AirBnB Property Manager Files Constitutional Challenge To Pennsylvania’s Real Estate Licensing Regime

Sally Ladd has always had a knack for technology. So as she started to near retirement a few years ago, she saw an opportunity to make some extra money by starting her own business helping fellow Pocono Mountain property owners list and manage their vacation rentals on websites like AirBnB and others. After three years of building her business, it all came to an abrupt end when the Pennsylvania Department of State informed her she was under investigation for allegedly operating an unlicensed real estate brokerage.

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Sally Ladd (Photo Credit: Institute for Justice)

 

Rather than risk fines or jail time, Ladd shut down—but she’s not giving up. Today, July 18, 2017, Ladd has teamed up with the Institute for Justice—a national public interest law firm—to file a lawsuit against the Pennsylvania Real Estate Commission arguing the law requiring that she obtain a real estate broker’s license in order to manage vacation rental property—two entirely distinct occupations—violates her constitutional right to earn an honest living.

Under Pennsylvania’s protectionist law, merely clicking an AirBnB submit button on behalf of someone else is illegal. Anyone who wants to help a property owner list a rental online or manage the rental process has to be a state-licensed real estate broker. To obtain that license, Ladd would first have to become a licensed real estate salesperson, which would require taking 60 hours of approved instruction and passing an exam. She would then have to spend three years working as an apprentice under an established broker, take another 240 hours of approved instruction, and pass a second exam before her broker’s license would finally be issued. To top it all off, Ladd would have to open her own brick-and-mortar office in Pennsylvania before—at long last—she could help her first client.

But Ladd wasn’t operating a real estate brokerage. Ladd, who lives in New Jersey and owns two rental properties of her own in the Poconos, helps her clients market their homes, post them online and rent them out to short-term vacationers. Fueled by the rise of the sharing economy in recent years, she built up a small portfolio of happy clients working mostly on her laptop from the comfort of her own home.

“Pennsylvania’s real estate laws do little to help vacation renters, and serve only to preserve brokers’ lucrative monopoly,” says Josh Windham, an attorney at the Institute for Justice, which represents Ladd. “Sally does nothing that resembles operating a full-scale real estate brokerage, but treating her like a broker has forced her out of business. That’s unconstitutional. Pennsylvania courts have decades of precedent protecting the constitutional right to earn an honest living, and Sally’s case gives them the opportunity to carry that tradition forward into the age of the sharing economy. We’re confident that they’ll do just that.”

“I didn’t understand why they would want me to get a broker’s license,” says Ladd. “I don’t have any interest in selling houses, and don’t see why I should have to spend three years working for somebody who does, just to keep managing vacation rentals.”

Ladd’s instinct is completely right. Requiring her to obtain a Pennsylvania real estate broker license does nothing to protect the public from harm. What it does do, however, is protect established brokers from honest competition by giving them a stranglehold on the entire industry—including the emerging short-term vacation rental market.

But economic protectionism has real-world consequences. Ladd loved property management, and at 61 years old, she was hoping to rely on it as a source of stable, home-based income into her golden years. Instead, made to choose between obtaining an onerous license she didn’t need and breaking the law by continuing to manage vacation properties, Ladd felt forced to shut down her business. That’s a choice that no one should have to make.

Fortunately, the Pennsylvania Constitution protects Sally’s basic right to earn an honest living free from the arbitrary and protectionist legislation: laws restricting that right must bear a “real and substantial” relationship to a legitimate government end, and may not impose an “undue burden” on the freedom to pursue a chosen occupation. Because Pennsylvania’s real estate license fails on both fronts when applied to Ladd’s work as a vacation property manager, this case asks Pennsylvania courts to protect her from having to comply with that burdensome and unconstitutional regime.

“What’s happening to Sally is part of a nationwide explosion of occupational licensing laws,” said IJ Senior Attorney Paul Sherman. “Fifty years ago, only five percent of American workers needed a license from the government to work in their chosen occupation, but today that number is nearly 25 percent, and it’s growing.

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