Pennsylvania Short-Term Rentals Limited in Residential Areas

Commentary

Generally, property owners  may not assume that they can buy or convert homes in residentially zoned neighborhoods for purely short-term rental use (such as investment properties) as recently corrected by the Pennsylvania Supreme Court in Slice of Life v. Hamilton Township . (NOTE: Be cautious if looking up this case or when reading comments about “this” case. There are two reported appellate cases by the same name: a) the 2017 Commonwealth Court opinion (now overruled) and b) the new, 2019, Pennsylvania Supreme Court opinion which represents the current law.)

For a short time (2016-2019), the lower Commonwealth Court suggested two “rules” about short-term rentals in residential zoning districts.

  1. The Commonwealth Court suggested an “owner-occupied rule” that appeared to require/support short-term rentals in residential zoning districts if the property was somehow owner occupied.
  2. The Commonwealth Court generally suggested a new, but deeply flawed, ‘allowed-unless-expressly-excluded’ rule about any uses, including short-term rentals, suggesting that a municipality must specifically and precisely exclude uses or those uses are automatically allowed. In short-term rentals, the “rule” required the municipality to expressly, specifically, and precisely “exclude” the short-term rental use in the a residential zoning district and rejected using the decades-old non-transient and family-unit language to impliedly exclude such incompatible commercial uses.

The prior cases, all addressing short-term rentals, launched a flurry of municipal ordinances, see example, trying to reign-in problematic short-term-rental, commercial activity in residential zoning districts based on these murky, new “rules.” However, in 2019, the Pennsylvania Supreme Court overruled the Commonwealth Court’s analysis and “rules.” Thus, we are back-to-square-one with short-term rentals allowing municipalities (and neighboring property owners) additional latitude in addressing these types of incompatible  commercial uses in residential districts.

Summary of Short-Term Rental Uses in Pennsylvania (Mid-2019).

The Pennsylvania Supreme Court held in Slice of Life v. Hamilton Township that if a municipality defines a family as a “single housekeeping unit” for purposes of a residential neighborhood, then a property in that zoning district cannot be used purely for transient uses such as short-term rentals. The Supreme Court stated that residential zoning districts accommodate family units and a family unit implies some degree of functional permanency as a “single housekeeping unit.” The Court held that AirBnB and other short-term-rental situations, by definition, address transient accommodations. Thus, purely transient use of a residentially zoned property for short-term rental is not compatible with a residential zoning district. Slice of Life v. Hamilton Township (2019) expressly reverses and overrules Slice of Life (2017) (Commw. Ct. 2017)(reversed and overruled).

The Pennsylvania Supreme Court also took this opportunity in Slice of Life to overrule the Commonwealth Court’s prior and problematic Marchenko v. ZHB Pocono Township (Cmmw. Ct 2016)(overruled) and Shvekh v. Shroud Township (Commw. Ct. 2017)(overruled) cases that also addressed short-term rentals. These cases, now overruled, suggested that any owner occupancy meant that the commercial use was not “purely transient” due to the owner occupancy. The Commonwealth Court also stated the municipality had not precisely, expressly, and specifically excluded short-term rentals (even if the ordinance had similar language), and thus allowed short-term rentals must be allowed in residential districts regardless of family unit definitions, transience definitions, or similar-sounding exclusion (calling then vacation homes).

The overruling of the three cases appears to restore stability to municipal ordinances that limit commercial  transient-type uses  such as short-term-rentals in residential neighborhoods. The overruling also restores some practically to ordinance drafting by not requiring to exclude every possible and imaginable use or risk allowing that use. Short-term rentals pose, in legal terms, an extraordinarily fast-moving area of law. Most cases have not yet explored the fundamental constitutional rights of neighboring properties to quiet enjoyment or the constitutional duty to use property in a way that does not interfere with the quiet enjoyment of others. Short-term rentals, and the three reported cases illustrate this, do not qualify as statutory no-impact businesses and may improperly impair constitutional property rights of neighboring properties.

Factual Summary

In Slice of Life,  an out-of-state owner purchased a residential property in the Pennsylvania Poconos as an “investment property” and purely for short-term rental use. The owner did not reside at the property. [slip 8] The property, advertised as a six-bedroom that could accommodate seventeen people, drew noise and other complaints from neighbors about groups using the property. [slip 9-10] Neighbors needed to call police several times, sent letters to the owner about problems that included “public urination, fireworks, loud music, large bonfires in the heavily wooded area, nudity and lewd conduct.”

Transient Uses Not Compatible with Residential Neighborhoods

The Supreme Court opinion focused first on transience and residential neighborhood character. The concept of transience versus neighborhood stability has deep roots in law. The Court cites:

The permanence and stability of people living in single-family residential zoning districts creates a sense of community, cultivates and fosters relationships, and provides an overall quality of a place where people are invested and engaged in their neighborhood and care about each other. This is a place where children can play together, neighbors can know each other and look out for one another, and people can enjoy the “quiet seclusion” of their homes. [slip 22-23](emphasis added)

The Court carefully notes that while generally one possesses a fundamental right to enjoy his property, those rights may be limited including by zoning and must recognize and respect the equal rights of quiet enjoyment of neighbors. [slip 19-23]. (Strangely, the Court does not cite to corresponding constitutional duties to use one’s property in a way that does not interfere with the property of another. That is, while one may enjoy his property, a string of long-standing cases reminds that such rights are limited by federal and commonwealth constitutional law in addition to simple neighborliness. The latter, neighborliness, seems less a factor with non-owner-occupied properties who have no personal incentive to maintain peace in a neighborhood.) The Court also recognizes that Pennsylvania’s Statutory Construction Act does not apply the zoning—although, the Court appears to apply similar principles.

Overruling Marchenko and Shvek

The Court also firmly admonished the prior and deeply flawed Commonwealth Court’s decision on this same case, Slice of Life (2017). [slip 23]. The Supreme Court stated:

In the case at bar [Slice of Life 2017], the Commonwealth Court failed to discuss, let alone interpret,the definition of “family”as defined in the Ordinance or its requirement of “a single housekeeping unit.” Indeed, it ignored entirely our decision in Miller and distinguished our decision in Albert without any discussion or analysis. Instead, it relied on its own factually inapposite and legally inaccurate decisions in Marchenko and Shvek [slip 23]

The Commonwealth Court in June 2017 had erroneously held, now overruled, that municipalities must strictly define every possible term in a zoning ordinance, must strictly apply a term expressly as written, and that no latitude for any interpretation exists—relying on a string of recent but problematic Commonwealth Court cases. [See Commw. Ct. slip 15, (overruled)]. The Commonwealth Court had embarked on a allowed-unless-expressly-and-precisely-excluded interpretation scheme that made writing zoning ordinances almost impossible. (A problem with the Commonwealth Court’s “interpretation” is apparent ignorance of basic property law that confers competing rights to other property owners of quiet enjoyment. The Commonwealth Court assumed supremacy of one individual’s rights, without any citation, to every other neighboring property owner and went so far as to hold that the apparently uncontroverted health, safety, and welfare concerns in Slice of Life were merely “speculative.” [Commw. Ct. slip 20]).

The Supreme Court in Slice of Life (2019) now expressly overrules the Commonwealth Court’s prior opinion in Slice of Life that relied on the Commonwealth Court’s problematic Marchenko and Shvekh. [slip 27]. The Supreme Court requires an “excluded-unless-expressly-included standard, combined with Miller’s ‘functional analysis’.” [slip 27]

Broader Implications

Slice of Life restores practicality to zoning ordinances and correctly recognizes the appellate function of the Zoning Hearing Board under the Muncipalities Planning Code. The Supreme Court restores the “excluded-unless-expressly-included standard, combined with Miller’s ‘functional analysis…. ” Municipalities must still be diligent in drafting zoning ordinances and keeping them current, but drafters do not need to “state every conceivable impermissible use.” [slip 27]. The functional analysis requires a fact-finder to analyze the use and determine whether the use functions as a family unit (e.g., a family with six foster children who are not related by blood are still a functional family unit). The functional analysis assesses the implications of the unit not just relationships. Also, the excluded-unless-expressly-included helps make drafting practical and restores constitutionally sound principles underlying zoning originally. Drafters no longer need to exclude every possible use of a property. [slip 27, “A single-family home (or other structure) can be used in as many ways as the imagination allows –for example,as a restaurant, a bakery, a bed and breakfast, a school, a store, a veterinary hospital, a halfway house or a pigeon sanctuary.The rule announced by the Commonwealth Court is impossible for drafters of zoning ordinances to execute.”)

Zoning has always allowed municipalities to limit commercial uses in residential zoning districts. Short-term rentals are commercial uses. Short-term rentals cannot qualify for the statutory (MPC) no-impact home business exception because, by definition, the users/clients of short-term rentals arrive at property. Thus, just as any other commercial uses typically dis-allowed, the municipality may exclude short-term rentals from residential properties.