance department, said the city’s ultimate goal isn’t to collect every penny of every fine. It’s to get property owners and tenants to stop renting illegally, even if the owner ends up negotiating a smaller payment.

“The ultimate goal is compliance for that neighborhood,” Cardeno said. “The core is we are changing the character, nature, and repose of our community, of our neighborhoods. This is not what people purchased for or live there for in Miami Beach. This is not what they expected.”

Many residents say they are grateful for code enforcement’s aggressive stance. Code compliance officers work 24/7 on Fridays and Saturdays and almost around the clock the rest of the week, responding to complaints sent via the city’s hotline, website and phone app. They most often learn about illegal short-term rentals from noise complaints — calls made by desperate neighbors unable to sleep as the tourists next door party until late.

Code compliance officers have seen it all: wild bachelor and bachelorette parties, drunk tourists pounding on the neighbor’s door in the middle of the night trying to find their vacation rental, and even a rapper illegally renting a Miami Beach mansion to shoot a music video.

“It can be challenging,” said Maharaj, who has worked for the code enforcement department for over a decade. But, she added, “I like being able to make a difference.” Maharaj said it’s satisfying to drive through a neighborhood that used to have flagrant code violations and see it quiet and cleaned up.

Not everyone agrees with the city’s tactics. Some owners argue they have the right to operate a low-key business out of their home. Short-term rentals also generate a lot of tax revenue. Airbnb hosts paid more than $10 million in taxes to Miami-Dade County in 2018.

AN EXPENSIVE SURPRISE

When code compliance officers come across an illegal rental, they typically make the visitors leave the property unless they’re elderly or families with children. Officers instruct the renters to call the host so the host can find them new accommodations. Maharaj decided to let the tourists at 1518 Drexel stay through the weekend because they weren’t disturbing the neighbors and they only had a few days left.

Some owners have been able to successfully appeal violations by proving that their tenant was subletting illegally without the owner’s knowledge and that the landlord took steps to stop it, such as trying to evict the renter. But the property owner is ultimately responsible for what happens on their property, Cardeno said, even if it was the tenant who was operating the short-term rental.

That’s a lesson Matteo Cornali, who owns several Miami Beach apartments, learned the hard way. Cornali said he has been fined twice because his renters were operating short-term vacation rentals without his knowledge.

“I found out when the city fined me, they sent me the letter that they wanted to impose a $20,000 fine,” said Cornali. “I was kind of upset to say the least because I didn’t know they were doing this. I’m always clear to all of my tenants not to do short-term rentals because the fines are very expensive.”

Cornali said he was able to negotiate the fine down to $500, but he said his tenants weren’t fined.

“They should be fining also the tenant, but what happens is that I own the real estate so they know I’m the only one they’re going to get money from,” he said.

Cornali said he runs extensive background checks on his tenants, but he knows that’s not a guarantee they won’t operate illegal short-term rentals.

“I own more than 10 apartments but I’m not a police officer so I don’t go to check that nobody is doing a short-term rental,” Cornali said.

Miami Beach has an online tool for property owners to check the names of potential renters against a list of people who have been fined, but Cornali said he didn’t know about the tool.

Other owners are fighting back against the fines in court. Two property owners are suing the city, saying the fines violate a state law that caps municipal penalties at a much lower amount.

Property owners aren’t the only ones on the hook for illegal short-term rentals. Miami Beach has also taken an aggressive stance against the websites that advertise rentals.

Last September, the city passed an ordinance requiring rental platforms to post only listings that include business license and resort tax numbers — information proving that the rental is legal. Otherwise, platforms face fines of $1,000 for a first offense and up to $5,000 for repeated violations.

Cardeno said he thinks the ordinance, which went into effect in December, will be a “huge help” in cracking down on illegal rentals. “This would prevent somebody from even taking that affirmative action of even placing their property on a platform,” he said.

But Airbnb, the largest short-term rental platform, has sued Miami Beach over the restrictions, arguing that they violate a federal law that says websites are not responsible for policing the content on their platforms.

As the courts weigh the legality of Miami Beach’s enforcement tactics, code compliance officers continue to knock on doors and collect evidence.

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Information from: The Miami Herald, http://www.herald.com