Recently, the Illinois Appellate Court upheld Chicago’s Short-Term Rental (STR) ordinance in the case of Mendez v. City of Chicago. The city’s STR ordinance governs short-term housing arrangements such as those offered on Airbnb and VRBO. In 2016, two residents filed a lawsuit to challenge the original STR ordinance. Later, they added several claims to address the City’s amended ordinance.Mendez-v.-City-of-Chicago
Let’s take a closer look at the specific claims and how the Appellate Court ruled on each of them. This article was written by a Chicago Real Estate Attorney.
Table of Contents
Inspection Requirement for Chicago Rentals
Under the STR ordinance, hosts with more than one rental unit are subject to an inspection every two years. The plaintiffs challenged this inspection requirement, arguing that it authorized searches without their consent, which violated the Illinois Constitution. However, the Appellate Court found that this claim was not “ripe.” The building commissioner had not yet adopted rules governing these inspections, so it can’t be a search. Therefore, no host was actually subject to a search that might “offend” their constitutional rights.
Primary Residence Requirement for Short Term Leases
Another provision of the STR ordinance requires short-term rentals to be the host’s primary residence, with certain exceptions. The plaintiffs argued that the building commissioner had too much discretion to determine whether a home was exempt. However, the Appellate Court rejected this argument. Neither plaintiff had applied for an exemption. They did not try to test this issue before the lawsuit, so they cannot use this as their first try.
Noise Restrictions in Chicago Short Term Rentals
The STR ordinance prohibits “excessive loud noise” on Short Term Rental properties between 8:00 PM and 8:00 AM each night. This is noise “louder than average conversational level at a distance of 100 feet or more, measured from the property line of the unit.” Plaintiffs challenged the noise standard as vague. Similar regulations do not exist for hotels, bed-and-breakfasts, or other renting businesses. However, the Appellate Court dismissed this challenge. It found that the noise restrictions provided sufficient notice and clear standards to comply with due process. Also, it found these standards not discriminatory since most hotels are located in commercial rather than residential districts.
Ban on Single Night Rentals in Chicago
Under the STR ordinance, hosts are prohibited from renting their properties “for any period less than two consecutive nights” until City officials adopt future regulations ensuring that single-night rentals can be effectively and safely conducted. Obviously, the government is attempting to regulate other, less savory industries by this ordinance. The Appellate Court found the ban on VRBO and Air BNBs of one night to be a fair and reasonable exercise of the City Council’s legislative power.
Taxpayer Standing to Challenge Short Term Rental
Finally, the plaintiff-hosts claimed they had “taxpayer standing.” This argues that the enforcement of the Short Term Rental regulations was a misuse of taxpayer dollars. However, the Appellate Court rejected their argument, finding that the hosts presented no evidence to prove that. The Court found that they would not be required to pay increased sales or property taxes to account for the enforcement of the STR regulations. Therefore, they could not establish taxpayer standing to challenge the ordinance. This is somewhat unique, as a different case called Lujan v. Defenders of Wildlife would usually argue the taxpayers do have standing. You might see this case taught in law schools now!
In summary, the Appellate Court upheld the Chicago Short Term Rental ordinance. It noted that municipal ordinances are entitled to a presumption of constitutionality. Homeowners can only fight that challenge by clear and convincing evidence. Despite the plaintiffs’ claims, the Court found that the Short Term Rental ordinance did not violate the Illinois Constitution or their due process rights. Furhter, the various provisions of the ordinance were reasonable and within the City Council’s legislative power. So, you should know these Chicago Short Term Rental Ordinance laws aren’t going anywhere.