Ninth Circuit: Clark County Short-Term Rental Regulations Challenge Draws Skepticism

• The Ninth Circuit Court of Appeals panel expressed skepticism regarding Clark County's short-term rental licensing program during a recent hearing.
• A lower court injunction currently prevents Clark County from requiring short-term rental licenses, a prohibition the county argues is unlawful.
• The Greater Las Vegas Short-Term Rental Association initiated the lawsuit, contending the county's licensing system is deeply flawed and lacks proper procedural due process.
• Judges questioned Clark County's attorney extensively on the discretion involved in license approvals, suggesting potential for arbitrary denials.
• No immediate decision was rendered by the appeals panel, leaving the future of Clark County's short-term rental regulations uncertain.

The ongoing legal challenge highlights fundamental disagreements over local government authority to regulate property use versus the procedural rights of property owners.

A three-judge panel of the Ninth Circuit Court of Appeals recently expressed considerable skepticism regarding the short-term rental (STR) licensing program implemented by Clark County, Nevada. This appellate review follows a lower court's decision last year that broadly prohibited the county, which encompasses much of the Las Vegas Strip, from enforcing its requirement for property owners to obtain STR licenses. Clark County is now appealing this injunction, contending that the sweeping prohibition is unlawful and overly broad.

Representing Clark County, attorney Thomas Dillard argued before the panel that the ability to rent out property does not constitute an inherent property right. This assertion drew a pointed remark from U.S. Circuit Judge Ryan Nelson, a Donald Trump appointee, who quipped that "even California" had not gone so far. The county maintains that the existing injunction, which currently allows property owners to operate STRs without a license, is universally applied and therefore unlawful.

The legal challenge originated with a lawsuit filed by the Greater Las Vegas Short-Term Rental Association (GLSRA), which alleged deep flaws within the county's licensing framework. David Zionts, counsel for the association, contended that Clark County has demonstrated an inability to effectively manage a licensing system. Despite these criticisms, the county reported processing a significant number of applications, granting 175 licenses and denying 141, with approximately 500 applications still awaiting a decision. The appeals panel concluded its Monday hearing without issuing an immediate ruling.

During the appellate hearing, judges rigorously questioned Clark County's attorney, Thomas Dillard, concerning the discretionary aspects of the STR licensing scheme. U.S. District Judge Karen Schreier, a Bill Clinton appointee sitting by designation, specifically inquired whether an applicant who met all established county requirements would be guaranteed a license. Dillard responded that officials were required to balance various equities in their decision-making process.

This explanation prompted Judge Nelson to suggest that the county's argument implied unfettered discretion to deny licenses. He directly asked Dillard if the county could deny an application simply "because you don’t like it." Dillard acknowledged that property owners whose license applications had been denied were currently able to rent their homes, despite a county-imposed moratorium on the program—a measure taken due to an overwhelming influx of applications. U.S. Circuit Judge Roopali Desai, a Joe Biden appointee, also raised concerns about property owners' ability to utilize their land as intended, to which Dillard countered with hypothetical scenarios like a bar operating next to a school or a billboard being erected on private property. Judge Nelson, however, observed that Las Vegas residents have engaged in home rentals for decades, questioning the extent to which such activities should be "micromanaged."

David Zionts, representing the Greater Las Vegas Short-Term Rental Association, asserted that Clark County had failed to establish a meaningful licensing process, thereby depriving landowners of the use of their property. He referenced a Nevada Supreme Court decision that, in his view, supported the existence of a system allowing short-term rentals to operate. Zionts argued that if the county is unwilling or unable to properly execute its licensing process, it cannot then impose a deprivation of property rights, stating, "If you’re not going to do the process, then you can’t do the deprivation." He further claimed that the county holds the "keys" to resolving the current injunction by creating a proper and procedurally sound licensing system. Zionts highlighted certain county requirements as onerous, such as the mandate to pay the full amount of a fine within five days to challenge a citation, and emphasized the critical importance of "procedural due process" in any licensing framework.

The ongoing Clark County short-term rental regulations challenge at the Ninth Circuit carries significant implications for both property owners and local government entities. With the county's regulations currently on hold due to the lower court's injunction, property owners in areas like the unincorporated sections of the Las Vegas Strip are not presently required to obtain a short-term rental license to operate. This temporary status, however, underscores the profound uncertainty surrounding the future of Las Vegas short-term rental licensing.

The appellate court's eventual decision will be pivotal in defining the scope of local land use regulation and the procedural due process rights afforded to property owners seeking to engage in short-term rentals. A ruling that upholds the lower court's broad injunction could force Clark County to fundamentally redesign its approach to STR oversight, potentially impacting compliance obligations for thousands of properties. Conversely, a decision favoring the county could reinstate a licensing requirement, necessitating immediate action from property owners currently operating without permits. The Greater Las Vegas STR Association lawsuit has brought to the forefront critical questions about governmental discretion and the practical feasibility of regulatory frameworks, making the Ninth Circuit's forthcoming judgment a landmark moment for the short-term rental industry in the region.

Lawyers advising property owners or short-term rental platforms in Clark County should closely monitor the Ninth Circuit's decision, as it will dictate the future legality and structure of STR licensing. The current injunction means no license is required, but this could change, impacting compliance obligations and potential property rights challenges.

Source: Original reporting via Courthouse News.