Institute for Justice · May 19, 2020

Harrisburg, Penn.—In a victory for economic liberty in Pennsylvania, this morning the Pennsylvania Supreme Court held that vacation rental manager Sally Ladd’s constitutional lawsuit against the Pennsylvania Real Estate Commission could move forward. Today’s ruling allows Sally to continue challenging requirements in the Real Estate Licensing and Registration Act (RELRA) that she spend three years apprenticing for a fully licensed real estate broker, take hundreds of hours of irrelevant courses and open a brick-and-mortar office in Pennsylvania just to help manage rental properties on sites like Airbnb. The 5-2 decision reversed an earlier decision by the Pennsylvania Commonwealth Court dismissing the case. Sally is challenging the requirements alongside the nonprofit law firm the Institute for Justice (IJ).

More broadly, the decision vindicates the right to earn an honest living enshrined in the Pennsylvania Constitution, reaffirming that laws that burden economic liberty must bear a real-world connection to promoting a legitimate government interest. This means that going forward, Pennsylvanians can leverage the “more restrictive” protections of the state constitution when challenging economic liberty restrictions in court.

“This decision is a triumph for economic liberty in Pennsylvania. Simply put, nobody should have to spend three years working for established licensees and taking irrelevant courses just to earn a living. Requirements like these, the Court correctly recognizes, unconstitutionally burden the right to earn an honest living,” said IJ Attorney Joshua Windham.

Writing for the majority, Justice Kevin Dougherty declared: “We conclude Ladd’s allegations present a colorable claim that RELRA’s requirements, as applied to her self-described services, are unreasonable, unduly oppressive and patently beyond the necessities of the case.”

Sally first started listing and managing vacation rentals on websites like Airbnb in 2013 as she neared retirement, but that all came crashing down in 2017 when the Pennsylvania Department of State informed her she was under investigation for allegedly operating an unlicensed real estate brokerage. To get a license, Sally would have had to spend three years apprenticing with a broker, pass two exams and open up her own physical office in Pennsylvania. Unable to afford those burdens, Sally was forced to shut down. Represented by IJ, she sued, arguing that Pennsylvania’s heavy-handed real estate license violated her right to earn an honest living under the Pennsylvania Constitution.

“It seems like such common sense that short-term rentals aren’t the same as buying and selling properties, which is what the real estate industry and the state’s licensing requirements are largely focused on. It’s just a completely different business. This is a new frontier, and I’m just so thrilled that the Court acknowledged that,” Sally said.

The Court rebuked the state for requiring Sally to open her own brick-and-mortar office in Pennsylvania just to continue managing short-term rentals, since a “requirement that she obtain physical office space in Pennsylvania is tantamount to an excessive fee for entry into a profession.”

IJ Senior Attorney Paul Sherman said, “Today’s decision highlights the importance of judicial engagement. When the government takes away a person’s right to earn a living, it’s not too much to ask that the government have a good reason for doing so. The Court correctly rejected the position of the dissenting justices, which would have reduced judicial review of economic regulations to a rubber stamp.”

The case now returns to the Pennsylvania Commonwealth Court to reconsider the state’s motion to dismiss consistent with the Pennsylvania Supreme Court’s opinion.