This case arises from a dispute regarding the application of restrictive covenants to a short-term rental property.

Restrictive Covenants

Plaintiff, a property owners association, enacted restrictive covenants to govern the lot owners of a subdivision. It asserted that the covenants provided that each lot in the subdivision shall be used only as a single-family private residence, and no business of any sort, other than a home office, shall be conducted from or on any lot.

In April 2021, defendant purchased lot 106 of the subdivision. It was undisputed that defendant advertised it as a short-term rental property on its corporate website.

Breach of Covenant

After receiving information that three lot owners, including defendant, were using their properties contrary to the conditions set forth in the restrictive covenants, plaintiff, through counsel, sent cease-and-desist letters to stop the violations.

Defendant continued to advertise and lease its property for short-term rental. Because plaintiff concluded that defendant used its lot and the home thereon for business purposes, specifically as a rental property, plaintiff filed suit.

Counterclaim

Defendant filed a counterclaim. Defendant alleged that it reviewed the covenants before the lot purchase and determined that the covenants allowed it to lease the property, without restrictions, to a third-party. Defendant sought a declaration that the lease of the property did not constitute a commercial purpose or that leasing the property was exempt from the prohibition of commercial purposes.

Court Decision

The restrictive covenants, when read as a whole, require that leasing or renting comply with the single-family private residence and business restrictions and defendant’s short-term rentals violate those provisions. Although leasing of the premises was permitted, it did not allow a lot owner to deviate from using the premises as a single-family residential home. Advertising the property on the worldwide web for lease to up to 16 people on a year-round basis changed the character of the use from single-family residential into a business operation of the premises. The court granted summary disposition in favor of plaintiff.

Assistance with Real Estate Litigation

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