Appellate Court Reverses Decision, Upholds Miami Beach’s Short-Term Rental Law

Short Term Rentals

Susan Askew
Susan Askew

Appellate Court Reverses Decision, Upholds Miami Beach’s Short-Term Rental Law:

Fines must be reduced but ordinance prohibiting rentals remains intact

An appeals court has reversed itself and now says the City’s ordinance prohibiting short-term rentals in most areas of the City is valid. Following a request for rehearing by the City of Miami Beach, the court affirmed a portion of its ruling that the City’s fine structure does not comply with State law, but it reversed the opinion that the entire law was invalid. There may still be further legal challenges but, for today, the law remains intact.

Short-term rentals, defined by the City as less than six months and one day, are prohibited in single family homes and other multifamily residential buildings located in certain areas of the City. The Goldwater Institute filed suit on behalf of Natalie Nichols in June 2018. Nichols, who owns two properties that she previously rented out on a short-term basis, claimed her properties were treated differently from “similarly situated properties” where short-term rentals are allowed. 

In October 2019, 11th Circuit Court Judge Michael Hanzman ruled in Nichols favor writing the City’s “hefty (some might say exorbitant) fines,” are in conflict with State law which caps fines for code violations at $1,000 per day for the first infraction and $5,000 per day for repeat violations. The City’s fines range from $20,000 for a first offense up to $100,000 for a fifth and subsequent offense. In July, the Third District Court of Appeals agreed the fines were improper.

The Court of Appeals, however, upheld the entirety of Hanzman’s ruling which seemed to invalidate the City’s law altogether. In a footnote, Hanzman declined to sever the penalty provisions from the ordinance which, Nichol’s attorney said, had the effect of striking down the entire law and, thus, eliminating the ban on short-term rentals. The reason that would be problematic for the City is the State pre-empted local governments from regulating short-term rentals in 2011 but grandfathered in those municipalities that already had regulations in place. Miami Beach's regulations went into effect in 2010. 

Hanzman indicated “[T]he City is free to enact replacements so long as they are constitutional and do not conflict with state statutory law.” Because of the State pre-emption, the City could not pass a new law banning STRs because it conflicts with State statute which allows them and the grandfather status would be moot. 

The City maintained Hanzman’s ruling and the Appeals Court decision were ambiguous and argued the short-term rental law contained a severability provision – meaning that if any portion of the law were to be struck down, the other parts of it would still stand. In its new ruling, the Third District Court agreed stating that severing the fines portion from the law does not impact the effectiveness or intent of the rest of the ordinance “and we rebuff the view that the prohibition upon short-term rentals must be invalidated in its entirety.”

Citing previous case law, the ruling states, “If the… purpose expressed in the valid portions of the [Ordinance] can be accomplished independently of the invalid provisions, and if, considering the [Ordinance] as a whole, it cannot be said that the [municipality] would not have passed the valid portion had it been known that the invalid portion would fall, then it is the duty of the court to give effect to so much of the statute as is good... And, because the ordinance contains a severability clause that expressly provides for severance of any part of the ordinance declared invalid by a court of competent jurisdiction, the development agreement condition should be considered severed and the vacation should stand."

The appeals court remanded the case to the trial court for further proceedings which City Attorney Raul Aguila said was "because Nichols asserts another challenge to the short term rental ordinances that the trial court has not yet considered. The City has a pending motion to dismiss as to that claim."

Nichols said she is consulting with her legal team on next steps. “The constitutional issue of equal protection under the law should be heard,” she told RE:MiamiBeach. “The ordinance took the right to rent from people who bought properties with the express intent to rent out seasonally and it has caused financial hardship for many people who are unable to rent to get through tough financial situations like those caused by the pandemic.”

She says, “The City has been unfair in their enforcement of the law” with some property owners having the right to short-term rentals and others not, depending on the geographic area of the City.

Jacob Huebert, an attorney with the Goldwater Institute, said, "It was disappointing to see that the court partially reversed itself by saying that the City's ordinance could stand except for its illegal scheme of fees. Our view has always been it should rise or stand together."

As to next steps, Huebert said, "One possibility is to ask the entire Court of Appeals, all of its judges, to reconsider that conclusion. The other option would be to go directly to the Florida Supreme Court and that’s the decision we’re evaluating now."

City Commissioners approved on first reading Tuesday a new fine structure in compliance with the State’s. Second and final reading will be in October.

In a memo accompanying the item for Tuesday's meeting, City Attorney Raul Aguila wrote, “Notwithstanding the Nichols decision, the City continues to have a substantial interest in maintaining the aesthetics, character and tranquility of its residential neighborhoods… As such, the City's short-term rental laws remain necessary and in the public interest, and it is thus our recommendation that the City Commission proceed forthwith to amend the subject Code sections for the limited purpose of conforming the fines to those mandated by the Court's order…”

“[I]t is important to note that the amendments will merely substitute the City's existing fines for those set forth in [Florida Statute],” Aguila wrote. “The amendments do not regulate the duration or frequency of rental of vacation rentals, nor do they repeal or otherwise amend remaining unchanged provisions of the City's short-term rental ordinances.”

The latest ruling is here.

Image: Shutterstock.com

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