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Jayne W. Williams Attorney at Law 510.808.2000 DATE: September 5, 2006 TO: Jesse Baloca FROM: Jayne W. Williams, City Attorney By: Stephanie J. Stuart, Assistant City Attorney RE: Business License Tax Exemption for Related Party Residential Property Rentals (RPRP) ISSUE The Finance Department has proposed the adoption of an ordinance amending Chapter 2, Title 2 of the San Leandro Municipal Code relating to business license exemptions for residential properties rented to family members. Pursuant to the proposed ordinance, family members would be defined as nuclear family (parents, children, siblings and spouses) and extended family that also includes grandparents, aunts, uncles, cousins and foster children. The purpose of the exemption is to provide financial relief to incidental property owners whose primary intention in renting their residential rental property is to help their family members, not to conduct a business of residential property rental. DISCUSSION Implementation and enforcement of an ordinance which creates an exemption to the Business License Tax based upon the above-stated definition of family may prove to be both legally suspect and problematic. While it is common to think of "family" in terms of the blood and marital relationships described above, such definition is not one which is supported by any legal authority. In fact, California Courts have questioned the use of similar definitions of family where such definitions may be used to deny individuals who are not family members certain benefits that family members enjoy. For instance, in Santa Barbara v. Adamson, the California Supreme Court examined a Santa Barbara zoning ordinance which restricted certain residential zoning districts within the city to families, where "family" was defined as "an individual, or two (2) or more persons related by blood, marriage or legal adoption living together as a single housekeeping unit in a dwelling unit... [or] a group of not to exceed five (5) persons, excluding servants, living together as a single housekeeping unit in a dwelling unit."1 The plaintiffs were a group of 12 unrelated individuals who lived together in one dwelling unit and considered themselves a family. The Court invalidated the Santa Barbara ordinance and said that the California constitutional right to privacy required that any incursion into individual privacy be justified by a compelling public interest.2 In addition to being legally suspect, enforcing the ordinance based upon the above.stated definition of family may prove problematic as Finance Department staff members would be charged with the task of verifying that a claimed familial relationship is valid and recognized under the ordinance. 1 City of Santa Barbara v. Adamson 27 Cal.3d 123, 127 (1980). 2 Id. at 131.