On May 14th, 2015, the New York City Council passed a controversial bill that prevents hotel owners from converting over 20% of their rooms to condominium units without obtaining special approval from the Board of Standards and Appeals. While the two year ban is in place, the city will conduct a study of the impact hotel conversions have on the city's economy and employment.

Council Member Corey Johnson introduced Bill 592-A in December 2014, which originally called for a permanent ban on hotel conversions. The purpose of the bill was to protect the jobs of hotel workers. The preservation of hotels bill passed by a City Council vote of 42 to 8. The bill creates a two year moratorium on hotels with more than 150 rooms from converting more than 20% of its rooms into apartments or condominium units for long-term residents.

The bill went into effect immediately on passage by the City Council and applies to approximately 100 buildings in the city.

The bill features two exceptions to the ban:

The bill received support from Mayor Bill de Blasio, City Council Speaker Melissa Mark-Viverito and the New York Hotel Trades Council. Supporters cited the need to prevent job losses caused by hotel conversions and to protect the city's hotel and tourism industries. The text of the bill states that tourism generates over $3.7 billion in tax revenue and supports 360,000 jobs in New York City. In the last 11 years, approximately 3,600 rooms at 14 properties have undergone conversions to condominiums or apartments. Conversions are responsible for the termination of over 1,000 hotel jobs.

Opponents of the bill include the Partnership for New York City, the Hotel Association of New York City and the Real Estate Board of New York. These groups raised concerns about the infringement of property rights without an explanation or clear purpose.

Opponents of the bill claim that job losses due to conversions would be offset by new development. Challengers of the bill also believe that the bill creates disincentives for future development. Some groups allege that the bill is unconstitutional because it improperly interferes with hotel owners' property rights.

Counsel for owners of New York City hotels that are planning a condominium conversion should advise on alternative courses of action or begin preparing a petition for an exemption if applicable.

This bill may become the subject of litigation by groups that believe the bill unconstitutionally interferes with private property rights. Counsel should follow the actions of the City Council closely for further developments.