Right to pursue chosen occupation; PA.CONST. Art. I, Section 1; does the Real Estate Licensing and Registration Act impose unconstitutional burdens on short-term vacation property managers?

Ladd et al. v. Real Estate Commission et al., 187 A.3d 1070 (Pa. Cmwlth. 2018), appeal docket number 33 MAP 2018.

In 2009, Ladd began renting two cottages in the Pocono Mountains of PA and providing short-term vacation property management. These management services included developing an online system to keep the cottages consistently booked when she was away, managing and renting her own properties, accepting requests of other lake property owners and assisting their rentals, marketing properties, responding to inquiries, arranging cleaning services, managing the billing, and informing property owners of tax burdens. In 2017, the PA Department of State, Bureau of Professional and Occupational Affairs (BPOA) informed Ladd that she had been reported for the unlicensed practice of real estate in violation of the Real Estate Licensing and Registration Act (RELRA). Upon discovering that RELRA required Ladd to spend three years working for an established real estate broker, pass two exams, and set up a physical office in PA in order to obtain a real estate broker’s license, she shut down the business. Ladd subsequently sued BPOA and the Real Estate Commission in the original jurisdiction of the Commonwealth Court, seeking a declaration that RELRA, its implementing rules and regulations, and the practices and policies of BPOA and the Commission impose unconstitutional burdens on Ladd’s ability to work as  a short-term manager.

The Commonwealth Court overruled the respondents’ preliminary objections that Ladd failed to exhaust her administrative remedies and  that her claim was not ripe, finding that Arsenal Coal [Company v. Department of Environmental Resources, 477 A.2d 1333 (Pa. 1984)]-style pre-enforcement review was appropriate under the circumstances, but sustained BPOA’s demurrer on the merits, and so dismissed Ladd’s petition for review.  ,

As to Arsenal Coal, the court reasoned that:

We agree with Petitioners that there is a justiciable controversy in the instant matter under the Arsenal Coal exception. Like in Arsenal Coal and its progeny, Ladd faces sanctions for noncompliance with RELRA or the substantial cost and lengthy administrative process if she acquiesces to RELRA’s requirements. The effect of the licensing requirements on Ladd under RELRA, therefore, is sufficiently “direct and immediate” to warrant justiciability in advance of enforcement. [Citation omitted]. Pre-enforcement review of the application of RELRA’s licensing requirements to Ladd in this Court’s original jurisdiction is proper.

Slip Op. at 8-9.

As to the merits of Ladd’s constitutional challenge, the court held that RELRA and its application to Ladd pass muster under  rational basis review, reasoning that:

[W]e agree with Commonwealth Respondents that the licensing scheme under RELRA is constitutional. The primary purpose of RELRA’s licensing requirements is ‘to protect buyers and sellers of real estate, the most expensive item many persons ever buy or sell, from abuse by persons engaged in the business.’ [Citation omitted]. . . . Were this Court to accept Petitioners’ argument, we would effectively upend the legitimacy of any requirement by the Commonwealth for a professional license. State-mandated licensing requirements serve to ensure competence of professionals in given fields. Petitioners do not cite to any case, nor is this Court aware of any, in which a Pennsylvania court has determined that a license requirement becomes unreasonable or oppressive for individuals who provide professional services, like the services Petitioners admit Ladd provided, but in a limited fashion. Moreover, RELRA bears a real and substantial relationship to the interest in protecting from abuse buyers and sellers of real estate and is similar to licensing requirements in other fields. The application of RELRA’s licensing requirements to Ladd, therefore, satisfies the Gambone rational basis test.

Slip Op. at 11-12 (emphasis in original).

Finally, the Commonwealth Court did not reach a determination on the preliminary objection pertaining to Harris’s standing in this matter, because Petitioners were unable to succeed on the constitutional challenge application of RELRA’s licensing requirements to Ladd. Slip Op. at 14.

Ladd filed a direct appeal to the Supreme Court, and the Supreme Court noted probable jurisdiction pursuant to 42 Pa.C.S. § 723(a).

For more information, contact Kevin McKeon or Dennis Whitaker.