The Court Decision on Miami Beach’s Short-Term Rental Ban: What it means (and what it doesn’t)

Susan Askew
Susan Askew

The Court Decision on Miami Beach’s Short-Term Rental Ban: What it means (and what it doesn’t):

It’s not just about the fines

After a Miami-Dade County Court struck down Miami Beach’s ordinances banning short-term rentals, questions are emerging as to the interpretation of the Court's decision. In the ruling first reported here, 11th Circuit Court Judge Michael Hanzman wrote the City’s ordinances “are in jarring conflict with [State law] and are therefore illegal and unenforceable.”

Hanzman’s ruling was centered around the large fines imposed by Miami Beach for illegal rentals. Those “hefty (some might say exorbitant) fines,” Hanzman wrote, start at $20,000 for a first violation, then increase to $40,000 for the second, $60,000 for the third, $80,000 for the fourth, and $100,000 for each violation thereafter. State law caps fines for code violations at $1,000 per day for the first infraction and $5,000 per day for repeat violations. Citing previous case law, Hanzman wrote it has been established that “[m]unicipal ordinances are inferior to laws of the state” and that a municipality “may not legislate ‘in conflict with state law.’”
 
Despite the focus on the fines, it isn’t as simple as adjusting the fines to comply with State law. The City could lose its ability to regulate short-term rentals (STRs) completely because of a State law that preempts municipalities from imposing their own rules. That law has been in effect since 2011. Miami Beach was one of the municipalities grandfathered in due to laws already on the books when the State preemption went into effect.
 
By not allowing the City to sever the fine portion from the ordinances banning short-term rentals, the judge threw out the ordinances in their entirety. Hanzman indicated “[T]he City is free to enact replacements so long as they are constitutional and do not conflict with state statutory law.” And therein lies the rub. The City cannot replicate the current law banning STRs because it conflicts with State law which allows them and the grandfather status is moot. 
 
The City immediately announced it would appeal the decision. “The City believes that the circuit court's ruling was not consistent with Florida law or Appellate Court legal precedent, and that the ruling (in its entirety) should be overturned by the Third District Court of Appeals,” according to the statement. “The City will be immediately seeking its appellate remedies regarding this matter, and the ruling of the circuit court will be stayed pending the determination of the Third District Court. The City will continue to take all necessary and appropriate enforcement action for any individual(s) that violate the City's Ordinance during the Appellate proceedings.” Short-term rentals are described as less than six months and a day.
 
In a follow up statement, Mayor Dan Gelber said, “It’s no secret that rental rates in Miami Beach are astronomical, and our previous fines represented the cost of doing business and were a mere fraction of the charges for the illegal rentals. There was a need for more substantial penalties as the city has an obligation to maintain the aesthetics, character and tranquility of our residential neighborhoods.”
 
The City also “maintains that the fines are not in conflict, are legal and enforceable under Florida law. Chapter 162 of the Florida Statutes merely affords one method of enforcing the city’s ordinances, but the clear and plain language of the statute authorizes municipalities to adopt an alternate code enforcement system, which the city has done in this matter. Florida courts have routinely upheld similar alternative code enforcement systems that have been adopted by municipal and county governments, including those that set their own fines beyond those established within Chapter 162," the statement concluded.
 
That said, if the fines are deemed “illegal and unenforceable” as the Circuit Court ruled, then the question becomes the severability of the fines. Was the judge’s ruling to not allow the fines portion of the ordinance to be separated from the overall law proper? If not, then the City can simply adjust its fines and its ordinances banning short-term rentals will remain in effect. If the ruling stands as is and the ordinances are thrown out in their entirety, the City cannot enact a new law banning STRs as that would conflict with State law and short-term rentals would then be legal on Miami Beach which is what the Plaintiffs will argue.
 
The Goldwater Institute filed the lawsuit on behalf of Natalie Nichols in June of 2018. Nichols owns two properties that she rented out on a short-term basis, a single-family home and a four-plex, prior to the City's ban going into effect.

Jose Smith was elected as a Miami Beach Commissioner in 1997 serving until 2005. He was appointed City Attorney immediately after, a position he held until 2014. Smith wrote the original legislation banning STRs in almost all areas of the City. [For a map of where they are legal, click here.]

RE:MiamiBeach asked Smith about the judge’s ruling. “I agree with the ruling because of the reasons set forth in the order, principally that the ordinance conflicts with State statute,” he told us. 
 
That said, Smith questioned not allowing severability of the fine. “I don’t know that throwing out the whole ordinance without giving the City an opportunity to make the fines compliant with State law was legally correct.”
 
He explains: “Every time a City enacts an ordinance there’s always a severability clause in the ordinance so that if a particular section of the ordinance is held unconstitutional the remaining portions that are not unconstitutional survive. That’s called severability. However, that is not binding on a judge if a judge deems the section found unconstitutional to be an integral part of the ordinance. Then the judge has the authority to throw the whole thing out. The consequences would be… it would make it impossible for the City to adopt a new ordinance” given the Florida law that prohibits local governments from regulating STRs.  
 
The City maintains the fines are not in conflict with State law, but if the ruling should stand, what happens to the fines already collected?
 
According to City spokeswoman Melissa Berthier, as of September 30, 2019, the City has collected $593,241 in short-term rental fines of which $278,648 was allocated to homeless services and $314,593 went toward workforce housing initiatives. Unpaid invoices total $2,793,000.
 
Smith said he “doesn’t have an easy answer” but added “I would make an analogy to the red light camera ordinances” which fined drivers for running red lights or making a right turn on red without coming to a complete stop. A number of class action suits were filed across the state and some were successful, Smith said. He also noted he was involved in a class action lawsuit while he was City Attorney in North Miami Beach where a group of residents sued the City for collecting utility deposits from new tenants to make up for an unpaid amount from a prior tenant, a practice deemed in violation of Florida law. A settlement was reached to refund the deposits.
 
“I can also argue the other side,” Smith said. “Somebody paid it, didn’t contest it, didn’t pay it in protest. You waived your right to seek recovery.”
 
“My gut feeling based on the red light camera cases tells me there is a reasonable chance of collecting fines that were paid under an unconstitutional ordinance but I’m not 100% sure,” he said.
 
Asked to comment on the fine structure added later, Smith said, “I tried to understand how they were able to do it because when I wrote the original ordinance, we basically adopted the fine schedule in the Florida statute and, nonetheless, people did challenge the ordinance a couple of times [in Federal and State court] and they withstood those challenges so to me it seemed clear, if you go above those limits you would expose the City to liability. Either because they conflict with Florida statute but also because it probably violates the Constitutional prohibition against exorbitant fines.”
 
“A fine has to be rationally based to the activity in question,” Smith said. “You can’t just fine somebody $100,000 because they’re renting their home. To me it’s unconscionable, so I always questioned how they were able to do that… I figured maybe they found something that allows them to do that. But now I understand they had no basis. The argument that the statute allows them to opt out as the judge found is absurd… My interpretation was that that provision [of State law allowing cities to opt out] meant that you could go into a special master system instead of a code enforcement board… not that you could create whatever you feel you want to charge you can charge… that’s not what the statute says. It just merely gives the City the option of going from a board to a special master.”
 
“Am I in favor of short-term rentals in single-family neighborhoods? No,” Smith added. “I live in a single-family home” and he said he wouldn’t want his neighbors renting out their homes to short-term renters. “I don’t like that. On the other hand, I’m a lawyer so I want to see whatever the City does is legal.”
 
“This is going to be a tremendous challenge for them because I think the judge made a reasoned, very sound decision except for the severability [of the fines],” Smith said. “I believe the ordinance was constitutional when it was originally adopted. I believe it became unconstitutional when they changed the fines.”
 
What the ruling does not do… 
 
It does not mean short-term rentals are now legal everywhere in the City. The appeal stays the ruling until the Third District Court makes its ruling and the City has indicated it will continue to enforce the law on the books.
 
No matter what happens in the case, the ruling does not stop condo associations from prohibiting short-term rentals. Even if the City were to lose its grandfather status and STRs became legal throughout the City, condo associations may still prohibit them, though they must abide by City law. “Before the judge ruled in this case, a condo association that was not in the right zoning district could not give the owners of the condos the ability to rent for a month or a week because that was contrary to City Code, but if the condo documents prohibit them or limit them, that’s fine,” Smith said.
 
The ruling also does not invalidate the City requirement that anyone within a legal zone for short-term rentals obtain a business license and resort tax certificate
 
The City has taken a tough stand on short-term rentals in recent years. In addition to the ban and the large fines, it has gone after the hosting platforms such as Airbnb that post listings for the rentals. 
 
In August, the City reached a settlement with Airbnb over its listings and a City ordinance that put the responsibility on rental platforms to verify that operators had the appropriate City licenses and provided accurate information on the rental sites. The settlement requires that hosting platforms post a notice on their websites advising that a City-issued business license and resort tax certification are required to list a rental property on the hosting platform but “The hosting platform is not required to verify whether those numbers are issued by the City or are otherwise valid,” according to the agreement. Airbnb was also required to pay the City $380,000 as part of the settlement.

Meanwhile, hosts who post fake business tax receipt numbers could face jail time under another ordinance that passed recently. 

 
Image: Shutterstock.com

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