A federal judge has effectively frozen a legal battle over Summit County’s short-term rental regulations — at least temporarily — after county officials filed a motion to dismiss a lawsuit brought by area homeowners. One of the claims of homeowners is that the new laws violate various federal laws.  Separately a lawsuit was filed in Breckenridge claiming the city implemented “rent control”.  Will the homeowners win against Summit County and Breckenridge, and will the regulations be overturned?

Two separate lawsuits in Summit County

It is important to note that there are two separate lawsuits in Summit County.  The first is against the County itself for implementing regulations outside Breckenridge.  The second is a lawsuit against the city of Breckenridge for their nightly rental regulations that are distinct from Summit County.  Below I’ll go through both lawsuits.

SUMMIT COUNTY NIGHTLY RENTAL LAWSUIT

What are in the new nightly rental regulations in Summit County?

The new rules limit the number of properties that can hold short-term rental licenses in the unincorporated county’s various basins, ranging from 5% to 18%. There is no limit in areas defined as “resort overlay zones,” such as Copper Mountain or Keystone.

According to officials, resort zones account for roughly 63% of all short-term rental properties, while neighborhoods where caps will be in place account for 37%. In total, the caps are projected to decrease the number of short-term rentals from 1,659 short-term to 1,290 between 2025 and 2030.

The rules also limit the number of annual bookings for short-term rentals to 35. 

Some exceptions exist, such as an exemption to the license cap for full-time county residents who work more than 30 hours per week in the county or who’ve retired and have a history of working in the county for at least 10 to 15 years or if the property is in a resort zone like Copper or Keystone.  Furthermore, licenses will also now be transferable between parents and children, spouses or domestic partners, siblings or grandparents and grandchildren.

 

What is in the lawsuit against Summit County?

Here is an excerpt from the lawsuit:

In short, many of the BOCC’s STR regulations, embodied in County Ordinances 20-B and

20-C, violate Plaintiff Todd Ruelle’s and members of Plaintiff Summit County Resort Homes

Inc.’s (“SCRH”) due process and equal protection rights, as well as their rights protected by the

Commerce Clause, under the United States Constitution. They also violate their statutory and

constitutional rights under Colorado state law. Thus, these STR regulations that treat County

homeowners differently, limit the STR bookings a homeowner can host, cap the STR licenses in

the County, and prohibit the transfer of STR licenses must be declared void and enjoined.

 

Overwhelming arguments in lawsuit against Summit County will fail with the court

There is ample case law in Colorado and throughout the country confirming a municipalities ability to control zoning and in turn nightly rentals by placing caps, setting up prohibited zones, prohibiting the transfer of licenses, etc…  These same laws are occurring in one shape or another in every single Colorado mountain town.  For example, Steamboat Springs has set up zones with caps on nightly rentals in each zone.  The meet of the arguments made against Summit County will ultimately fail

One part of the Summit county nightly rental lawsuit could win.

There have now been multiple rulings throughout the country that have invalidated the separation of primary owners and out of state owners due to interstate Commerce.  Depending on how the lawsuit goes this piece of the legislation could be invalidated where primary owners/ residents are allowed to rent more than out of state/absentee owners.

Fortunately, the solution is pretty simple.  Either than can be a requirement that the owner must be onsite during the rental, or they could scrap this provision altogether and just go with generic caps in all neighborhoods.

Summary of Summit County lawsuit

Nothing in the lawsuit moves the needle much against Summit County.  The County will ultimately prevail on the overwhelming majority of claims with the exception of different treatment of primary owners vs absentee owners.  I do not see huge changes in Summit County’s nightly rental regulations due to this lawsuit.

The Breckenridge nightly rental lawsuit

 

What are in the new Breckenridge nightly rental regulations

Breckenridge, like other ski towns, has implemented caps, zones for nightly rentals, and fees on nightly rentals.  These regulations are similar to every other Colorado mountain town.

What is in the lawsuit against nightly rental regulations in Breckenridge?

The lawsuit against Breckenridge is taking a “novel” approach.

“We believe that the town’s short-term rental ordinances violate Colorado law that expressly prohibits local governments from imposing rent controls,” Colorado Property Owners president Mary Waldman said in a statement. “The town’s actions are intended to suppress the short-term rental market in an attempt to force property owners to provide their units as longer term rentals at lower rates than the current market allows.”

The lawsuit seeks to invalidate two ordinances passed by the Breckenridge Town Council in 2021 and 2022. The ordinances restrict the number of nonexempt short-term rental licenses in Breckenridge to 2,200 and divide the town into four short-term rental zones, each with different caps on short-term rentals.

Did Breckenridge implement rent control with their nightly rental regulations?

Saying Breckenridge implemented rent control is a very novel approach that has zero chance of winning.  There is well established case law that allows cities to regulate zoning including nightly rentals.  By prohibiting or limiting certain properties a city is not controlling the rent.

For example, under this argument, a city limiting the number of liquor stores or Marijuana dispensaries or large scale hotels, or any property type would fall under this same argument.    I think the probability of this argument winning in court is close to zero.

 

 

Summary of Nightly rental lawsuits

Although the two lawsuits against nightly rental rules in Summit County and Breckenridge have hit the news with much fanfare.  Neither one looks to move the needle much in regard to regulating nightly rentals now or in the future.  I do think that there will be minor changes in Summit Counties regulations where nonresidents are treated differently, but other than that nothing profound will change in either Summit County or Breckenridge.

I’ve said for the last several years that mountain towns are changing and full-time residents/voters are pinning the blame rightly or wrongly on nightly rentals.  The rules in Breckenridge and Summit County will withstand the court challenges and likely be strengthened in the future due to the changing demographics of full time residents.  Anyone investing in a nightly rental for the revenue needs to be extremely careful as regulations will continue changing.

 

Additional Reading/Resources

• https://www.summitdaily.com/news/legal-battle-over-summit-countys-short-term-rental-rules-is-on-hold-as-a-federal-judge-weighs-motions-filed-by-county-officials-homeowners/
• https://www.summitdaily.com/news/property-owners-sue-breckenridge-in-effort-to-invalidate-short-term-rental-regulations/
• https://www.summitdaily.com/news/summit-county-homeowners-sue-local-officials-over-short-term-rental-regulations/

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Written by Glen Weinberg, Owner Fairview Commercial Lending.  Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine,  The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.

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