Hospitality Service Firm Challenges Single-Family Home Rental Ban

A renter of homes is fighting the Miami Beach policy prohibiting anyone – including hip-hop stars, Super Bowl athletes, and charities – from renting mansions to throw parties or just hang their hat for a few days.

Miami Beach-based Villazzo filed a lawsuit in Miami-Dade County Circuit Court, alleging the city’s prohibition on single-family home rentals of less than six months is unconstitutional because it undermines the owner’s property rights.

Villazzo, which provides services – from chauffeurs to homes – to the rich and famous, also alleges the city never turned the policy into law, making it unenforceable.

“Despite its failure to have codified this administration’s interpretation, the city continues to enforce it and give it full legal force and effect,” the lawsuit says of the seven-year-old rule. The complaint, filed Sept. 17 in Miami-Dade County Circuit before Judge Kevin Emas, names Villazzo and the 9,900-square-foot waterfront mansion it owns at 10 Palm Ave., on Palm Island, as plaintiffs.

Plaintiff’s attorney John Shubin said city planning director Jorge Gomez authored the “administrative interpretation” as a reaction to complaints from disgruntled neighbors about fly-by-night renters, their “party houses” and “obnoxious behavior.”

Gomez did not return several calls seeking comment.

Jose Smith, Miami Beach’s attorney, said the case was frivolous and the city’s position was legally sound. He would not comment on allegations made in the lawsuit, including the fact that city staff is executing a policy that was not approved by the commission.

In the last decade, Miami has become a chic location for internationally televised events like the Latin Grammys, the MTV Video Music Awards, and the Super Bowl. Post-event parties held in waterfront mansions have gotten as much press as the events themselves.

Some hosts of “hip-hop parties” from a few years ago charged to get in, turning events in single-family neighborhoods into a commercial enterprise – another city no-no, according to Villazzo principal Richard Freeman.

The city’s code enforcement department cited the owner of a single-family home on Pine Tree Drive because of a party sponsored by fashion and perfume company Chanel, said Kevin Tomlinson, an Esslinger Wooten Maxwell broker based in Miami Beach. The city interprets corporate sponsorship of a party as a commercial enterprise, which is prohibited in single-family neighborhoods.

Short-term rentals are a hot topic in vacation destinations such as Key West and Miami Beach, with local officials claiming they spur crime and drive up traffic in residential neighborhoods. The issue has taken on national prominence as property rights organizations, such as the Sacramento, Calif.-based Pacific Legal Foundation, have filed lawsuits against governments across the country – including Brevard County, which challenged prohibitions on vacation rentals.

Freeman characterizes the city policy as an antibiotic, a broad remedy to the issue the city was trying to address.

“The city can’t say no to any hip-hop – that’s discrimination. So, it has to either pass a law or enforce a law or interpret existing laws in a way that would be a broad net that would not be guilty of profiling,” Freeman said. “This is like saying ‘because some people drive recklessly, then we will ban all driving.”

Tomlinson said demand for high-end, short-term home rentals was high in the early 1990’s, but has diminished because of the advent of high-end condo-hotels such as the Setai in South Beach. He said EWM doesn’t rent houses for less than six months because of the prohibition, but it can rent luxury condos in the Setai, Acoya and other buildings if the condominium documents allow it.

He said one house in high demand on North Bay Road has a monthly carrying cost of $40,000 and rents for $80,000 a month.

But Freeman said most owners aren’t in it to make a profit, they want to reduce their carrying costs. He said most, like his Villazzo partner, Christian Jagodzinski, primarily live and spend most of their time in Europe or Latin America.

Renters are at the top of the “wealth pyramid,” seeking homes valued at between $5 and $25 million. Thirty-day leases were typical, but now run to seven months.

Well-heeled renters from the Northeast seek luxurious accommodations without going to a resort. Some celebrities seek out single-family mansions because they want to avoid the paparazzi.

“Clients from Latin America have several children and are afraid of kidnappings and don’t want to go to a hotel,” Freeman said.

omusibay@bizjournals.com | (954) 949-7567

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