The County of Monterey's vacation rental ordinance stands but without restrictions on corporate or out-of-state ownership.

The County of Monterey’s vacation rental ordinances approved in 2024 still stand in a tentative ruling issued by Monterey County Supreme Court Judge Thomas Wills on June 3, but the judge struck down wording that prohibited companies or out-of-state individuals or trusts to own and operate properties used as short-term rentals.

Wills agreed with the petitioners, Monterey County Vacation Rental Alliance, that the County’s ordinances were discriminatory against non-resident owners and entities under the Commerce Clause of the U.S. Constitution, based on rulings on cases decided by higher courts.

“In view of the existing higher Court authority, the Court feels it is compelled to find that as enacted, the Ordinance runs afoul of the dormant Commerce Clause,” Wills wrote. “But that does not mean they must fail in entirety.”

It means that while the County’s two ordinances remain in place to regulate STRs in unincorporated areas of the county, one of the key provisions meant to protect the housing stock from being bought up by corporate interests for short-term rentals is gone.

Wills also ruled that MCVRA demonstrated that the ownership requirement violates the equal protection clauses of the federal and state constitutions, because the County failed to show how potential harms caused by short-term rentals would differ for an individual versus a corporation.

The record, he said, “appears to contain little evidence demonstrating that [STR] impacts materially differ depending upon whether title is held individually or through an LLC or corporation.”

The County had already suspended the ownership provisions of the ordinances in December, in response to an amended lawsuit filed by MCVRA in November contending that the ordinances violated the U.S. and California constitutions. County officials worried that they would lose in court and be subject to hefty court penalties. 

Wills “severed” those portions of the ordinances that violated the petitioner's rights but left the rest of the ordinances standing.

The judge struck a sentence pertaining to homestays requiring the property to be the owner’s primary residence but ruled that the other part of the rule on homestays—that the owner must be present during the rental—is not discriminatory and could remain in the ordinance.

“Local and out-of-county property owners alike must reside in the property while it is rented for short term in order to qualify for Homestay STR status,” Wills said.

Under his ruling, individuals or entities that want to operate non-hosted rentals will need to function as limited vacation rentals, one of three categories the County created under the ordinances: homestays, limited vacation rentals and commercial vacation rentals.

There are no limits on homestays or commercial rentals. Limited vacation rentals are allowed up to three times a year.

In its lawsuit, MCVRA argued that the County’s penalty fees exceeded limits imposed by state law, and Wills agreed.

The rest of the two ordinances that took 14 years to finally bring to fruition remain, including a 4-percent cap on commercial vacation rentals and bans on commercial rentals in Carmel Valley’s residential zones, as well as rules surrounding use permits.

A spokesperson for the County said officials have no comment on the lawsuit at this time, "however, we want to remind residents and property owners that the tentative ruling maintains the current status of the vacation rental ordinances, which is that they are lawful and enforceable, with enforcement suspended only to discrete provisions."

In recent months the county has been receiving and processing approximately 60 applications for vacation rentals.

The Carmel Valley Association, which filed its own petition to the court in 2025 in support of the County, called the outcome disappointing in its newsletter on Thursday, June 25, specifically because it would not protect the long term rental market from intrusion by the STR industry.

“CVA’s decision to weigh in was constructive, as Judge Wills’ decision took note of CVA’s argument that potentially problematic aspects of the ordinances were severable from other provisions,” the CVA statement said.

In January, the Monterey County Board of Supervisors responded to the MCVRA amended lawsuit, voting 3-2 in favor of creating a ban on commercial vacation rentals in all residential areas.

County Housing and Community Development staff brought proposed ordinances to the Monterey County Planning Commission in February. Commissioners had questions and concerns and ultimately did not support the ordinances as drafted. There is no timeline to bring amended ordinances back for consideration.