Daily Development for Wednesday, June 27, 2007
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

SERVITUDES; RESTRICTIVE COVENANTS; USE RESTRICTIONS; RESIDENTIAL ONLY: A restriction that property shall be used for residential purposes does not restrict the use of the property for daily and weekly rentals. 

Scott v. Walker,   2007 Westlaw 1651138  (Va. 6/8/07)

Scotts and Walkers owned adjacent properties in a subdivision.  Both lots were subject to the same recorded restrictive covenant:

LAND USE AND BUILDING TYPE: No lot shall be used except for residential purposes. No building shall be erected, altered, placed or permitted to remain on any lot other than one detached single-family dwelling not to exceed two and one-half (2 1/2) stories in height, a private garage for not more than two cars, boat dock and boat houses. No lot or lots in said subdivision can be re-subdivided except a lot may be subdivided providing each part is allotted to an adjoining lot.

Scotts began using the residence on their property for nightly and weekly rentals, and Walkers objected.  This litigation ensued, and the trial court enjoined Scotts activities, finding it in violation of the residential purposes restriction.

The Supreme Court of Virginia reversed, holding that the application of the residential only language to this type of use is sufficiently ambiguous as to invoke the principle that ambiguous land use restrictions ought to be construed in favor of free use of the land.

The court cited a number of cases from other jurisdictions and from Virginia that were very close to this case, including two former DIRT DDs: Compare Yogman v. Parrott, 937 P.2d 1019, 1023 (Or. 1997) (the DIRT DD for 9/9/970  (short-term rental of lot did not violate restrictive covenant requiring that the lot "be used exclusively for residential purposes"), with O'Connor v. Resort Custom Builders, Inc., 591 N.W.2d 216, 220321 (Mich. 1999) (the DIRT DD for 3/3/99) (interval ownership in a home violated restrictive covenant prohibiting use of a lot "except for residential purposes"). Readers can find both collected on the DIRT Website: www.umkc.edu/dirt  

The court also had before it some interesting Virginia precedent.  One case found  that simply renting rooms, without providing board, was a residential use in compliance with a the applicable residential only restriction. Another found that a boarding house was a business and violated a covenant requiring residential use only, even though the owner and her family lived in the kitchen.  Compare:  Persson Mokvist v. Anderson, 942 P.2d 1154 (Alaska 1997) (DIRT DD for 3/26/98).(Bed and breakfast usage permitted under "residential use"where restrictive covenant limits property to "residential use").

The court found that the duration of the residential stay ought not to be a factor.  If the use was essentially residential in character, and did not entail the operation of some other business, then the covenant could not be stretched to prohibit such use, in light of the general Virginia preference for construing covenants in favor of free use of the land. 

Under our case law, a restrictive covenant of "substantial doubt or ambiguity" must be interpreted "in favor of the free use of property and against restrictions." . . . If the restrictive covenant at issue was intended to prevent the short-term rental of lots in the Harbor Village Subdivision, "it would have been easy to say so, and it would not likely have been left to the uncertainty of inference." Id. In the absence of language expressly or by necessary implication prohibiting nightly or weekly rentals, we find that the Scotts' short-term rental of their property did not run afoul of the restrictive covenant at issue. The Walkers did not carry their burden to establish that the terms of the restrictive covenant prohibited the activity to which they objected.  (Citations omitted)

Comment 1: In Yogman v. Parrott, supra,  the Oregon Supreme Court suggested that a servitude restriction limiting the use of property "exclusively for residential purposes" was inherently ambiguous on the issue of whether short term rentals were permitted. The Virginia court relied extensively on the analysis in Yogman, but neglected to note that, in addition,  the use restriction in Yogman stated that  "no commercial enterprise shall be constructed or permitted on the property" and the court found that this, also, was too ambiguous t apply to short term rentals. 

Also see Mullin v. Silvercreek Condo., Owner's Ass'n, 195 S.W.3d 484 (Mo. Ct. App. 2006) (nightly rentals did not violate residential restriction.) Catawba Orchard Beach Assn. v. Gasinger, 665 N.E.2d 584 (Ohio App. 1996) (DIRT DD for 2/15/98) (short term rentals do not violate " private residences" restriction in servitudes, but case remanded for determination of whether short term tenants' use of subdivision's beach and recreational amenities violated requirement that amenities be used for "noncommercial purposes." 

Comment 2: In sum, Virginia is in line with growing authority on the issue of short term rentals.  Note that the Virginia precedent concerning boarding houses involved a use that was a bit more of a business than a simple bed and breakfast.  But the line is a bit squiggly with regard to that activity, and it is difficult to know where Virginia would come out. 

For another interesting residential use case, see Turudic v. Susan Estates Homeowners Association, 31 P.3d 465 (Or.App. 2001). (the DIRT DD for 2/18/05) (Keeping of pet cougars was a "residential use" within meaning of covenants; and discretionary authority of association review for construction of cougar pen was limited to aesthetic or design requirement).  The editor wonders whether the Virginia court would have come out the same way as Oregon on that issue.

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