The City’s “Hotel Moratorium Law” (Int. No. 592-A 2014) (the “Law”), effective as of June 2, 2015, creates a two year moratorium on the conversion to new uses of certain “large” hotels in Manhattan.

The Hotel Moratorium Law applies -- with some important exceptions-- to transient hotels in Manhattan with more than 150 sleeping units. For those hotels, not more than 20% of the area currently used for primary hotel space (defined generally as the portion of an hotel with living or sleeping accommodations) can be converted to new uses, including accessory hotel uses.

The purpose of the Hotel Moratorium Law is described as maintaining the tourist industry, a major source of revenue in the City, and retaining quality jobs. The moratorium would “facilitate the preparation and consideration of a comprehensive report”, and halt new conversions of certain hotels pending implementation of the recommendations of that report.

The new Law includes an exception for lots which were the subject of a sale agreement within the 24 months preceding the Law’s effective date, where the purchaser “exhibited a demonstrated interest in converting…. from primary hotel space at the time of the purchase.”

The Law provides for waivers if the hotel owner can demonstrate to the NYC Board of Standards and Appeals that the owner would not otherwise have a reasonable rate of return, considering, among other things, the financial state of the existing facility. Such waivers are limited to the minimum amount necessary to afford the necessary financial relief. (Note that the process has similarities to a zoning variance, which can take six to twelve months to obtain.)

During the two year moratorium, an agency designated by the Mayor is to complete an impact report of the hotel industry, including the impact of projected conversions, and to provide recommendations for legislation or zoning or other changes toward the preservation and enhancement of the hotel industry.