Short-Term Rental Site in Venice Deemed Legal

Short-term rental market, or at least advocates in the space, may have gotten a win. Los Angeles Superior Court Judge Beaudet has deemed that a local apartment owner is not breaking city law by leasing units on a short-term basis. City attorney Mike Feuer brought a civil suit against Venice Suites LLC for leasing units in a Venice apartment building for less than 30 days. Some celebrated the decision as a win for the short-term rental market—where units are rented as pseudo hotel rooms on a short-term basis—but others say that impact might be minimal because of the details of the case. We sat down with Andrew Starrels, a partner at Holland & Knight, to talk about the case and the potential impacts.

GlobeSt.com: What was your reaction to the decision that this was not an illegal hotel? Legally, were you surprised by the decision?

Andrew Starrels: Based on the media reports, the decision—and there has not been a final judgment in the case yet—seemed far-reaching. Going deeper, I’m not at all sure there will be much widespread impact. The ruling responded to summary judgment motions brought by both the project owner and the L.A. City Attorney on the issue of short term rentals in this particular building, and the judge ruled in favor of the building owner: that short term rentals at that building were permissible. This will not be the end of the case, however, as some claims about the owner’s activities remain for trial. Moreover, it is not at all clear that this will apply throughout the City because of the particular facts of this case.

GlobeSt.com: What precedent does this set for home sharing in Los Angeles?

Starrels: That’s hard to say.  There were some particular facts and history relevant to this building that could very well distinguish this case from others.  Bear in mind also that this was technically not a “home sharing case.”  This case involves “short term rentals,” in which the owner of a permitted multifamily building that at times has been described as an “apartment hotel” and an “apartment building” was renting some of its apartments on a daily basis.  This building dates back to the early 20th century, and there was evidence that this type of daily operation had been conducted historically.  As the term “home sharing” implies, this is factually quite different from the a homeowner seeking to rent out their home (or rooms within it) on a part-time basis to overnight guests, as is typically seen as the most common use of the well-known home-sharing platforms.  So I don’t see this case necessarily opening the door to wider home-sharing activity.  In my view that will still require City Council action.

GlobeSt.com: Do you think this will incentivize more home sharing activity in the city, or was this a property-specific situation because of the building’s zoning?

Starrels: There is still great interest in home sharing citywide, and it continues on an underground basis even without formal enabling legislation from the City.  At the same time, there are many interest groups that oppose over-use of the practice.  Most apartment owners, for example, would want to limit their tenants’ ability to rent out their units on a short-term basis.  These activities are typically regulated by the terms of the lease agreement.  Similarly, affordable housing advocates hope that rent-stabilized and affordable housing units are not lost to home-sharing activity.  Both of those issues were addressed in the proposed ordinance that the City Council has been considering for nearly two years, and the proposed ordinance also limits how many days in a year an owner can engage in home sharing rentals.  That would address the concerns of community and neighborhood groups that fear changes to neighborhood character that rampant home sharing might bring, and the concerns raised by the hotel industry and others about rampant misuse of the practice to evade regulatory or market forces that affect competing operators.  In fact, the hold-up with the proposed ordinance apparently relates to how long the annual limit on home sharing would be – some proponents wanted greater limits, while other groups argued for harsher restrictions.  None of those questions are addressed in the Venice case, so there is still a need for a legislative response from Council.

GlobeSt.com: What was the response from the hotel community?

Starrels: I have not heard any collective or particularly vocal hotel industry response.  I believe this case and this set of facts may be localized, and not particularly transferrable to the larger issue.  I don’t know the specifics of this market and this property, but from what I have observed the hotel community has objected to non-permitted buildings being operated as competing hotels either without fulfilling the same regulatory requirements or in markets that can’t support more hotels.  I’m not sure those factors were present here.

GlobeSt.com: Has there been any more movement for the city to outline specific regulations for home sharing?

Starrels: Several council committees have held hearings attempting to allow various constituencies to be heard.  It looked like there was some momentum late in 2017 and that an ordinance might pass, but that has now stalled.  The concerns raised by the various constituencies have not changed, and the issues present in the proposed legislation remain as I’ve described.  Perhaps the visibility of the ruling in this case will stimulate some movement at Council, even if the case isn’t widely applicable to other situations.