Short Term Rental Court Case Summaries

The following is a brief summary of cases from around the country. Each case deals with community associations and restrictions on renting. Watts v. Oak Shores Community Assn., 235 Cal. App. 4th 466 (2015)

A common interest development's homeowners association could adopt reasonable rules and impose fees on its members relating to short term rentals of condominium units because its covenants, conditions and restrictions gave its board of directors broad powers to adopt rules for the development, and nothing prohibited the board from adopting rules governing short-term rentals, including fees to help defray the costs such rentals imposed on all owners; That short-term renters cost the association more than long-term renters or permanent residents was not only supported by the evidence, but experience and common sense placed the matter beyond debate. Watts v. Oak Shores Community Assn., 235 Cal. App. 4th 466 (2015)

The Association has a rule stating that the minimum rental period is seven days. The Association's general manager testified that, based on his discussion with Board members, staff and code enforcement officers,  as well as his review of gate and patrol logs, short-term renters cause more problems than owners or their guests. The problems include parking, lack of awareness of the rules, noise and use, and abuse of the facilities. Expert James Smith testified that, unlike guests, who are typically present with the owners, short-term renters are never present with the owner. Guests tend to be less destructive and less burdensome. Short-term renters require greater supervision and increase administrative expenses. A $325 fee is charged to all owners who rent their homes. A 2007 study calculated each rental cost the Association $898.59 per year.

Slaby v. Mt. River Estates Residential Ass'n, 100 So. 3d 569 (2012)

Property owners who engaged in a short-term rental of their cabin were not in violation of a restrictive covenant that provided for "single family residential purposes only," as the covenant did not require only owner occupancy, there was no required duration of occupancy indicated, and the rental was not a commercial use.

Yogman v. Parrott, 325 Ore. 358 (1997)

The ordinary meaning of "residential" does not resolve the issue between the parties. That is so because a "residence" can refer simply to a building used as a dwelling place, or it can refer to a place where one intends to live for a long time. In the former sense, defendants' use is "residential." The people who rent defendants' beach house use it as a temporary [***6]  home, and their purpose is to engage in activities commonly associated with a dwelling place. For example, the record shows that they eat, sleep, bathe, and watch television there. On the other hand, if "residential" refers to an intention to live in a home for more than a temporary sojourn or transient visit, even defendants' own use of the property, as well as their rental use, is not "residential." Because of the different possible meanings of "residential," this portion of the restrictive covenant is ambiguous.

Seagate Condominium Association. v Duffy (1976, Fla App D4) 330 So 2d 484.

A provision of a condominium declaration which barred the leasing of any units except for limited periods of time under exceptional circumstances with the approval of the condominium association was held not to be unreasonable by the court.The court concluded that such a bar was not an unlimited or absolute restraint on alienation and was therefore to be judged in terms of its reasonableness. Noting that the problems of condominium living required a greater degree of control on the rights of individual unit owners than might be tolerated under traditional forms of ownership, the court concluded that the bar against leasing was neither an unlimited nor unreasonable restraint on alienation. The restriction was not unlimited inasmuch as the association could suspend its application in cases of hardship, and the court found it to be reasonable in view of the objective of inhibiting transiency and imparting a degree of continuity of residence.

Breene v Plaza Tower Asso. (1981, ND) 310 NW2d 730,

The court held that an amendment to a condominium declaration which prohibited the leasing of a condominium unit to a nonowner except in exceptional circumstances was invalid as applied to a condominium owner who purchased his unit prior to the adoption of the leasing restriction. Although the court noted that the condominium concept inherently required each owner to give up a certain degree of freedom he might otherwise enjoy in privately owned property, the court stated that such restrictions, to be enforceable, must be within the applicable statutory structure. Reasoning that the statutory provisions relating to condominiums contemplated that recording of the declaration, restrictions, and bylaws would place prospective purchasers and owners on notice as to the restrictions affecting their interest in the property, the court concluded that as a prerequisite to enforceability, the restriction must be recorded prior to the conveyance of any condominium unit. Consequently the leasing restriction adopted after the purchase of the condominium unit was not enforceable as an equitable servitude, the court said, except through the purchaser's acquiescence.

Re 560 Ocean Club, L.P. (1991, BC DC NJ) 133 BR 310.

Condominium association had no authority to restrict leasing of condominium units to certain minimum periods of time during summer months and during other times where restrictions on leasing, to be valid, had to be designated in recorded master lease and could not be inconsistent with state's condominium statute, and in instant case there was no specific reference in master lease to opportunity of association to restrict or limit duration of leases.

Woodside Village Condominium Ass'n, Inc. v. Jahren, 806 So. 2d 452 (Fla. 2002).

Condominium owners were bound by amendment to declaration that restricted leasing a condominium to nine months in a 12-month period, where owners were on notice when they purchased their units that the leasing provisions in the declaration could be changed byamendment, amendment was properly enacted under the amendment provisions of the declaration, and leasing restrictions did not violate any public policy or owners' constitutional rights.

Mullin v. Silvercreek Condominium Owner's Ass'n, Inc., 195 S.W.3d 484 (Mo. Ct. App. S.D. 2006).

Section of the condominium declaration stating that no business, trade, occupation or profession of any kind shall be conducted, maintained or permitted on any part of the property was not intended to restrict the right of any condominium unit owner to rent or lease his condominium unit from time to time.

Adverse Possession and Community Associations

There are several ways to acquire ownership of land.  The most common form, of course, is by purchase.  A buyer and seller enter into an agreement, and at the closing of the transaction title is conveyed to the new owner. But there’s another way to get land—without an agreement and without consent.  It’s called adverse possession.   

In Nickell v. Southview HOA, the owners purchased a lot in the subdivision in 1989. At the edge of their lot, shrubs and trees marked what they thought was the boundary of their lot. For many years the owners maintained the vegetation and even installed a sprinkler system.  Years later an adjacent owner surveyed their property. The surveyor found that the shrubs and tress maintained by the owners was actually on the HOA’s property.  The Washington Court of Appeals found that the owners had present sufficient evidence to establish a claim of adverse possession.

In a Maryland case, the court also found that owners in a subdivision acquired common property through adverse possession.  The HOA was created in 1959.  Much of the draw to the community was beachfront access.  The HOA common property included the strip of land between the water and the subdivision, and all owners were authorized to use the area.

The lots of most of the beachfront lots were marked and bounded by trees and shrubs. However, after a hurricane most of the vegetation was destroyed.  Several owners then built bulkheads, or retaining walls on the front of their property.  However, the bulkheads were actually constructed on the HOA’s common property.  The court found that the owners had title and ownership of the common property where the bulkheads were built.

Here’s what adverse possession requires:

1. Actual use or possession

2. Open and notorious

3. Exclusive

4. Hostile

5. Continuous

6. At least 10 years

If your association comes across an adverse possession claim, consider your options.  The association may demand removal of a fence or other improvement built on common property. If the owner refuses, the association would file a "quiet title" lawsuit.

The association could possibly enter into an easement agreement with the owner. The owner would be obligated to maintain the area and assume all liability for their use.  Another option is selling the portion of the common property which an owner claims they adversely possess.  These options often required a vote of the entire ownership.

In any event, consult qualified legal counsel to discuss the association's legal rights and options.

2015 Case Law Review

Lawyers depend on case law to provide advice to homeowner and condominium associations.  While cases in other states are not binding, they often provide guidance to lawyers and board members. The following is a short summary of cases from around the United States involving community associations.

Filmore LLLP v. Unit Owners Association of Centre Pointe Condominium - Washington

The association attempted to adopt a cap on the number of rentals in the community. While the governing documents stated that only a majority of owners were required to vote in favor of the amendment, the Court imposed a higher approval threshold of a supermajority of all owners.

Acorn Ponds Homeowners Association vs. DeBenedittis - New York

Pedestrian filed action against homeowners association and association's snow removal contractor to recover damages for personal injuries pedestrian allegedly sustained when he slipped and fell on a patch of ice on property owned by association. The court found that the snow removal contractor did not substantially contribute to the injuries.

Neufairfield Homeowners Association v. Wagner - Illinois

The court in this case determined that two daycare businesses did not create sufficient traffic to violate a use restriction prohibiting frequent commercial traffic in the subdivision.

100 Harborview Drive Condominium Council of Unit Owners v. Clark - Maryland

An owner sued the association after the board refused to provide copies of it’s legal invoices. Under the law, communications between an association and it’s legal counsel are considered privileged. The court denied the owner’s request for copies of those documents.

Bluff Point Townhouse Owners Ass'n, Inc. v. Kapsokefalos - New York

An owner within the community claimed that the association did not have the authority to levy assessments. The Court found that the governing documents provided the authority to levy assessments and that the board had followed the proper procedures to levy and collect monthly assessments.

Arbors at Sugar Creek HOA vs. Jefferson Bank - Missouri

Owners of five lots in 18-lot subdivision brought action against lender that acquired from developer, through foreclosure, the 13 unsold lots and against contractor that agreed to build on the unsold lots seeking, among other things, declaratory and injunctive relief relating to management of the subdivision. The court made the following rulings:

1 lender could establish a successor homeowners association for the subdivision;

2 lender did not violate its duty of good faith and fair dealing by amending subdivision's declaration of covenants so as to remove residency requirement for members of association's board;

3 sufficient evidence supported trial court's finding that board acted reasonably and in good faith in approving building plans for one of the unsold lots;

4 lender was not entitled to recover from the lot owners the expenses it incurred to maintain the subdivision; and

5 lot owners could not be held liable to lender for abuse of process or slander of title.

Belleville vs. Malvern Hunt Homeowners Association - Pennsylvania

The developer of the community recorded CC&Rs before starting construction of the homes. During construction, the developer decided that a portion of the community would receive certain services (snow removal, landscaping) and that other portions would not receive those services.  Shortly after that decision, an owner purchased a lot. The developer gave the owner an unrecorded and unsigned amendment to the CC&Rs. The Court held that without recording the amendment, it was not valid or binding on the owner.

Houston v. Wilson Mesa Ranch Homeowners Association, Inc - Colorado

An owner in the community began leasing his home using VRBO (a short-term vacation rental website). The association took the position that frequent short-term rentals violated the commercial use provision in the CC&Rs.  The Court found that even though the owner was making a profit, the rentals merely provided a place for others to eat and sleep—therefore the use was “residential” and not commercial.

Gonon v. Community Management Services, Inc. - Indiana

Law firms or agencies which handle the collection of assessments are subject to the Federal Fair Debt Collections Practices Act. In this case, an owner sued the association’s management company for violations of the Act. The Court found that because the owner was not delinquent at the time the association hired the management company, the management company was not subject to the Act.

Walker I Investments, LLC v. Sunpeak Association, Inc. - Utah

In this case the Court found under the state’s nonprofit corporation law, the homeowners association was not obligated to provide an owner with the email addresses or phone numbers of the other owners in the community.

Deschutes County Woman Sues Neighbors Over Felled Trees

Interesting case with creative legal theories.  Click here to read: http://www.bendbulletin.com/localstate/3449691-151/woman-sues-neighbors-for-damages-over-felled-juniper?referrer=bullet2#

Ventana Partners, LLC v. Lanoue Dev., LLC (Or. App., 2014)

For some interesting reading on a planned community association's authority or ability to convey common property, take a look at Ventana Partners, LLC v. Lanoue Dev., LLC (Or. App., 2014). Especially interesting is the section of the case which reads:

"Common property" includes property "designated in the declaration for transfer to the association." ORS 94.550(7) (2005). Accordingly, ORS 94.665(1) allowed the MOA to transfer common property, even if it had not yet been transferred from the declarant to the association.

Finally, plaintiffs contend that the amendment to the declaration was ineffective to convey title to Lot 1 to LaNoue because "the recorded [amendment to the declaration] was not fully executed" because the signature line for the City of Portland was not filled in. However, a signature from the city is not required on an instrument conveying title to common property under ORS 94.665(1). See ORS 94.665(6) (formal requirements for an instrument conveying common property do not include signature from the city). And, as noted above, the city gave the approval required by the declaration.

Thus, the trial court correctly construed ORS 94.665(1) in accordance with the plain meaning of its text. That provision allowed the MOA to convey the townhouse owners' interests in the common areas in Lot 1 to LaNoue after receiving consent from 80 percent of the townhouse owners.

Click here to read the full case: Ventana Partners, LLC v. Lanoue