Sounds like real estate malpractice (does that exist?) for your agent not to tell you about this law, assuming you told him/her about your rental plans!
My town in NJ also has inspection requirements; I grumble about it, but it does ensure the upkeep of the housing stock, so maybe you can live with that. Month-long rentals might actually be possible in your area, so don't give up! You'll need to price it right, of course, to attract a month-long or even a season-long rental.
We started off doing short-term rentals (a week or less), and then we found we had so much demand, we were able to increase our minimum stay requirement to 30 days or more. So ... if you've got a minimum stay of 29 days in Southampton, don't give up on your idea of getting rental income. It may very well be that you'll find enough people who want to stay for a month at a time. If you make your apartment highly desirable with more amenities than any other place ... people will book the whole month just to make sure they get the place.
Also we find that there are lots of people who need a month-long rental (furnished). There are very few apartments on VRBO / HomeAway, etc, which can make that available, because most properties have a few weekend bookings here or there, making the month-long rental impossible. So there's definitely a niche market for month-plus rentals.
Of course, if everyone in Southampton is following the rules and not doing any short stays, then there will be lots more apartments with month-long blocks available, so you'd have more competition. But assuming the other people aren't following the rules, then you could follow the rules (and avoid risk of penalties and fines) and still get lots of bookings, if you're one of the few property owners having those month-plus blocks available.
Unfortunately the realtors in Southampton are not as honest as they should be. I too own rentals homes in the Hamptons. The process to get a rental permit, inspections, etc is not that bad. If you work with honest people, they will help you along the process. Be sure you have a listing of all the codes. Not just the length of rental. If you go to the building dept in Southampton, they will give you a Liszt or you can get them on line. The process takes about 3-4 weeks from start to finish. You can get a rental permit without having tenants or needing to give tenants names upfront. You do not need to use an architect, you can get an inspection from the town inspectors (does not cost anything).
Hope this helps.
I have a house in Southampton area which I use mainly for myself but would like to rent for a few weeks in the summer.
Is it possible to get a rental permit before having a signed lease? Do you know if there are any restrictions on who you rent to.... For example, I have a couple from France with two children who might be interested in two - weeks. Are they okay? Thanks
Also, if you know where I could find a good lease that would meet the towns needs, I would appreciate any suggestions.