SAN FRANCISCO (CN) - A federal judge Friday raised concerns about vacation rental marketplace HomeAway's challenge to a San Francisco ordinance regulating short-term rentals in the city.
The company sued the city in November over the so-called "Airbnb law," which legalizes and places restrictions on rentals in private homes.
HomeAway claimed that the law, crafted with the help of its competitor Airbnb, discriminates against nonresidents who want to rent homes they own.
The law requires hosts to be permanent San Francisco residents, but many of HomeAway's users list second homes and do not live in the city year-round.
HomeAway's websites include VacationRentals.com and VRBO.com.
HomeAway claims the law will create a local monopoly for Airbnb, because the regulations are tailored to its competitor's business model.
In a dismissal hearing on Friday, U.S. District Judge Joseph Spero expressed doubts about whether the company has standing to sue.
HomeAway provides only "ancillary services" for people who want to rent out properties, the judge said.
"The ordinance itself doesn't restrict the delivery of those ancillary services, it rather regulates a transaction that is entered into by the customers of HomeAway with others, not with HomeAway itself," Spero said. Those people could file their own lawsuit, he said.
Spero also questioned HomeAway's argument on hotel taxes, known as transient occupancy taxes.
HomeAway said in its complaint that the ordinance imposes a new obligation for companies like it to collect taxes.
But attorneys for San Francisco argued in a dismissal motion that HomeAway "misread" the ordinance, and that the law does not create any new rules - it just requires companies to comply with what's already in the city tax code.
"It seems to me that one way or another the complaint would be dismissed as to the occupancy tax, as there's no injury as a result of the ordinance," Spero said. "The ordinance doesn't actually do anything ... in terms of increasing or decreasing the obligation of the plaintiff to collect the occupancy tax."
HomeAway was represented by Rex Heinke of Akin Gump Strauss Hauer & Feld.
San Francisco may not be the last fighting ground for the vacation rental company. HomeAway co-founder Carl Shepherd recently threatened legal action against New York, if the city pursues a law similar to the San Francisco law.
Contact Arvin Temkar at [email protected]