FAYETTEVILLE, Ark. — New details emerged in a court hearing on Aug. 1 over a lawsuit filed against the City of Fayetteville for its rules regarding short-term rentals.
Shelley and Stephen Hause of Round Rock, Texas, filed a complaint against the city on July 14.
According to the lawsuit, the Hauses bought a property in Fayetteville in 2023 to have a place to stay during their trips to visit their daughter, a student at the University of Arkansas who requires regular care due to health concerns.
The couple said they hoped to rent the home out when not in use in order to help offset costs.
"Given the expense of maintaining a second home, plaintiffs selected the property with the intent of renting it out on a short-term basis between their trips to help offset these costs," the complaint says.
However, an ordinance enacted on April 20, 2021, by the Fayetteville City Council applied stronger regulations on residential real estate offered for rent for fewer than thirty days at a time.
The couple claims that at the time of purchasing their home in Fayetteville, they weren't provided with "any indication that their proposed use would be disallowed." They submitted their application for a conditional use permit on Sept. 15, 2023, and the maximum had still not yet been reached, the complaint alleged.
The city approved the couple's application on Sept. 28, but the planning commission denied it on Oct. 23 on city staff's recommendation that "the proposed short-term rental is incompatible with the neighborhood" due to the number of rentals already there.
The Hauses appealed on Nov. 2 but learned later that no members of the city council had agreed to sponsor the appeal, effectively denying it.
"Given their underlying motivation for purchasing the property, the plaintiffs wish to rent it out for fewer than thirty days at a time. However, they have been thwarted by the city's enforcement regime and its arbitrary denial of their application for a conditional use permit to operate a short-term rental," the complaint said.
Court documents show the Hauses are asking the city to pay the damages "for the deprivation of beneficial use" or "the fair market value of said property taken without just compensation by the city."
Attorney Garrett Ham represented the couple throughout the appeals process.
"A big part of our contention is that the individual feelings of planning commission members should not dictate whether or not a conditional use permit is granted. It should be determined according to ascertainable standards by the city," Ham explained.
City Attorney Kit Williams explained that the planning commission had already turned down six other permit applications, seeing potential issues with any more conditional use permits.
"One of the primary ones is compatibility with the neighborhood. That is something that they look at many different factors, are there going to be too many cars, are there just too many of these short-term rentals right there," Williams said.
Another factor that Williams explained in circuit court was the density of short-term rentals.
Two motions were made at Thursday's hearing before Judge Doug Martin. One was that the judge consider a preliminary injunction pausing the City of Fayetteville from enforcing their short-term rental ordinance on the couple.
"Those are pretty difficult to get, typically, oftentimes, even when you win the case at the end, you don't get your injunction in the beginning. But we wanted to give that a try. And obviously we believe that my client's property rights were violated on the Arkansas constitution, and we wanted to put a stop to that as soon as possible," Ham said.
"That kind of motion is supposed to do is kind of freeze everybody in place so that they don't get penalized or hurt because of the length of the litigation, but that's called maintaining the status quo. But the status quo has, in fact, been maintained because their status quo before they filed is they didn't have a conditional use permit to do a short-term rental, and they still don't, so they really didn't need that motion for preliminary injunction, and it could have adversely affected other people that might want to get a short term rental approved," Williams explained.
The other motion made at Thursday's hearing was that the appeal made by the couple was made within a 30-day appeal period. The planning commission had denied their application on Oct. 23, but the couple was notified of their Nov. 2 appeal denial through an email on Nov. 7. Those two dates are why a decision is yet to be made on when that countdown started.
"The city had argued that it was when the planning commission denied us the conditional use permit. Our argument was, it was when the city council refused to hear the appeal," Ham said.
"That's a very important development for this case, and it might mean eventually that none of the claims that they have made in this case would be allowed," Williams said.
Williams said there could be a summary judgment motion keeping this case from going to trial, but that decision is yet to be made by Judge Martin. While he says these typically rule in favor of the city, attorney Ham said the couple is ready to appeal the case to a higher state court. They also have a pending federal court case that will revolve around the US constitution, rather than Arkansas' constitution.
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