Lawsuit Filed to Overturn Miami Beach's Ban on Short-term Rentals

Short Term Rentals

Susan Askew
Susan Askew

Lawsuit Filed to Overturn Miami Beach's Ban on Short-term Rentals:

Filing takes aim at constitutionality of the ban and “excessive” fines

A Miami Beach woman has filed suit to overturn the City’s ban on short-term rentals saying it violates her constitutional rights. Natalie Nichols who owns a single-family home on Stillwater Drive and a four-plex on 86th Street said when she first bought her properties in 2004 and 2006 respectively, short-term rentals were legal and the income then kept her from losing her properties to foreclosure. She says the ban denies people the right to hold onto their properties in difficult times and depresses property values.
 
The lawsuit was filed in Circuit Court on Nichols behalf by The Goldwater Institute which describes itself as a free-market public policy research and litigation organization that is dedicated to empowering all Americans to live freer, happier lives. The group says it “focuses on advancing the principles of limited government, economic freedom, and individual liberty, with a focus on education, free speech, healthcare, equal protection, property rights, occupational licensing, and constitutional limits.”
 
The Nichols’ filing says it is a civil rights lawsuit based on her “constitutional rights to be treated equally to other, similarly situated property owners; and to be free from excessive punishments for engaging in the peaceful, non-nuisance use of her property.”
 
The suit claims, “The City of Miami Beach has violated those rights by banning home-sharing in most – but not all – areas of the City, and by adopting fines ranging from $20,000 to $100,000 per violation for homeowners, like [Nichols], who rent their property on a short-term basis.”
 
“The fines violate the equal protection provision… of the Florida Constitution by treating similarly situated properties differently without any legitimate reason,” it states.
 
Calling the fines “excessive”, the suit says “the fines also violate, and are preempted by, Florida state law… which caps municipal property-code fines at a maximum of $1,000 per day for the first violation and $5,000 per day for repeat violations.”
 
One of the “facts” asserted: “The City’s current ban on home-sharing runs counter to [the City’s] long history as a popular destination for tourists.”

According to the filing, the four-plex which was built in 1949 was designed to be for rentals, and when built, short-term rentals were legal. “The apartments are fairly small and are suited toward use by tourists and other short-term tenants,” it states.
 
The City considers short-term rentals to be “for a period of less than six months and one day.”
 
The crux of the suit: “Importantly, the City does not ban home-sharing everywhere. It allows short-term rentals in the City’s North Beach neighborhood and described by law as ‘those properties fronting Harding Avenue, including buildings and properties located east of Harding Avenue and west of the alley, from the city line on the north, to 73rd Street on the south.’”
 
“Properties in the ‘North Beach’ zone are allowed to conduct short-term rentals, which are banned everywhere else in the City,” it says.
 
“Thus, property owners in North Beach enjoy a significant advantage over those property owners, like Plaintiff, who are not allowed to conduct short-term rentals. Not only is property more valuable if short-term rentals are permitted, but North Beach owners also enjoy much less competition under the current scheme and can accordingly charge higher prices for their short-term rentals,” it claims.
 
“The City’s carve-out benefits people who own property in North Beach, but harms both other property owners in the City and people who might wish to rent their properties from them.”
 
Regarding the North Beach rentals, the suit says, “This discrimination is irrational and arbitrary, and it violates the right to equal protection of the law of people outside of North Beach who wish to offer homes as short-term rentals. This discrimination is not rationally related to any legitimate government interest and therefore is not a valid exercise of the City’s police power to protect the public’s health, safety, or welfare.”
 
“The City has no reasonable basis for believing that guests staying at homes in North Beach would pose a lesser threat to the public’s health, safety, or welfare than guests who stay at homes outside of North Beach,” it states.
 
“By imposing restrictions on property based not on the use of that property but on the irrelevant and arbitrary criterion of whether the property is located in or outside of North Beach imposes a form of unconstitutional discrimination in violation of… the Florida Constitution. This discrimination injured Plaintiff because it prevents her from renting out her properties simply because they are not located in North Beach.”
 
Point of clarification: both of Nichols’ properties are located in North Beach, though not in the specific area where short-term rentals are allowed. 
 
As to the City’s short-term rental ordinances, the City’s website, provides a link to the City Code related to short-term rentals. It indicates that properties within the Flamingo Park and Española Way Historic Districts were eligible to continue as short-term rentals after 2010 under certain provisions such as demonstrating a consistent and predominant use as short-term rentals and payment of resort taxes. 
 
Properties within the Collins Waterfront Local Historic District south of West 24th Terrace are eligible for short-term rentals as long as the buildings are fully renovated and restored in accordance with the Secretary of the Interior Guidelines and Standards, register with the State and the City, and demonstrate there is on-site management 24 hours a day, seven days a week. The minimum stay is seven days. Eligibility to apply for those approvals was for a period of six months in 2017.
 
The eligibility within North Beach is similar to the Collins Waterfront area. It covers buildings that are classified as “contributing” (meaning architecturally significant) in the North Shore National Register Historic District and are zoned RM-1 (residential multifamily, low intensity). Under the Code, those properties must be fully renovated and restored to the federal preservation guidelines before the issuance of a business tax receipt permitting short-term rentals at the property. State and City licensing is required along with minimum stays of seven days and a manager available 24 hours and located no more than 500 feet from the property. In the event the contributing structure is demolished, the short-term rental provision does not carry forward to any new or future buildings. The purpose of that ordinance change was to provide incentives for restoration of significant buildings. 
 
Nichols’ suit seeks a permanent injunction prohibiting the City from enforcing its short-term rental provisions “or seeking penalties for short-term rentals that exceed those permitted by state law.”
 
As to the penalties, the suit takes aim at the escalating fines of $20,000 for the first offense, $40,000 for the second, $60,000 for the third, $80,000 for the fourth and $100,000 for each subsequent offense. “Miami Beach imposes some of the heftiest short-term rental fines in the country,” it states.
 
The filing says the fines “are not remedial and do not compensate the City for any loss. The fines constitute a punishment meant to deter people from peacefully using their property for home-sharing.”
 
“The $20,000 to $100,000 fines are so great as to shock the conscience of reasonable people and are patently and unreasonably harsh and oppressive.” It claims the fines violate Nichols’ “right to be free from excessive punishments” and says they are unconstitutional under the Excessive Punishments Clause of the Florida Constitution.
 
It also states the City Code provisions on short-term rentals “conflict with and are preempted by Florida Statutes” which “expressly limits the fines that the Miami Beach Zoning Board of Adjustment can impose to $1,000 per day for the first violation and $5,000 per day for repeat violations.”
 
The suit does not seek damages beyond the costs of the lawsuits.
 
Nichols told RE:MiamiBeach that her four-plex is located three blocks from the Harding Avenue area included in the newer addition to the Code.  She said, “We’re saving some buildings that are unremarkable and some that are more charming in order to make people renovate them. It’s really driving away investors.”
 
“The rent here is already less than in some of the downtown… areas that used to be less desirable,” she said mentioning Allapattah and Wynwood. “Those places are bouncing back and people are leaving here and buying there to have a place that is cash flow positive. Our property value is not doing as well.”
 
She said her property is very similar to the properties on Harding where short-term rentals are allowed after restoration. “I just happened to buy a little further away. We don’t have the lobby bloc” that they have on Harding, she said.
 
Trying to get people to support her view has been difficult. “Less than 20% of the homes and the condos here are homesteaded so a lot of times when I’m dealing with owners, if I’m trying to get together a group of people, they live somewhere else. They don’t vote here.”
 
“People are afraid to come forward and speak,” she added. “I was afraid… people come forward, they get targeted.”
 
“I have spoken up for years,” she said. She admits to having short-term rentals after they were no longer permitted and said she was cited “probably back in 2010 before the fines were higher.”
 
“I tried to speak with every Commissioner but, at the same time, I was afraid of not being able to do it anymore because if I didn’t do it anyway I would have lost everything I own. The million dollars I came to town with to buy property and the blood, sweat, and tears… my properties would have been foreclosed on so I kind of did it under the radar for a while,” she said.
 
The times she was cited, she said were not for problem tenants but “because I’m on a street where it’s primarily investor-owned and they dedicate Code Enforcement officers looking for short-term rentals.” On one occasion she said she was standing outside as guests were putting suitcases into a van and officers asked her to leave while they talked with the visitors and looked at their lease. On another, she said, she was fined when a photo of her property turned up on an ad in France that she had not placed. 
 
In the meantime, she said, “People go into foreclosure or will be forced to sell at a loss and it’s a terrible situation to put the City in.”
 
When asked about neighbors who complain about overcrowded units, noise, and constant parties, Nichols said, “I don’t buy that short-term rentals are necessarily worse for tenants than long-term rentals. My worst tenants have always been long-term rentals… you’re stuck with them for a year until you can evict them.”
 
Instead of “all these resources into Code enforcement, officers sitting by computers and pulling up advertisements and finding people” with short-term rentals, she would like to see the City “partner” with short-term rental operators to enforce noise ordinances and restrict the number of people in units. “And no parties and if it’s violated and it’s against the law, I can call the police to back it up.”
 
“Put the resources into the people that are actually a problem, work with the platforms like Airbnb to make sure there’s an additional deposit for disturbing the peace,” she said.  “There are so many solutions the City hasn’t looked into.”
 
“Their enforcement of disturbing the peace when there’s a long-term tenant is very poor,” she added. “The noise should matter… if it’s disturbing the neighbors, it should matter if it’s short-term or long-term and if it’s short-term at least you don’t have the same problem tenants all year long.”
 
In the meantime, she said, owners who are seasonal residents have properties sitting empty while “people are losing money and they don’t have money to pay taxes and insurance.”
 
Nichols’ uses her own single-family home as an example. She said her monthly payment for taxes and insurance alone is $5,300. “It’s very difficult to get the long-term rentals to just cover taxes and insurance whereas you could be cash flow positive and put money back into the property if you do short-term rentals.”
 
Through her short-term rentals, Nichols said she could generate $10,000 a month in low season. “High season, maybe $14-15.”
 
“My mortgage, taxes, and insurance is more than $9,000.” She said she’s had her property listed for long-term rental for over a year at $7,500” and hasn’t had any takers. One neighbor is trying to rent at $6,500 and isn’t haven’t any luck either.  Another has a long-term lease for $5,500 per month, she said. “A similar house for short-term rent was making $20,000 per month”
 
At those rents, “I’m still coming out of pocket just to pay my mortgage and that’s not including fixing the things” that would need to be fixed for renters. “I’d rather stay in it myself,” she said.
 
Her four-plex includes “three little one-bedroom units and a two bedroom.” She said she switched from long-term to short-term rentals “sometime after the recession when I couldn’t keep decent tenants and the difference was night and day in terms of the quality of people I had. I liked it a lot more when I went to short-term rentals... I just had a much nicer crowd of people.”
 
“It’s more pleasant for me and I can use the unit if I need to for other guests from time to time,” she said. She believes owners should have the ability to rent their homes out when they travel or “rent it out to help you through a hardship. It’s the difference between them losing their life savings and making it over a rough patch.”
 
“In the recession, my street probably had more short sales/foreclosures than anywhere in the country,” she said. “A house that appraised for $2.1m was $700-800,000. If all of the people doing short-term rentals were added to that [list], that would have been devastating. Yet the City passed a law cutting off homeowners’ lifelines. How does it benefit the City to have homes foreclosed on and banks reap the profit when markets bounce back? Doesn’t go into our community. Allowing short-term rentals employs housekeepers, yard men, and increases spending on the neighborhood.”
 
“By holding onto it for short-term rentals, I sold [one house] for a profit in 2015 and I sold it just because I couldn’t do short-term rentals anymore. I believe it decreased the property value” which is a major problem, she said. “People don’t buy… it’s really hurting the neighborhood. It’s taking down the property values, I believe in all of Miami Beach… I believe it’s because we’re mistreating our investors. We’re telling our second home buyers and the investors they’re not important to us.” While those owners can’t vote in elections, “They vote with their dollars,” she said.
 
“I see a lot of former Commissioners and the Mayor running for higher office, and while I agree with them on most national issues, and may like them personally, the main thing I think of when I look at them is how they all voted for measures that made many people lose 100% of their investment and their homes and they did it without hesitation and without trying to find another way to stop rentals from disturbing the neighbors.”
 
City spokeswoman Melissa Berthier said, "The City has not been served with a lawsuit and is therefore not prepared to issue a statement regarding the merits or lack thereof."

 
 
 Photo: Shutterstock.com
 
 
 

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