Posted by: Patricia Salkin | January 12, 2020

TX Appeals Court Holds Ban on Short-Term Rentals Violated Owners’ Freedom of Assembly

This post was authored by Matthew Loeser, Esq.

This case arose from challenges to a municipal ordinance amending the City of Austin’s regulation of short-term rental properties. Specifically, the several property owners challenged the ordinance provision that banned short-term rentals of non-homestead properties, and the ordinance provision that controls conduct and types of assembly at short-term rental properties. The State intervened in the property owners’ suit and argued the ordinance’s ban on short-term rentals of non-homestead properties was unconstitutional as a retroactive law and as an uncompensated taking of private property. In this case, the property owners and the State appealed from the district court’s order granting the City’s no-evidence motion for summary judgment and denying the property owners’ and the State’s motions for summary judgment.

On appeal, the State first contended that section 25-2-950 of the Austin City Code, which terminated all type-2 rentals by 2022, was unconstitutionally retroactive. Type-2 short-term rentals were defined as single-family residences that were not owner-occupied or associated with an owner-occupied principal residential unit. Here, the City failed to explain what public-interest issues supported a ban on type-2 short-term rentals, and there was nothing in the record indicating that any of these stated concerns was specific or limited to type-2 short-term rentals. Furthermore, there was nothing in the record supporting a conclusion that a ban on type-2 rentals would resolve or prevent the City’s stated concerns. Instead, the record reflected that short-term rentals did not receive a disproportionate number of complaints from neighbors, that short-term rentals were an “established practice” and a “historically … allowable use,” and that the ban on type-2 short-term rentals would result in a loss of income for the property owners. Accordingly, the court held that owners of type-2 rental properties had a settled interest in their right to lease their property short term.

The property owners next contended that section 25-2-795 of the Austin City Code, which banned types of conduct and assembly at short-term rental properties, violated the Texas Constitution’s due-course-of-law provision. The court found section 25-2-795 was subject to this strict-scrutiny review because it “infringes on and limits short-term rental tenants’ fundamental, constitutionally secured rights to freedom of assembly, association, movement, and privacy.” Here, the City’s restrictions on the right to assemble were not narrowly tailored and could be achieved by less intrusive, more reasonable means, such as enforcement of the already-existing ordinances regulating noise, parking, building codes, and disorderly conduct. Therefore, the court held that section 25-2-795 constituted a violation of the property owners’ freedom of assembly.

The property owners also claimed that another provision of the short-term rental ordinance put owners and tenants of short-term rentals at risk of unconstitutional search and seizure. Specifically, they argued the provision that added short-term rentals to the enumerated list of types of property that officials must inspect “to ensure compliance with this chapter and other applicable laws.” As this provision was modified to allow the licensee or occupant to deny the inspector’s entry and to seek pre-search administrative review, this claim was found moot.

Zaatari v City of Austin, 2019 WL 6336186 (TX App. 11/27/2019)


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