Immortalised in song, film and poetry, the hotel is going upmarket - but its new British manager has a battle on his hands

Punks, poets, painters, dropouts, drug fiends, drag queens - all have been welcome at the Chelsea hotel. Andy Warhol filmed there, Arthur Miller wrote there and Leonard Cohen met Janis Joplin there, going on to write a song about New York's most beloved hotel.

But long-term tenants of the Chelsea - witnesses to a colourful history of fires, murders and suicides - believe it is in danger of losing its bohemian soul. They have launched numerous lawsuits against the hotel's owners because they fear eviction. And the new manager they blame for enforcing the crackdown is British.

'The whole atmosphere has changed,' said Michele Zalopany, 53, an artist who has lived behind the famed red-brick facade for nearly 20 years and is bringing a legal action. 'I loved the Chelsea because it was old New York, the way it used to be: a microcosm. As soon as I moved in I felt at home. There were all kinds of different people and they were tolerant. Now it's a horrible vibe. The desk people are unfriendly - I think they're told to be deliberately rude.'

The owners of the hotel deny that they are driving out tenants or seeking to alter its character. They claim the changes are for the benefit of everyone who stays there.

The 12-storey, 250-room Chelsea hotel was among the tallest buildings in New York when it was built in 1883. It became a residential hotel in 1905 and a celebrated retreat for musicians, painters and men of letters, including Mark Twain, William Burroughs and Tennessee Williams. In one room, Arthur C Clarke wrote 2001: A Space Odyssey, and in another Thomas Wolfe wrote You Can't Go Home Again. Dylan Thomas drank 18 glasses of whisky in a row in his room before falling into a coma and dying in a nearby hospital. Andy Warhol's muse Edie Sedgwick set fire to hers. Jimi Hendrix rehearsed there, Leonard Cohen and Bob Dylan both wrote songs about it and Joni Mitchell's 'Chelsea Morning' gave the Clintons the name of their daughter. The Sex Pistols' Sid Vicious was arrested after his girlfriend, Nancy Spungen, was found stabbed to death in room 100.

'This hotel does not belong to America,' wrote Arthur Miller, the playwright who lived there for several years. 'There are no vacuum cleaners, no rules and shame.'

This thriving community of artists, eccentrics and loners was presided over for half a century by Stanley Bard, a manager known for his leniency towards artists who struggled to pay their rent on time. But Bard was ousted in a boardroom coup on his 73rd birthday last year, to be replaced by a company specialising in boutique hotels. After a short and unhappy spell, that company was in turn supplanted by Andrew Tilley, a Londoner who previously worked at the Hard Rock Hotel.

Fears persist that Tilley will attempt to 'modernise' the hotel and push up room rates, meaning that one of the last bastions of the city's old neighbourhoods will succumb to the relentless tide of gentrification. Some long-term residents, who occupy around 60 per cent of the hotel, claim there is pressure for them to make way for more lucrative short-term guests.

Ed Hamilton, 47, author of a blog and book, Legends of the Chelsea Hotel, said: 'The management would like to throw out all the long-term tenants, gut the place and turn it into a boutique hotel for rich tenants, charging $400 a night. Sure, every place in New York is gentrifying, but isn't that reason enough for there to be a place where money isn't the bottom line? If you don't give creative people a place to live, the city loses its edge. These are productive artists who contribute something to society.'

Scott Griffin, 37, a theatre producer who lives at the hotel, estimates that 15 long-term tenants have been lost since Bard's departure. He said: 'Everyone here is in danger of having to leave. Leaving is a given when you're dealing with very greedy people; they are avaricious. The ambition is to get rid of all long-term tenants. I don't think these people care unless it's a Four Seasons hotel. They would be happy to tear it down and build a McDonald's. But I can't imagine living anywhere else.'

Some tenants benefit from a city law granting 'rent stabilisation', intended to restrain the hand of landlords. A number are paying below the market rate, although they insist that none of the rooms comes cheap. Griffin said that one tenant was paying $90,000 and left when his annual rent was increased to $140,000. He believes dozens of guests have filed lawsuits to protect themselves from a similar fate.

Storme DeLarverie, a singer and 'drag king' performer and veteran of the 1969 Stonewall riots, says nothing will budge her. DeLarverie, who said she is 78, although past reports have put her age at above 85, insisted: 'They know better. I'm not going to take it. I've been here for 34 years and my rent is always paid on time.'

Ten-year tenant Joseph O'Neill, the Irish-born novelist and author of Netherland, said: 'The destiny of this hotel is to be run by the Bard family. Everyone here is hoping for that to be the case. It's always been a village community, a community curated by Stanley Bard, and there's no doubt it's under threat.'

Andrew Tilley failed to respond to several voicemail messages. But Marlene Krauss, who with fellow board member David Elder now has control of the hotel, denied they are unravelling Bard's legacy. 'We have done nothing to make it more commercial, we have done nothing to force more tenants out,' she said. 'They may have thought that would happen but it's not at all what's going on. I would think the tenants would be happy with what we've done: the lobbies are cleaner, the service is better, we have security guards to protect them if anything happens.'

She added: 'The only long-term tenants that have left are the ones who wouldn't pay their rent. I don't think it's unreasonable for a hotel owner to ask that people pay their just rent. I don't think a business should have to support anybody that comes in and doesn't pay the rent.'

Krauss admitted that she is seeking more short-term stays. 'In order to keep up the hotel and the long-term tenants, many of whom are paying under market, if people leave our preference is to have more transient tenants. It's a business, we'd like to make it more money. But no one is forced to leave.'

Not all the great characters are gone. Gerald Busby, a 72-year-old composer, has lived at the Chelsea since 1977. He remembers conversing with a guest who had just murdered his wife and who was promptly arrested on the spot. His 92-year-old mentor took his own life at the hotel by refusing to eat, timing his suicide for a Friday so his obituary would appear in Sunday's New York Times. Today Busby is philosophical about changes taking place. 'I think we're safe as long as we're alive. When we die off they'll probably replace us with people paying 10 times as much.

'The tradition is disappearing. It's no longer a place where you can present yourself as a poor artist at the door; it's strictly a business now. The era of Stanley Bard is gone. He ran it entirely by instinct - his instinct was eccentric and bizarre but usually accurate. Something creative has gone because he has gone. But that's inevitable - I don't see it as a tragedy.'