A Pa. law that required an Airbnb manager to get a real estate license is unconstitutional, judge says

A Pennsylvania judge has ruled that the state’s real estate licensing requirements violate the Pennsylvania Constitution when applied to a North Jersey woman who managed short-term vacation rental properties in the Poconos.

Commonwealth Court Judge Stacy Wallace said in a ruling Monday that licensing requirements for real estate salespeople and brokers are “unreasonable,” “unduly oppressive,” and unnecessary in the case of Sally Ladd, who managed vacation properties for a handful of homeowners in the Poconos and listed homes for rent on platforms such as Airbnb and her own website.

Wallace said the Real Estate Licensing and Registration Act’s licensing requirement is an unconstitutional infringement on Ladd’s right to pursue her chosen occupation. She said that in Ladd’s case, the requirements are an unreasonable means of achieving the law’s goal of protecting consumers from fraudulent real estate practices.

Wallace’s court order prohibits the state from requiring Ladd to get a real estate license if she manages rentals of fewer than 30 days. The order applies only to Ladd, although many other people throughout Pennsylvania operate similar businesses managing short-term vacation rentals. Wallace said that whether and how these rental managers should be regulated is up to legislators.

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Monday’s ruling “is a victory for entrepreneurs and common sense,” said Josh Windham, an attorney at the Institute for Justice, a public interest libertarian law firm based in Virginia that represents Ladd.

Now, “other individuals who are operating a business that is substantially similar to the one Sally’s operating should feel confident they can run those businesses without having to get a full-blown real estate license,” Windham said. “We’re talking about people who are helping other people use platforms like Airbnb and Vrbo to rent out properties to vacationers.”

The Department of State and Pennsylvania’s Real Estate Commission, which could appeal the judge’s ruling, had no comment on the decision.

Ladd, a Somerset County resident in her late 60s, shut down her online vacation home property management business in 2017 after the Pennsylvania Department of State said she was under investigation for practicing real estate without a license. At the time, she made the vast majority of her income through her business, which she expanded after she was laid off from a full-time job in digital marketing.

She sued several Department of State agencies, including Pennsylvania’s Real Estate Commission, saying she was being denied the ability to make a living in her chosen occupation. Under the Real Estate Licensing and Registration Act, Ladd would have had to spend hundreds of hours learning material that doesn’t apply to her business, complete an apprenticeship, pass exams, pay thousands of dollars, and open a physical office in Pennsylvania instead of operating out of her New Jersey home.

“I never had any interest in buying or selling property or managing long-term leases,” Ladd said in a statement following Monday’s ruling. “But I saw a need in the marketplace for someone who could help property owners manage their vacation rentals. I liked the work, I was good at it, and I’m overjoyed that this ruling will let me do it again.”

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About a decade ago, Ladd started renting out properties she owned on Arrowhead Lake in Monroe County. In 2014, her company, Pocono Mountain Vacation Properties, began managing rental properties for other homeowners.

She usually managed rentals lasting a couple of days to a couple of weeks, according to court documents. Property owners paid her a commission, which was about $30 to $50 per night per booking, court documents said.

She has since sold the two Poconos properties she owned.

A 2020 opinion by the Pennsylvania Supreme Court said the law governing licensing and registration of real estate agents appeared to be “unduly oppressive” and unnecessary when applied to someone in Ladd’s position. The court reversed a previous Commonwealth Court order that had dismissed Ladd’s lawsuit and sent the case back to the lower court for review.

After the state Supreme Court ruling, Commonwealth Court ordered a hearing, which took place in July.

“When the court looked at the facts,” Windham, Ladd’s attorney, said in a statement, “it became clear that Pennsylvania’s real estate licensing scheme had nothing to do with the sort of short-term vacation rentals that Sally managed and that the state had plenty of ways to protect consumers that were less burdensome than full-blown licensure.”