As technology takes hold on our everyday lives, embracing e-commerce poses both challenges and rewards for those embroiled in the Airbnb vs. Town legal front. Municipal authorities seek to regulate short-term rental opportunities under the guise of proper land use and zoning ordinances. The power of local municipalities to regulate the activities occurring on the land within and subject to their jurisdiction derives from §10 of the Municipal Home Rule Law.

But, can a change to this legal landscape be far off?

The proliferation of e-commerce platforms should be embraced by both the homeowner as well as the municipality as a potential revenue stream (Occupancy /Sales Tax), but who or what will pioneer this “outside the box” thinking? What will it take to bring the constituents, local business community and politicians together in championing this new cause?

Unsuccessful challenges to rental permit obligations have been lodged, but no constitutional challenges to transient rental prohibitions have ripened into a justiciable controversy in this state. As e-commerce continues to remain at the forefront of social change, can a constitutional challenge be far behind?

In an average transient rental complaint, the homeowner is faced with a Town Code that reads something like this:

it shall be unlawful and a violation … to use, rent or suffer or permit … a rental occupancy … without first having obtained a valid rental occupancy permit therefor.

“transient” rental is defined as a rental period of 29 days or less.

“transient” rentals are prohibited.

Equal Protection Per Se

From the homeowner's point of view, “renting” is a property right that the local municipality is trying to regulate. This property right is protected by both federal and state Equal Protection rights Hernandez v. Robles, 7 N.Y.3d 338, 362 (2006).

Under the Equal Protection Clause, all persons similarly situated are to be treated alike; hence any homeowner seeking to legally rent their property must comply with the local rental permit ordinance. Restricting the homeowner from renting might seem like an unreasonable restraint on the homeowner's property rights, but applying the well-established “rationally related” standard to any property right deprivation would bring us back to our 1L Constitutional Law class.

This regulation is judged on whether the intent of the ordinance, to protect the health, safety and welfare of the Town's residents [in requiring a rental permit] is rationally related to the ordinance. The guise of any rental permit ordinance is to protect the rental property occupants as well as property neighbors and consequently the “rental permit ordinance” would withstand the rationally related standard. But what about the subsequent classification created by the transient rental prohibition?

In further classifying those homeowners who maintain valid rental permits as either “transient or unlawful” vs. “permitted or lawful” simply on the basis of the number of days in the rental period, without further justification, is where the transient rental prohibition does not pass constitutional muster.

Similarly situated citizens, both holding valid rental permits for their property, are subsequently treated unequally by the number of days in the rental period. As often cited, the Town's interest in the safety of its residents, who occupy rentals, is paramount to the permit process, but what justification is there for any more or less safety being present at a rental home that is for 29 or less days as compared to more than 29 days? Safety conditions in the property are no more or less to be impacted by the term of the rental. Further municipal justification for minimum rental periods is that long term rentals are more invested in the community. This reasoning is flawed when compared to the premise that a homeowner is always more vested when compared to a renter due to property ownership [it should be noted that vested property owners do leave abandoned blighted properties].

The argument that this homeowner classification is rationally related to the legitimate municipal interest of protecting the health, safety and welfare of the rental occupants as well as the property neighbors is disingenuous when examining the unequal treatment of the short term rental problem by our local municipalities. A cursory review of some local municipal transient rental ordinances shows neither uniformity in the minimal rental term, nor a true nexus to perceived community threat which spawned such ordinances. Municipalities are arbitrarily seeking to restrict property rights.

Reviewing minutes of Town Board meetings finds the political inertia of neighbors complaining of “John Belushi and the Deltas” moving in next door for the weekend is not dissuaded by the ordinance. Any homeowner or legal tenant could host a party so long as the local noise and other nuisance ordinances are not violated.

Arguably, the length of the rental term as it is used to justify a transient rental prohibition is not “rationally related” to its intended purpose as all valid rental permit holders would not be treated alike in violation of the Equal Protection Clause.s

Equal Protection as Applied

Another challenge to transient rental ordinances is selective enforcement. What difference is there between a homeowner's graduation party and a guest having some friends over? The party atmosphere is still the same, yet code enforcement has purposefully and unreasonably targeted those properties allegedly in violation of the transient rental ordinance by persistent investigation and by selective enforcement.

Discriminatory enforcement of this seemingly dormant ordinance has only recently been resurrected as more and more complaints are lodged and vacationers look for alternatives. Even-handed enforcement of the rental permit ordinance would require code enforcement to investigate all complaints of illegal rentals, not only those advertised on the popular “house sharing” websites. Enforcing transient rental ordinances by reviewing Airbnb or VRBO listings, rather than an independent investigation, demonstrates a purposeful and intentional enforcement as against these websites. Does evidentiary proof gathered through the online “Booking Calendar” demonstrate an ulterior motive and a purposeful enforcement as against the alleged “transient” renter?

Fourth Amendment

As the recently issued preliminary injunction against NYC's reporting ordinance demonstrates, the Fourth Amendment still shields the homeowner from unreasonable search and seizure. As municipalities seek further regulation and disclosure of host information, non traditional business platforms are championing privacy rights in their ongoing battle. Are more constitutional challenges on the horizon?

As more and more property owners look to the economics of “house sharing” and more municipalities look to tax this new found stream of income, can invoking the almighty Commerce Clause provide the next legal battleground?

Irwin S. Izen is a sole practitioner in Commack, N.Y., where he concentrates on real estate and commercial transactions. He is currently the co-chairman of the Suffolk County Bar Association Transactional Law Committee and past co-chairman of the Real Property Committee. He can be reached by email at [email protected].