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Monday, August 26, 2019

7th Circuit Upholds Construction Licensing Ordinance

Earlier this week, the Seventh Circuit Court of Appeals upheld an Indiana city's ordinance requiring a residential property owner who wants to make repairs to the residence either to obtain a license or to hire a licensed contractor. Regan v. City of Hammond.

Christopher Regan and the Northwest Indiana Creative Investors Association, Inc. were landlords who own and lease property in the City of Hammond. As property owners, they made periodic repairs and improvements to their properties. Before they could make improvements to their properties, however, they were required by city ordinance to either obtain a license or hire a Hammond-licensed general contractor. The code also makes an exception for persons making repairs or improvements to their own private, single-family residences in which they reside. Because the plaintiffs do not reside in their respective properties, they did not fall under this exception and were required to obtain a license or hire a licensed contractor.

In their lawsuit against the City of Hammond, the plaintiffs argued that the license requirements coupled with the exemption impermissibly burdened property owners who do not reside in the City, thus impeding "interstate commerce." They also argued that all owners of residential property in Hammond are participants and competitors in the national housing market, and that giving an occupant homeowner an exemption from the license requirement would discriminate against the non-occupant homeowner and landowners who are not domiciled in Hammond.

The Seventh Circuit rejected the plaintiffs' arguments, finding that the ordinance does not discriminate based on the where a homeowner lives. In its reasoning, the court explained that commerce clause analyses fall into three categories: laws that expressly discriminate against interstate commerce; laws that, although neutral on their face, bear more heavily on interstate than local commerce; and laws that may have a mild effect on interstate commerce but in practice do not give local firms any competitive advantage over firms located elsewhere. Because the ordinance draws no distinction between landlords that reside in Hammond and those who do not, the court concluded that the ordinance does not impose a disparate burden on non-Hammond landlords.

The court reasoned that the distinction rested on occupancy, which was a rational distinction considering occupants of residential property are more closely affected by property defects and repairs than that of the removed landlord. Furthermore, the court concluded that Hammond has an interest in the safety and habitability of the homes in which its residents reside, and the ordinance is a permissible exercise of its authority to promote that interest.

Although this case dealt with an Indiana municipality, the holding that this type of ordinance does not offend the commerce clause of the U.S. Constitution would also appear to apply to Illinois municipalities as well.

Post Authored by Rain Montero & Julie Tappendorf


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