NJ District Court Provides Guidance to Municipalities Seeking to Regulate Short-Term Rentals
Jun 17, 2022 | Written by: Share|
The regulation of short-term rentals has become controversial in recent years as an increasing number of municipalities seek to enact ordinances. Litigation throughout the State of New Jersey has followed the adoption of such ordinances. Most recently, the District Court of New Jersey considered a challenge to an ordinance regulating short-term rentals in the Borough of Point Pleasant Beach. (Selvaggi v. Borough of Point Pleasant Beach (May 25, 2022)).
The plaintiffs filed an action to temporarily restrain enforcement of an ordinance prohibiting short-term rentals of less than seven days during the summer and less than one month in the winter. The Borough’s stated purpose in enacting the ordinance was to "regul[ate] [...] short term rentals," to prohibit "home sharing activities," such as Airbnb, and to "maintain the quality of life in residential neighborhoods[.]” The plaintiffs, California residents, own residential rental properties in the defendant municipality and filed an action contending that the ordinance violated equal protection and due process rights under the federal and state constitution, violated the Fair Housing Act, and was ultra vires under state law.
The court granted the plaintiff’s request to enjoin enforcement of the ordinance in a limited fashion. The Court only enjoined the enforcement of the ordinance’s overbroad definition of the term "rental.” The ordinance defined “rental” as including “the use of a residence by someone other than the owner even though no funds are transferred for said use.” The Court found that the definition of “rental” in the ordinance infringed on plaintiff’s right to privacy under the New Jersey Constitution. Relying on United Property Owners Ass'n of Belmar, the Court held that “a property owner's right to share his or her home with guests or visitors is within the panoply of their right of privacy under the New Jersey Constitution, and therefore, the Ordinance is subject to strict scrutiny.” The Court further found that an injunction regarding the definition of “rental” was appropriate because the plaintiffs had demonstrated a likelihood of success on the merits as to that issue. The Court stated, “Thus, applying the strict scrutiny standard, the Court finds that the definition of "Rental" is so untethered from the Borough's purpose in enacting the Ordinance that Plaintiffs have demonstrated a likelihood of success on the merits of their state substantive due process claim.” The Court’s injunction went a step further and mandated that the term "rental" in the ordinance is limited to "the use of a residence by someone other than the owner where funds are transferred for said use."
In issuing the injunction, the District Court has indicated an acceptable definition of “rental” to be used when a municipality regulates short-term rentals via ordinance.