This case involves a small residential community made up of nine homes, seven of which are owner-occupied for at least six months out of the year. The other two lots are owned by a limited liability company, whose owners reside in England, and a married couple who live in the state of Washington. The community offers a number of amenities that are available for members’ use only, and it historically has permitted property owners to rent their homes to family and friends. The two non-permanent resident property owners engaged a company to short-term rent their properties on their behalf, and they both alleged that their ability to short-term their properties when they were not occupying them was an important factor in their decision to purchase the homes.
The community is governed by a set of restrictive covenants that limit the use of property to “single family residence purposes.” The restrictive covenants define a “single family” as “one or more persons each related to the other by blood, marriage, or adoption, or a group of not more than three persons not all so related together with his or their domestic servants, maintaining a common household in a residence,” and defined a “single family residence” as “any dwelling structure on a lot intended for the shelter and housing of a single family.”
The homeowners association decided that short-term rentals were not permitted under the restrictive covenants and short-term renters were not permitted to use the community’s amenities, and plaintiffs/appellees filed a lawsuit against the two non-permanent resident property owners to enforce the restrictions. The trial court agreed that the deed restrictions prohibited short-term rentals and the defendants/appellants appealed the trial court’s decision to the Michigan Court of Appeals.
The Michigan Court of Appeals upheld the trial court’s decision in an unpublished opinion, relying on prior published decisions from other panels of the Michigan Court of Appeals regarding short-term rentals and restrictive covenants. The opinion laid out a concise and pointed statement of Michigan law regarding short-term rentals and restrictive covenants, stating:
A residential purpose is the one place where a person lives as their permanent home, and, when applying that standard, a summer home cannot constitute a permanent residence when a person’s domicile is in another location. In a residence, a person lives, has a permanent presence, and stores their belongings there, even when they are not at home. A residence reflects permanence and a continuity of presence. Occasional rentals do not alter the character of a subdivision, do not defeat the original purpose of the restrictions, and do not result in a waiver of restrictions. Additionally, short-term rentals violate a restrictive covenant barring commercial use of a property. The act of renting property to another for short-term use presents a commercial use despite the fact that the activity is residential in nature.
The Michigan Court of Appeals then focused on defendants/appellants’ use of their properties, noting that:
[I]t is apparent that defendants did not utilize their property as a single family residence. Defendants, as purchasers of the properties, did not use the properties as a permanent home, and a summer home cannot constitute a permanent residence when their domicile is in another location . . . Defendants did not delineate the extent to which they stored their belongings at their homes. Instead, their use was intermittent and inconsistent with a single family residence; it did not reflect permanence and a continuity of presence generally associated with a single family residence but rather, a vacation home.
On October 12, 2023, defendants/appellants filed an application for leave to appeal this opinion in the Michigan Supreme Court and, on May 29, 2024, the Michigan Supreme Court granted the application, requesting the parties to address whether a restrictive covenant limiting a lot to “single family residence purposes” unambiguously prohibits all short-term residential rentals.
Court: Michigan Supreme Court
Topic: Restrictive Covenants and Short-term Rentals
Brief Author: Kayleigh Long, Esq., and Kevin Hirzel, Esq., CCAL fellow of Hirzel Law, LLC
Filed: January 24, 2025