Chattanooga short-term vacation rental owners drop lawsuit against city

Staff photo by Matt Hamilton / Kendall Petersen holds a variety of pamphlets advertising various Chattanooga area attractions in the living room at a vacation rental property on Riverfront Parkway on March 6.
Staff photo by Matt Hamilton / Kendall Petersen holds a variety of pamphlets advertising various Chattanooga area attractions in the living room at a vacation rental property on Riverfront Parkway on March 6.

A group of private property owners is dropping a lawsuit it filed against the city of Chattanooga, which sought to challenge new rules about short-term vacation rentals.

On Jan. 31, lawyers for the Greater Chattanooga Coalition for Private Property Rights filed a stipulation for voluntary dismissal in federal court of the Eastern District of Tennessee. This comes about a month after the group's attorneys, Bennett Wills and Brian Boyd, filed a motion asking to withdraw from the case, citing a "substantial financial burden."

(READ MORE: Lawyers for vacation rental owners withdraw from lawsuit against city of Chattanooga)

Brad Wardlaw, a member of the group, said in late December the coalition wasn't able to keep up with the funding to sustain the lawsuit and would likely dismiss its complaint against the city. An online fundraiser the coalition created March 1 raised $47,325 for the legal effort out of a $200,000 goal.

The coalition was challenging new rental rules the Chattanooga City Council approved in May, which came after a more than yearlong pause on certain permits.

The city's new ordinance differentiates between absentee rentals, properties where the operator doesn't live on-site, and homestay rentals, properties where the vacation rental operator does live. Absentee rentals are now only allowed in certain commercial zones, while homestay rentals are allowed in any of those zones plus residential areas within a preexisting city overlay.

The new ordinance also raised the application and annual renewal fees to $250 for homestay rentals and $500 for absentees. They were both originally $150.

The group's attorneys have argued the new rules violate provisions of the U.S. and state constitutions and were overbroad, stating they could limit tourism.

In the lawsuit, the attorneys alleged the ordinance violated the constitutional rights of vacation rental owners by making a distinction between homestay and absentee rentals and limiting certain units to commercial zones.

(READ MORE: New rules would clamp down on short-term vacation rentals in Chattanooga neighborhoods)

The complaint also claims the ordinance discriminates against applicants seeking a permit for an absentee rental because the city charges a higher application fee and has more inspection requirements in order to qualify for a certificate.

In a response, the city denied the coalition's claims, demanding stricter proof. The city attorney's office has said officials were trying to enact common sense ground rules about short-term vacation rentals for everyone, including landlords.

Staff Writer Ben Sessoms contributed to this report.

Contact David Floyd at dfloyd@timesfreepress.com or 423-757-6249.