Court Strikes Down Miami Beach Ban on Short Term Rentals

A Miami-Dade County court struck down the city ordinance that fines homeowners up to $100,000 for repeat short-term rental violations. Short term rentals are not allowed in many areas of Miami Beach and fines for violations have increased greatly in the past several years. 11th Circuit Court Judge Michael Hanzman ruled that the ordinances “are in jarring conflict with [State law] and are therefore illegal and unenforceable.”

This lawsuit began in 2018 when Miami Beach resident Natalie Nichols, represented by the Goldwater Institute, sued the city for the ban and the excessive fines that it imposed. Goldwater Institute represents other Airbnb hosts across the country and filed the lawsuit on Nichol’s behalf. 

Nichols sought to have the ban overthrown on the basis that short term rentals are legal in some parts of the city, which treats her property differently from “similarly situated properties”. Nichols rented her two properties on a short term basis prior to the ban in 2010. She also challenged the “grossly excessive punishment meant to deter people from peacefully using their property for home-sharing.”  

According to Mayor Dan Gelber, “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.” 

Judge Hanzman ultimately struck down the city’s short term rental ordinance, declaring that the $20,000 to $100,000 fines violate state law. Florida law prohibits local governments from fining residents more than $1,000 a day for code violations. Hanzman noted that the state “clearly and unambiguously imposed caps on the amount local governments may fine citizens for code violations”.

Goldwater Institute’s Lead Attorney on the case Matt Miller said “This ruling vindicates the property rights of all Miami Beach homeowners who share their homes as short-term rentals. Home-sharers in Miami Beach no longer have to fear that they will end up in financial ruin for exercising this essential property right.” 

The Future of Short Term Rentals in Miami Beach

The city immediately announced that it would appeal the court’s decision to strike down the short term rental ordinance. 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 also made it clear in the statement that they would continue to enforce the ordinance during the appellate proceedings.  “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.” 

Mayor Dan Gelber provided this comment via text message: “We respectfully disagree with this Court’s ruling and intend to ask the appellate court to validate our City’s ordinance.”

In a footnote, judge Hanzman noted that the “The Court declines the City’s invitation to sever the penalty provisions from the remainder of these ordinances, city is free to enact replacements so long as they are constitutional and do not conflict with state statutory law.” 

It would seem that the city could simply amend the ordinance to abide by the state’s fee limitations, but the state actually pre-empted cities from regulating short-term rentals in 2011. Miami Beach was grandfathered in since their regulations went into effect in 2010, but the judge’s ruling invalidated the ordinances. If the ruling stands, it is unclear how new regulations would be able to be put into place and enforced.

July 2020 Update – City of Miami Beach Loses Appeals

The city of Miami Beach racked up a couple of losses in July surrounding appeals of the court’s decision to strike down the short term rental ordinance.

On July 16, the appeals court rejected the city’s petition to overturn a Miami-Dade judge’s ruling that determined the city didn’t have the authority to shut off water and sewer connections to a property due to unpaid short-term rental fines. This particular homeowner owed hundreds of thousands of dollars in short-term rental violations. The ruling solidified the decision that Miami Beach cannot shut off water and sewer services to a house whose owner refused to pay short-term rental fines.

Later in July, the city of Miami Beach struck out for the second time on their larger appeal. On July 22nd, the Third District Court of Appeals court rejected Miami Beach’s petition to overturn a Miami-Dade judge’s ruling that determined that the city’s exorbitant fines ran afoul of state law.

Miller, the attorney representing Nichols, said his client is pleased with the appellate court’s decision. “Now, more than ever, people need the extra income that short-term rentals can generate,” Miller said. “Ms. Nichols looks forward to resuming her rentals as soon as possible.”

Looking forward, Miami Beach City Attorney Raul Aguila left open the possibility for additional legal action at the appellate level or potential amendments to the existing legislation.

“The city maintains that its short-term rental fines comply with all applicable laws,” Aguila said in a statement. “In the meantime, the City’s short term rental laws remain in full force and effect. I have, additionally, not ruled out going forward with an amendment to the penalty and fines provisions of the city’s short term rental laws, lowering the fine schedule, per the lower and appellate court’s orders. At this time, all options are on the table.”

The History of Short Term Rentals in Miami Beach

Miami Beach’s short term rental regulations went into place in 2010, severely limiting what areas are allowed to use properties as short term rentals. Nichols speaks to the effect the ban has had on Miami Beach homeowners, saying “like many others in Miami Beach, I bought properties in a resort town in a neighborhood where it was, at the time, legal to conduct short term rentals. At the height of the recession, when property values had dropped 75%, the city stripped us of our property rights, directly causing foreclosures and short sales.” 

The city has been further cracking down on short term rental violations for the past several years, implementing steep fines in March 2016. These fines start at $20,000 for a first offense and then work their way up to $100,000 for repeat offenses.

According to Miami Herald, from March 2016 to March 2019, Miami Beach’s code compliance department issued violations for 260 units and issued $13.3 million in fines. Many property owners appealed, and that amount dropped down to $8 million. By June of this year, the city had collected around $500,000 in fines, or 6 percent of the amount it had issued since March 2016.

The city settled another legal battle with Airbnb in August where it was determined that Airbnb is required to display business licenses and resort tax certifications for Miami Beach listings. However, falsification appears to be rampant as the home-sharing platform is not required to verify whether those numbers are valid. The city licensed fewer than 1,000 short-term rentals as of this summer, but approximately 4,500 entire homes are advertised on Airbnb, according to market data from BNBVestor, a short-term rental analytic company. 

Since this settlement, the city has cracked down further on short term rental violations. The city announced in August that it will prosecute hosts who provide fake business license numbers in order to list their properties on home sharing sites. According to Melissa Berthier, a spokesperson for the city, the penalty for the violation is 60 days of jail time and/or a $500 fine. 

Is Home Sharing Still Illegal in Certain Areas of Miami Beach?

Although the city’s ordinance banning short term rentals was struck down, the city has indicated that it will continue to enforce the rules on the books as they seek to appeal the decision. Therefore, the court’s ruling does not mean that short-term rentals are now legal everywhere in the city, nor does it invalidate the requirement for a business license and resort tax certificate for anyone within a legal zone for short term rentals.