The central question presented by this case is whether a community association may enforce an amendment to its declaration prohibiting leases shorter than 90-days (about 3-months) against an owner/ member which had been offering its unit for such short-term leases prior to the declaration amendment. Secondarily, because this issue was the subject of a petition for declaratory relief, also at issue is the Court's denial of a motion to dismiss the action, which motion had been based upon the Plaintiff's failure to name all members of the community as parties to the action, as required by the Declaratory Judgment Act, Md. Code, Courts & Jud. Proc. §3-405.
Cove Creek Club, Inc. (association) is a homeowners' association in Queen Anne's County, Maryland, and 107 Terrapin Lane, LLC (homeowner) purchased a home at Cove Creek in January of 2022. Following the purchase, the homeowner began offering the home on the short-term rental market via Airbnb, at this time the association's governing documents did not specifically prohibit short-term rentals. The association's declaration did include the following provision:
The Declaration of Covenants may be amended only upon the assent of two-thirds of all Membership votes eligible to be cast, which votes shall be cast by written ballot in accordance with the procedures specified in the Bylaws. Any such amendment(s) of this Declaration of Covenants shall not become effective until the instrument evidencing such change has been duly recorded.
In the summer of 2022, more than 2/3 of the association's membership approved and recorded a declaration amendment stating that “[no] lot may be leased for a term of less and ninety (90) consecutive days", which would take effective June 1, 2023, and was consistent with Maryland statute. The homeowner filed an action for declaratory judgment, breach of contract, and negligent misrepresentation against the association, as well as a motion for summary judgment to liability, in circuit court. Association then filed a motion to dismiss. In opposing the homeowner's motion for summary judgment, the association made two basic arguments: (1) that a properly executed amendment barring short-term rentals was binding on all owners, even those who had previously engaged in short-term rentals; and (2) short-term rentals constituted a "commercial use," which was prohibited by the governing documents.
The trial court denied the association's motion to dismiss, granted the homeowner's motion for summary judgment as to liability on all county, and issued a declaratory judgment ruling that the homeowner had a right to use their property for short-term rentals under Maryland law, the association improperly took away the right without notice by adopting the amendment to the declaration, and that the amendment cannot be enforced against the homeowner or any other homeowners prior to its effective date of June 1, 2023, and that the association is permanently enjoined from enforcing the amendment or any amendment banning short-term rentals against homeowners prior to June 1, 2023. Association filed a motion for reconsideration, which was denied by the courts and final judgment was entered on October 2, 2023. This appeal followed.
At issue is the basic ability of a community association to govern and the sanctity of properly executed amendments to governing documents. Short-term rentals have been the source of disputes and controversy within community associations nationwide in the last decade. As noted in the brief, associations nationwide have addressed the issue directly. Some, mostly from the western part of the country, have ruled in a manner consistent with the trial court's. Others, mostly those of the eastern part of the country, and in Texas, have ruled that such an amendment binds even those owners who had engaged in short-term rentals before the passage of the amendment. Maryland appellate courts, however, have not directly addressed this question.
Amicus Brief
Court: Appellate Court of Maryland
Topic: Short-term rentals
Brief Author: Erica L. Litovitz, Jackson & Campbell, P.C., Washington D.C.
Filed: February 22, 2024
CAI Amicus Review Panel:
Mr. Robert Diamond, Esq., CCAL, Co-Chair of Amicus Committee (VA)
Mr. Edmund Allcock, Esq., CCAL, Co-Chair of Amicus Committee (MA)
Mr. Augustus Shaw, Esq., CCAL, CCAL BOG Liaison (AZ)
Mr. Steven Sugarman, Esq., CCAL (PA)
Mr. Thomas Ware, Esq., CCAL (CA)
Ms. Trisha Farine, Esq. (TX)
Ms. Kayleigh Long, Esq. (MI)
Mr. David Wilson, Esq. (NC)