At a brief hearing Monday afternoon, Circuit Court Judge Leah Case shot down the city's attempt to get a dismissal of the lawsuit that accuses the city of illegally making changes to its short-term rental rules three years ago.
DAYTONA BEACH — The legal tussle between the city and 22 property owners over short-term vacation rentals will continue to move through the courts.
At a brief hearing Monday afternoon, Circuit Court Judge Leah Case shot down the city's attempt to get a dismissal of the lawsuit that accuses the city of illegally making changes to its short-term rental rules three years ago.
"The plaintiff has filed a complaint with a valid cause of action," Case said at the end of the 35-minute hearing at the Volusia County Courthouse Annex on City Island.
Assistant City Attorney Gary Glassman indicated he'll file the city's answers to the lawsuit within the next three weeks. Glassman, who declined comment after Monday's proceeding, argued in a court filing aiming to get the case tossed out that the plaintiffs have failed to show that the city's rental rules are invalid and haven't been enforced over the years.
After the city files its response, plaintiffs' attorney Keith Brady will attempt to fast track a decision by filing a motion for summary judgement.
Billion-dollar business
The lawsuit's ultimate goal is for Daytona Beach to allow rentals of homes, condos and apartments for a few nights or weeks citywide. Short-term vacation rentals are legal in Daytona Beach along some main thoroughfares where hotels and motels are allowed, and in parts of the beachside, downtown and Midtown. They’re permitted in four types of tourist zoning districts and 13 types of redevelopment area zoning districts.
Many of the property owners who joined the lawsuit want to be able to rent houses they own in residential areas, which is not allowed in most of those neighborhoods. Those who rent their homes to paying guests for short stints argue that they're improving neighborhoods with dramatic makeovers of ramshackle houses and boosting the local economy by luring tourists with money to burn.
"We are wondering what is motivating Daytona to prohibit short-term rentals," Stephanie Ruta, whose husband and rental company are named plaintiffs in the suit, said after Monday's hearing. "The new Florida study shows it's a $31 billion industry. Daytona's percentage is estimated to be $1.24 billion per year, and the tourist tax alone would be conservatively $10 million to $12 million per year."
Ruta said she doesn't understand why the city doesn't work with property owners to license, inspect and tax short-term rentals.
"With licensing and inspection we can make sure the vacation rentals are safe, beautiful and provide our guests with a great Daytona experience," she said.
"I think with the right regulations, we can make Daytona Beach the best vacation rental destination in Florida," plaintiff Mary Synk said Monday night.
In a conversation after Monday's hearing, Brady said a Walt Disney World study showed people who stay in short-term rentals spend five times more money in vacation towns as other tourists. Brady said short-term renters also stay longer than other visitors, and return more often.
"They're out spending money on fine dining, river cruises, jet ski rentals," Brady said. "These are the money people. Short-term rentals are the last thing you want to get rid of."
Seeking compensation
In addition to asking the city to drop any pending code enforcement actions involving vacation rentals from March 2015 forward, the plaintiffs are also hoping to be compensated for lost rental bookings since the city started cracking down a few years ago.
Krista Goodrich said after the hearing that she has lost $200,000 over the past two years not being able to rent out two of her short-term rental properties. Goodrich was one of only two plaintiffs who sat in on the proceeding before Case, which was held in a small meeting room. The other plaintiff listening in was Beachside Redevelopment Board member Mike Denis.
The lawsuit against the city was filed in July 2017. The legal challenge argues that the city unlawfully made changes to its short-term rental rules in 2015 when the city adopted a new Land Development Code, and then several months later illegally made a change in short-term rules in that new LDC. Land Development Codes are lengthy publications packed with rules that regulate the development and use of land and buildings in a city or county.
The legal complaint focuses heavily on a state statute that says "a local law, ordinance or regulation may not prohibit vacation rentals or regulate the duration or frequency of rental of vacation rentals." A key caveat in the state law passed seven years ago is that it doesn’t apply to any local measure adopted before June 2011.
City: Rules date to '93
In a March email to the mayor and city commissioners, City Attorney Robert Jagger said that the city was continuing to enforce its short-term vacation rental regulations since those rules were adopted prior to the June 2011 cutoff in the state law’s grandfathering clause.
In his lawsuit dismissal motion, Glassman wrote that the new LDC adopted by the City Commission in January 2015 "carried forward the city’s existing regulations relating to short-term rentals that were in the city's prior land development code, originally adopted in 1993." He made a similar statement Monday.
After the new LDC was passed, a mistake was discovered regarding short-term rentals, but it was corrected that year, Glassman said in the motion. The rentals had to be deleted as a permitted use in 10 redevelopment zoning districts because it was incorrectly listed in those areas, according to the motion document and city records.
"Plaintiffs have failed to show that short-term rental uses were at one time a legal activity on any of their properties, and is now illegal due to a change in zoning," Glassman wrote.
Brady, the St. Petersburg attorney for the property owners, contends that part of the LDC rewrite wound up rezoning the beachside properties of three of the plaintiffs from one type of residential zoning that allowed short-term rentals to a different type of residential zoning that does not.
On Monday, Glassman said the lawsuit should have included more detail on the plaintiffs' properties and explanations for why they weren't grandfathered in as legal rentals after the new LDC passed.
Brady argued to the judge Monday that even if the exact same short-term rental rules were used in both the old and new LDCs, the fact they were newly adopted after June 2011 violates state law.
"I will stipulate to you they were regulating prior to 2011," Brady said. "The issue is did they add new regulations after 2011, which you're not allowed to do."