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Michigan Court Says Short-Term Rental Isn’t Residential Use

In Michigan, short-term vacation rentals are a hot button issue. Many communities have little-to-no regulation of this use. The state legislature is currently considering a bill to provide protections for short-term rentals. Many neighbors who don’t participate in the rental business cringe when they discover someone has listed a nearby home on Airbnb or VRBO. In the absence of local regulation, can restrictive covenants be used to limit short-term vacation rentals in Michigan?

In Cherry Home Association v Baker, the Michigan Court of Appeals considered whether short-term vacation rentals were a violation of restrictive covenants which limited property usage to “residential uses.” The court concluded that the types of rentals at issue in the case were not a residential use.

The restriction at issue provided the following:

All land which is subject to this Declaration shall be limited to residential use. No building shall be erected, altered, placed or permitted to remain on any property other than a one family dwelling and private garage or outbuildings incidental thereto.

The defendants co-owned a home within the association and had been advertising it for short-term rentals on various online platforms. The association sent the defendants a letter demanding they cease and desist rental activities. Defendants refused, and the association brought a lawsuit based on a violation of the restrictive covenants.

The trial court found in favor of the association. In its ruling, the trial court emphasized that offering a property for short-term rental on online platforms is for the purposes of “raising money,” not residential purposes. The court also found that the restriction was not waived simply because the association had not enforced it “every time.” Defendants appealed.

On appeal, the court noted previous cases in which the meaning of “residential” in a restrictive covenant was interpreted. The court stated that, in order to conform to the residential use restriction, “the use must have been more than transitory, evidencing an intent to establish a permanence to the occupants’ presence there.” In this case, Defendants had apparently never resided at the property and had used it only as a rental. The court therefore affirmed the trial court and found that the use was not “residential” within the meaning of the restrictive covenants.

This case clearly has implications for other short-term vacation rentals in Michigan. It appears that properties used solely as rentals will not be included as a “residential” use by courts. However, where a property is only occasionally rented out, and used the remainder of the time as a residence is likely a closer question. No doubt, that issue will come before the courts at some point as well.

The attorneys at Dalton & Tomich have extensive experience with property and land use issues. We represent property owners throughout the State of Michigan. If you feel that you may have an issue regarding short-term vacation rentals, please do not hesitate to contact us. We would be happy to speak with you.

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