Regulating short-term rentals in the EU after the Smartflats Opinion: What role for Article 17 of the Fundamental Rights Charter?

From populist stagecraft by politicians cutting through key safes in Vienna to the governmental crackdowns in Spanish tourist hotspots (see here, here, and here), the operation of short-term rentals remains among the more contentious issues across European cities and municipalities that increasingly fail to provide sufficient housing for growing populations and low income households. As already discussed previously on this blog, there are also the particular interests of more traditional accommodation providers in seeing regulators reign in undertakings engaged in short-term rentals under the argument of fair competition.

It is in this context that the Cour d’appel de Bruxelles had asked for a preliminary ruling regarding Belgian authorisation and registration procedures for the operation of tourist accommodation in light of Directive 2006/123/EC (the Services Directive). The underlying dispute involved a Belgian undertaking active in the Brussels real estate sector engaged in short-term rentals that had, so far unsuccessfully, attempted to register a tourist accommodation in a Brussels property.

Regulatory Restriction of Short-term Rentals

On 5 February 2026, Advocate General Sánchez-Bordona handed down his Opinion in Case C-813/24 Smartflats SA v Région de Bruxelles-Capitale. It comes following the previous judgment by the European Court of Justice in Cali Apartments concerning similar issues relating to the French legislation on tourist accommodation. In the meantime, the proposal for a Short-term Accommodation Rental Services Regulation had entered into force which, surprisingly, only features by way of reference in this recent Opinion. Whereas in the Cali Apartments judgment, the Court had demonstrated how far states can go in regulating short-term rentals in light of the Services Directive, if it now follows the Opinion of the Advocate General, it will mark a line across which states may have gone too far (see also a first assessment of the Opinion in this direction here).

The Advocate General finds that any such scheme for the regulation of short-term rentals must be “necessary and proportionate for the purposes” it seeks to protect, in this particular case “the protection of tourists and the urban environment” (Smartflats, para. 93). By further asking the national courts “to assess the necessity and proportionality of that scheme, taking into account its geographical scope, whether it is based on studies and precise data, and its effects on residential needs in the urban areas in which it applies” (ibid.), an endorsement of the Opinion by the Court would give a “chill pill” to the divided fractions regarding short-term rentals. Naturally, states and local authorities can take regulatory measures, but their trajectory cannot follow ideological fervour or political polls but must rather be based on an objective, differentiated appreciation of the relevant empirical data. In this context, the Advocate General also brings into the equation the effective self-regulatory nature of the “collaborative economy” on platforms such as Airbnb, allowing for a feedback-loop of property reviews by the tourists themselves, pushing back on the necessity of states to further regulate for the protection of tourists (Smartflats, paras. 64-66).

Services Directive as a Rule of Law Review Mechanism

In what reads like a reiteration of the standard of fair and equitable treatment under international investment law, reminiscent of the German Constitutional Court in the Nuclear Phase-out decision (1 BvR 2821/11, para. 270), the Advocate General frames Articles 10 and 13 of the Services Directive as a rule of law review mechanism:

First, the Opinion emphasises that Article 10 of the Services Directive sets clear requirements for authorisation and registration procedures. Where red tape merely constitutes an administrative burden, regulation is disproportionate (Smartflats, para. 63). Too broad a discretion of the authorities throughout the process would equally fail the test, as would an underlying legal basis “which lacks clarity, objectivity and transparency” (Smartflats, para. 125).

Second, almost akin to the formal criteria set out by Ron Fuller in their generality, the Opinion gives a crisp and concise reiteration of Article 13(1)-(4) of the Services Directive, namely that any such authorisation procedures:

“– must be clear, made public in advance and be such as to provide the applicants with a guarantee that their application will be dealt with objectively and impartially;

– must not be dissuasive and must not unduly complicate or delay the provision of the service;

– must be easily accessible and any associated costs must be reasonable and proportionate;

– must provide applicants with a guarantee that their application will be processed as quickly as possible and, in any event, within a reasonable period which is fixed and made public in advance.” (Smartflats, para. 127)

The Opinion of the Advocate General concludes that where there is neither a time limit for the relevant authorities to issue a certificate nor an obligation for them to state reasons these criteria are not fulfilled (Smartflats, para. 138). In addition, there must be provided specific means of redress in case of a negative decision (ibid.).

Activating Article 17 Fundamental Rights Charter

It will be interesting to see whether the Court follows this differentiated interpretation of the Cali Apartments judgment and applies it to the questions set before it in the request for a preliminary ruling. But, moving forward, this request also presents an opportunity for the Court to properly activate Article 17 of the Fundamental Rights Charter (FRC). After all, regulation restricting the use of private property naturally limits the exercise of that right, possibly to the level of indirect expropriation. Multiple measures appearing prima facie as mere restrictions can, ultimately, appear as a “creeping expropriation” ex post. Particularly, the Commission has suggested an openness towards recognising the application of fundamental freedoms as a means to protect against regulatory takings (see COM(2018) 547 final, p. 16).

In Commission v. Hungary the European Court of Justice had examined the violation of the free movement of capital against the threshold of Article 17 FRC. Here already, the Court found that there must be genuine pursuit of public interest and that the measure must be appropriate and necessary to attain the relevant objectives (Commission v. Hungary, para. 124). Read together with the Opinion in Smartflats, this could fundamentally strengthen the position of individuals or undertakings in light of wanton governmental action.

Furthermore, even the loss of a single right relating to property – in Commission v. Hungary the loss of the rights of usufruct – can constitute a deprivation in the sense of Article 17 FRC, requiring compensation (Commission v. Hungary, para. 125).

Ensuring Individual Rights and Better Regulation

Considering the backlash against intra-EU investment protection, it would be a welcome development in the case law concerning the protection of freedom of services that the Court not only applies the Services Directive as a rule of law review mechanism as suggested by the Smartflats Opinion but also takes into account the protection of private property. That would finally lead in the direction of a sufficient protection of individual rights holders within the Union, “strengthening common European fundamental rights standards” within the Member States and avoiding “frictions and different value judgments in the interest of effectivity and legal certainty”, as the German Constitutional Court puts the ideal it seeks to aspire towards (2 BvR 206/14, para. 71).

Irrespective, the clarification of the Cali Apartments judgment through the Opinion of the Advocate General in Smartflats is a step in the right direction, laying out a minimum standard for public authorities in regulating short-term rentals. Hanging up laws so high, nobody can read them, may have befitted the tyrants of antiquity, not regulation of EU Member States. After all, while political and social contentions often blind the view from what it takes to achieve a competitive and sustainable common market, the European Commission has committed itself as an institution to “better regulation”, an expectation that EU citizens hold towards all areas of regulation that fall within the application of EU law. It will also have to be seen whether these considerations are properly reflected through the implementation of the European Affordable Housing Plan with its proposed legislative initiative on short-term rentals, seeking to establish “a coherent, data-driven, clear and predictable EU legal framework to enable and support local authorities in taking targeted and proportionate action” (COM(2025) 1025 final, p. 12), ensuring fair competition between undertakings engaged in short-term rentals from one Member State to another.

Conclusion

From an economic perspective, one might question what restricting price or supply can achieve in meeting higher demand for either accommodation or housing. Contrary to the arguments of competitive disadvantage equally put forward against other platform business models by traditionally regulated service providers (see, for example, here and here), this Opinion by the Advocate General points to the possible equality – if not perhaps even higher efficiency – of “collaborative economy” models vis-a-vis top-down regulation. Considering that competition law in its core seeks consumer welfare, undertakings for short-term rentals have the capacity not only to offer a greater choice but also more tailored solutions as opposed to the structured set-up of more traditional accommodation providers. A stronger protection of the individual rights of undertakings, including through the FRC, would at least ensure public authorities consider before regulating.