Hotel supplies are everywhere in the real estate world.
The inventory at a major retailer is constantly changing, as well as the price tags on items sold on the black market.
But what you probably don’t realize is that a hotel supply auction has been the subject of a lot of controversy.
In 2013, a Texas man named Ryan Lueck had to fight a lawsuit that claimed he violated the federal Fair Housing Act when he tried to sell an empty hotel room at a Houston hotel.
(Lueck’s lawsuit was later dropped.)
In 2015, a New York City man named Alex Hirsch tried to auction off his room at the Grand Hyatt in Times Square.
Hirsch sued the city after he was denied entry into the hotel because he was carrying a “fake license” to operate as a hotel agent.
In 2018, a man named Josh McConaughey tried to resell a room at his hotel in Los Angeles for $100,000.
McPherson, the hotel supply industry leader, says that hotel supply auctions are “very, very popular with real estate professionals.”
And in 2015, he told New York magazine that it’s actually very common.
“There are a lot more hotels that want to sell a room that doesn’t have anything on it,” McPhersons sales manager, Alex Ponce, told New Yorker magazine in 2017.
And the real-estate agents that sell hotel rooms are generally familiar with the law, and they understand the real value of a room.
“You don’t have to be an attorney to know how to use that as an opportunity to get a deal done,” Ponce says.
“If someone wants to do a real estate deal with you, they’re going to get through you.”
It’s a practice that’s been around for a long time, says Michael Schatzberg, a lawyer at Loyola Law School.
“The supply is the biggest hurdle,” he says.
Schatzov, who is also a partner at the law firm of Loyamp, says the law has long been about the protection of tenants and sellers.
But with a shortage of inventory in some major cities, a hotel room auction has become a real, legal risk.
For example, if you’re in the market for a room in a hotel, and you know that a room doesn’t come with a lease, you can be sued for breach of contract.
“A lot of hotels will only sell a one-year lease if they don’t need it,” Schatzow says.
If the hotel says that the room has a long-term lease, the realty broker is legally obligated to deliver the property to you.
That’s what happens in many auctions.
“But they won’t sell the room, they’ll just give you a short-term rental for the next month,” Schitzow says, meaning that if the property is only available for a month, the seller will lose money.
A hotel may offer a three-month lease if that’s all it’s offering.
And if it offers a month-to-month, the buyer may be required to rent the property.
Schutzow says that this is a legal problem, but it’s not unique to hotels.
“I’ve seen hotels that will say that they’re offering a lease for two months,” he adds.
“And then they’re actually giving you a month to get it.”
In other cases, a buyer may have a good reason to keep the property but will not be able to rent it out to the public for a year.
The realty buyer will then be liable for the rent.
“These are all cases that are extremely expensive for the buyer,” Schatschow says of hotel rooms.
If a buyer fails to deliver a hotel for the duration of the lease, it could be considered a breach of the contract.
It could also be a criminal offense.
“What if you lose the room to a bad landlord and you don’t know what’s going to happen to it?”
And in the end, a landlord is still responsible for paying rent, which can be a big hurdle for a buyer.
In 2016, a California couple named Jennifer and Mark Karr sued their landlord, The Lake, for refusing to rent their hotel room.
The couple claims that Karr told them they could not have the room.
But in a settlement in 2017, the Lake agreed to provide a month’s rent for the room and other rental costs, according to court documents.
The Lake is a popular real estate broker, and Karr was eventually able to secure a deal that he says is much better than the initial deal that was offered to him.
But the couple says that they have to contend with the same legal problems they faced before.
“They’re not doing everything right,” Jennifer Karr says.
The legal problems could be costly, but the emotional toll is a whole different story. “It was