Real Estate Law Client Advisory: Thinking of Investing in Short-Term Rentals? Make Sure You Know The Local Laws

In Slice of Life, LLC et al. vs. Hamilton Township Zoning Hearing Board, et al., the Supreme Court of Pennsylvania unanimously decided that a Monroe County township’s zoning ordinance bars the short-term rental of homes in strictly residential districts. The Supreme Court reversed the Commonwealth Court’s ruling and found in favor of Hamilton Township and its zoning board.

The issue fell on the interpretation of the term “single housekeeping unit.” A term commonly used in zoning ordinances in Monroe County. The Supreme Court applied the “functional standard” by looking at whether the individuals functioned as a family within the household and if those individuals were sufficiently stable and permanent and not just short-term or transient.

In this case, a New York investor purchased a house in the Poconos, through his company, as an investment property, but he never actually lived in the home. The house was used exclusively for short-term rentals. Accordingly, it was advertised via online rental companies such as Airbnb, and HomeAway. The permitted reservations were a minimum of two nights, a maximum of one week, and the house accommodated up to 17 guests.

The Township’s ordinance did not define terms such as “transient lodging” and “transient tenancies.” The Commonwealth Court found the zoning statute to be ambiguous and, therefore, ruled in favor of the home owner.

The Supreme Court, however, thought otherwise. The Supreme Court pointed out that a single-family home can be used “in as many ways as the imagination allows,” making the standard set by the Commonwealth Court impossible for drafters of zoning ordinances to execute. Declaring that there was no ambiguity, the Supreme Court said that the use of the house was “purely transient,” which is precluded.

While this is a win for municipalities, potential investors in short-term rental properties need to proceed with caution. Investors should check local zoning ordinances and other codes, such as home owners’ association agreements, to be aware of any enacted restrictions or prohibitions on short-term rentals. Municipalities are slowly starting to enact short-term rental laws that dictate licensing requirements, as well as use restrictions in various areas.

For more information on this or any other real estate matter, please contact Maxwell Briskman Stanfield or any other member of Meyer, Unkovic & Scott’s Real Estate & Lending Group with whom you may have worked.