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Paul Zimmerman

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Short-Term Rentals Fight Flares Up Nationwide

In recent months, cities across the nation have been implementing legislation aimed at regulating and restricting short-term rentals. The affected companies, namely Airbnb, have responded with lawsuits. The dispute has played out differently depending on which city and statute is at issue, but one thing is quite certain: the degree and extent of restrictions ultimately placed on short-term rentals, particularly in larger cities, will have a considerable impact on the hospitality industry.

Some cities (i.e., Anaheim, Santa Monica, and San Francisco) have passed laws that make it unlawful for a short-term rental company to post listings of unregistered and/or otherwise prohibited short-term rentals. As a result of these laws, short-term rental companies have been going on the offensive, filing lawsuits against the cities.

In the lawsuits, the short-term rental companies argue that such laws violate the First Amendment and Communications Decency Act (CDA). As for the First Amendment, for example, they argue that the laws could be drafted more narrowly, such as by enforcing the short-term rental laws directly against the hosts who violate them as opposed to the short-term rental companies.

With respect to the CDA, Airbnb contends that the laws violate the CDA because they hold the internet company responsible for the content posted by its users. As the argument goes, Airbnb, like YouTube, should not be held responsible simply because the site’s users break the law. The CDA provides that operators of internet services are not to be treated as publishers and, thus, are not liable for the words of third parties who use their services. 

Results thus far have been mixed. For example, in Anaheim, just weeks after Airbnb filed its lawsuit, the City of Anaheim advised that it would not be enforcing its ordinance against the short-term rental companies. However, Anaheim officials also noted that they have not ruled out future passage of an ordinance “that is determined to be consistent with the Communications Decency Act and any other laws deemed to be applicable to hosting platforms.”

Meanwhile, the San Francisco case has proven to be a bit more complex, and thus drawn out. San Francisco’s ordinance is unique because, instead of taking aim directly at the publishing of unlawful listings (i.e., making it unlawful to publish the non-permitted listings), the ordinance instead focuses on the booking of an unlawful short-term rental. This distinction may prove to be significant. The judge in the matter, for example, recently commented that he was “struggling” to understand how the law, which focuses on bookings as opposed to publishing, would violate the short-term rental company’s constitutional rights. With that said, not all was sunny for the City of San Francisco, as the judge was also critical of the city, noting that it did not offer a specific plan as to how it would allow the short-term rental companies to verify whether a listing was, in fact, registered with the city. This posed a concern since violation of the ordinance subjected the websites to criminal penalties and hefty fines.

Meanwhile, on October 21, 2016 Airbnb filed suit against the City of New York just hours after the Governor signed legislation that prohibits the advertising of accommodations that cannot legally be rented out for less than 30 days. Notably, the City announced that, in light of the lawsuit, it would hold off in enforcing the new law until the lawsuit is resolved. Since 2010, it has been illegal in New York to rent out a whole apartment for fewer than 30 days. But some tenants and landlords have ignored those rules and have been using Airbnb to rent out their apartments for much shorter periods. The new law in New York allows authorities to fine hosts up to $7,500 if they are caught listing a property on a rental platform such as Airbnb.

Airbnb has attempted to meet lawmakers half way, seemingly to no avail. For example, Airbnb recently offered an alternative to the proposed New York legislation, offering to crack down on hosts with multiple listings who essentially run illegal hotels, and would provide a registry of hosts to local regulators to enable them to enforce existing restrictions. Additionally, the company disclosed that it had already removed nearly 3,000 commercial operators from the service.

Most recently, a Tennessee trial court judge has ruled that a Nashville ordinance regulating short-term rental properties is unconstitutional, thus slapping down yet another city law designed to manage sharing economy websites such as Airbnb. The ordinance required homeowners to obtain short-term rental permits from the city’s department of codes administration and to buy liability insurance coverage of at least $1 million. It also forbade homeowners from installing on their property any form of signage advertising their short-term rental. The judge’s ruling did not, however, affect tax collection on short-term rentals, so Airbnb hosts must continue to pay hotel taxes as required by the Tennessee Attorney General.

As this legal drama plays out across the country, the hospitality industry will keep close watch. The sharing economy has revolutionized modern travel and lodging, but it remains to be seen whether legislative activity and resulting litigation will dampen the incredible growth of short-term rental companies. While judicial oversight may ultimately guide and inform how the industry works and operates, it appears that cities will continue to enact legislation seeking to regulate short-term rentals. Likewise, in an effort to defend their business model, the short-term rental companies are likely to continue their aggressive public relations and litigation strategy. As always, M&R will monitor the situation closely, and will provide updates as new developments in the saga occur. 

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.