Mi Casa, Su Casa? Courts Continue to Uphold Local Regulation of Short-Term Rentals

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As short-term rentals continue to remain a popular option for travelers and a profitable investment opportunity for residential property owners, municipalities continue to impose restrictions on this properties¹. These extra regulations have resulted in a number of legal battles, with courts consistently upholding the new regulations.

Short-term rentals, also known as vacation or transient rentals, provide an alternative to traditional hotels for travelers seeking to rent a spare room or property on a nightly, weekly, or monthly basis. Property owners hoping to earn extra income can use Internet-based home-sharing platforms – such as Airbnb, VRBO, and HomeAway – to market these rentals.

As previously discussed on this blog, in 2019, the Pennsylvania Supreme Court decided unanimously that short-term rentals are prohibited in areas zoned single-family residential or single housekeeping unit, even if the zoning ordinance does not expressly prohibit short-term rentals. Earlier this month, the Third Circuit – which is the federal appellate court for Pennsylvania, New Jersey, Delaware, and the Virgin Islands – likewise upheld an ordinance curtailing the ability of property owners and leaseholders to operate short-term rentals.

In 2015, Jersey City, New Jersey (“the City”), enacted an ordinance legalizing short-term rentals in the City.  However, four years later, the City enacted another ordinance limiting short-term rentals to twenty-eight (28) consecutive days in general and to sixty (60) total nights per year in non-owner-occupied properties, although an exception was made if the owner-operated two properties as of the date of the ordinance and was able to have an “individual designated by the owner” reside at the second property. The ordinance also banned the subleasing of properties by tenants on a short-term basis, even if the prime lease stated otherwise. A group of property owners and lease holders, many of whom had been enticed to invest in properties and long-term leases following the enactment of the 2015 ordinance, sued the City, alleging that the City violated their federal constitutional rights by taking their property without compensation. However, the Third Circuit rejected this argument and upheld the ordinance.

Similarly, last year, the Superior Court of New Jersey upheld an ordinance of the City of Asbury Park forbidding short-term rentals in certain dwellings, including foster homes, adult family care homes, assisted living facilities, and single-family homes where none of the homeowners list the home as a principal residence and any unit in a two-family home where the owner does not reside in either unit or does the owner list either unit as his or her principal residence. The ordinance also limited short-term rentals to thirty (30) or fewer consecutive days, with a cumulative total period of no more than one hundred eighty (180) days in a calendar year.  The Court concluded that these restrictions were valid under the municipality’s police powers.

These rulings are part of a nationwide trend. Since 2019, analogous local ordinances have been upheld by courts in California, Florida, Hawaii, Louisiana, Massachusetts, Michigan, New York, and Virginia.

The team at Obermayer will continue to stay abreast of any additional regulations for short-term rentals. We remain available to answer any questions that residential landlords may have in navigating this ever-changing legal landscape.

¹ New Hope Borough just passed such an ordinance earlier this month.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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