Picturesque Santa Monica on the coast of Southern California serves 90,000 residents and houses as many as 500,000 visitors on weekends and holidays. As the Federal Court of Appeals wrote: “Similar to other popular tourist destinations, Santa Monica is struggling to manage the disruptions brought about by the rise of short-term rentals facilitated by innovative startups such as HomeAway.com, Inc. and AirBnb Inc.”
SANTA MONICA’S ORDINANCE RE SHORT-TERM RENTALS
Santa Monica’s city council reported that the proliferation of short-term rentals had negatively impacted the quality and character of its neighborhoods at a time when California is already suffering from severe housing shortages.
In response, the city passed an ordinance regulating the short-term rental market by authorizing licensed “home-sharing” (rentals where residents remain on-site with guests), but prohibiting all other short-term home rentals of 30 consecutive days or less. That would be considered an aggressive ordinance.
In addition, the ordinance imposes four obligations on HomeAway and AirBnb: (1) collecting TOT taxes; (2) disclosing listings and booking regularly; (3) requiring licensing on the city’s registry; and (4) prohibiting fees for providing services ancillary to a vacation rental.
HOMEAWAY AND AIRBNB SUE SANTA MONICA
HomeAway and AirBnb filed separate federal lawsuits challenging Santa Monica’s ordinance; the cases were consolidated. (HomeAway.com, Inc. v. City of Santa Monica). Amicus Curiae briefs were filed by other short-term rental companies and seemingly by every major city in California – each side arguing their competing points of view.
At the core the online providers argued the ordinance violated the right to free speech and ran afoul of the 1996 Communications Decency Act CDA. Congress passed the CDA to promote the continued development of the Internet and other interactive computer services.
Under the CDA, corporations like Google, Yelp, Microsoft, AirBnb and HomeAway, as publishers of information provided by someone else, are immune from liability even if the someone else posts fraudulent or incorrect information. We should all have such an immunity. Total B.S.
FREE SPEECH CLAIM
The hosting platforms, as the Court called HomeAway and AirBnb, argued the ordinance imposes a content-based financial burden on commercial speech and is therefore violative of the First Amendment.
The Court concluded that the ordinance regulates not speech but the conduct of short-term vacation rentals which is non-speech, non-expressive conduct. Additionally, the ordinance is a housing and rental regulation regulating booking transactions – not speech.
HOMEAWAY AND AIRBNB LOSE
In the end, the Federal Court of Appeals found this ordinance was not inconsistent with or preempted by the Communication Decency Act (a misnomer in my mind).
TO U.S. SUPREME COURT
Santa Monica’s very restrictive short-term vacation rental ordinance was upheld despite big-name lawyers and law firms representing HomeAway, AirBnb and the other hosting platforms. Many similar cases are working through the courts throughout the country. I would not be surprised if this case makes it to the U.S. Supreme Court – the Trump Court.
Jim Porter is an attorney with Porter Simon licensed in California and Nevada, with offices in Truckee and Tahoe City, California, and Reno, Nevada. Jim’s practice areas include: real estate, development, construction, business, HOA’s, contracts,personal injury, accidents, mediation and other transactional matters. He may be reached at firstname.lastname@example.org or www.portersimon.com.
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