By Scott Holland – Cook County Record

6-Mar-23 – A state appeals panel had no reservations about ending a lawsuit challenging the constitutionality of a Chicago ordinance regulating short-term rental properties, such as those sold through Airbnb.

Homeowners Leila Mendez and Alonso Zaragoza sued the city in November 2016 to challenge its then-recently enacted shared housing ordinance. The lawsuit named as a defendant Kenneth Meyer, in his official capacity as commissioner of the Department of Business Affairs and Consumer Protection. They said the ordinance violated the state constitution through provisions concerning inspections and excessive noise, a primary residence rule, and a ban on single-night rentals.

The homeowners said the inspection requirement violated protections against unreasonable, warrantless search and seizure of private property; argued a requirement that people can only rent space in their primary residences is disconnected from a legitimate state interest; and said a limit on excessive noise violates due process protections because it is both vague and inequitably applied, as hotels or bed-and-breakfast rentals don’t have the same guideline.

After the city won dismissal on virtually all of the original complaint, it did so again on an amended complaint. They returned with a second amended complaint resulting in cross-motions for summary judgment. A judge ruled the homeowners lacked both a legal injury and standing to sue.

In their third amended complaint, the plaintiffs added an allegation the single-night ban unlawfully delegates the power of the legislative branch to administrative officials.

Cook County Circuit Court Judge Cecilia Horan dismissed the final complaint due to lack of standing.

Mendez and Zaragoza then brought their challenge to the Illinois First District Appellate Court, which affirmed Horan’s ruling.

Justice Terrence Lavin wrote the panel’s decision, issued February 14; Justices Michael Hyman and Mary Ellen Coghlan concurred. The order was issued under Supreme Court Rule 23, which may restrict its use as precedent.

Regarding inspections, the panel explained the ordinance allows inspections of units “operated by a shared housing unit operator,” which it defines as someone who has registered or must register “more than one” unit.

“Plaintiff Zaragoza rents out only one unit as a shared housing unit; plaintiff Mendez has ceased doing so due to the ordinance provisions,” wrote Lavin (left). “In short, plaintiffs are simply not currently subject to any inspection provisions. They thus lack standing to challenge the inspection provision of the ordinance because they are not interested parties, as required.”

The panel also said the claims are premature. The ordinance says inspections must fall under the building commissioner’s rules and regulations, but those rules have yet to be promulgated, rendering the ordinance powerless. It also said the Fourth Amendment does not inhibit “administrative searches” of hotel records but would not analyze whether that applies to shared housing rentals.

In analyzing the primary residence rule, the panel pointed to an August 2020 committee meeting prior to the Chicago City Council amending the ordinance, which established the rule “was intended to curb investor rentals in residential neighborhoods with single-family homes and townhouse walk-ups; as a matter of common sense, those residing in and more closely watching their homes a majority of the year have a greater stake in renting them to well-behaved and legally-compliant guests.”

On appeal, Zaragoza challenged the ordinance clause granting city officials the power to make exceptions to that rule. The panel said it could not invalidate that clause without negating their entire rule. They further explained Zaragoza lacks standing to challenge the clause by failing to allege how a vague application caused him legal injury. And they said he had not yet exhausted appropriate administrative remedies.

Similar logic doomed the challenge to a limit on single-night rentals, pending review of the building commissioner and police superintendent. The panel said the council enacted that ban as a public safety measure in 2020 amid pandemic-era concerns about party houses. So even if the panel decided the method for approving such rentals gives undue powers to administrators over elected aldermen, the reasons for instituting the ban remain valid.

The justices also rejected arguments the city’s limits on excessive noise were too vague.

“As the Circuit Court observed, even a child understands the difference between inside and outside voices,” Lavin wrote. “The ordinance clearly aims to proscribe the yelling, screaming, and loud laughter that often accompanies a party and wafts over to neighboring properties. It also reasonably proscribes this conduct during the evening hours when, due to such excessively loud noise, the average Chicagoan in a residential high-rise or neighborhood might be precluded from sleeping and getting up the next morning to go about their day. Notably, the ordinance does not proscribe just any noise, such as a baby crying or garage door opening, as plaintiffs would have us believe. Rather, it proscribes ‘excessive loud noise,’ and with the limiting language and parameters, it adequately delineates a nuisance.”

Lavin further explained that plaintiffs’ allegations of other types of rental units not being subjected to similar limits lacked supporting evidence while also failing to put their properties on the same legal footing as a hotel, bed-and-breakfast, or long-term rental. Even if the panel did accept the plaintiffs’ allegations, Lavin wrote, it also could logically explain why different types of rental housing businesses can earn different treatment.

Finally, the panel rejected the plaintiffs’ arguments they have grounds to sue as payers of sales and property tax, explaining the complaint fails to show how the ordinance itself makes them, as individuals, liable for increased taxes.

Mendez and Zaragoza have been represented in the action by attorneys Jeffrey Schwab, of the Liberty Justice Center of Chicago, and Jacob Huebert and Christina Sandefur, of the Goldwater Institute of Phoenix, Arizona.