Subletting Kiki paid more than $152,000 to settle fees after violating New York City’s short-term rental laws.

Kiki Club, founded in Oakland, launched its peer-to-peer subleasing startup in New York City in 2023 with the goal of helping renters sublease their apartments while traveling for long periods.

However, Kiki’s model violated local short-term rental laws, leading to its closure last June. The New York Sheriff’s Office of Special Enforcement (OSE) announced Wednesday that Kiki has agreed to pay more than $152,000 to settle the charges.

Backed by Blackbird, the Airbnb competitor was aiming 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 renters and renters based on their preferences.

However, the startup found itself on the wrong side of New York City’s short-term rental laws. Specifically, Local Law No. 18, enacted in 2022. This legislation imposes strict guidelines on short-term rentals, allowing them only if the host is registered with OSE as a short-term rental host and meets additional criteria, such as residing in the same unit with guests.

When the law was first introduced, many Airbnb hosts found the regulations extremely difficult to manage, leading to a massive 85% decline in short-term rentals, according to Inside Airbnb, an organization that monitors platform data.

Additionally, by law, booking services must use their operating system environment verification system to ensure that hosts are either registered or exempt. Unverified transactions face a penalty of $1,500 or three times the revenue earned, whichever is less.

According to the operating system environment, Kiki failed to provide quarterly reports on short-term rental transactions for eligible listings and did not verify approximately 400 short-term rental transactions.

“This settlement sends a clear message: If you are a business that facilitates short-term rentals, ignoring city laws will be an expensive proposition,” OSE Executive Director Christian Klausner said in a statement. “The Kiki Club served as an underground conduit for unregistered and illegal short-term rentals, directly undermining the city’s efforts to protect tenants and preserve permanent housing.”

Although Kiki neither admitted nor denied the results, she paid the fines. A Kiki spokesperson previously admitted in an interview with SmartCompany that the company was aware it was operating in a “regulatory gray area.”

Despite facing such dire consequences in New York, Kiki does not give up. In June, the startup announced its launch in London.

It is important to note that the UK also has regulations regarding illegal renting. Renting to someone who is not entitled to rent in the UK can result in up to five years in prison or a large fine.

Hopefully, the startup has learned a valuable lesson in New York so that its London platform does not suffer the same fate.