Court of Appeals Rejects Short-Term Rental Amendment - Again
Just
months after rejecting an STR Amendment in another case, the Court of
Appeals "doubled down" by ruling a planned community's amendment
prohibiting short-term rentals was "unreasonable" and therefore void.
Following on the heels of its decision earlier this year in Mileview, LLC v. Rsrv. II at Sugar Mt. Condo. Owner’s Ass’n
(2024), the North Carolina Court of Appeals has again found that a
community’s attempt to amend its covenants to regulate short-term
rentals was “unreasonable” under the teachings of the North Carolina
Supreme Court’s decision in Armstrong v. Ledges HOA (2005).
In McDougald v. White Oak Plantation HOA, Inc.,
the community amended its covenants, originally drafted and recorded in
1992, to impose a 90-day minimum rental period for homes the owners are
leasing in their entirety, and a 30-day minimum rental period for
“homestays” (in which the owner remains in the home but rents a portion
of it to a third party).
Although the 1992 covenants contained a common provision prohibiting
“commercial, business, or trade venture, manufacturing establishment,
factory, apartment house, multi-unit dwelling or house or building to be
used for a sanatorium or hospital of any kind,” the Court observed that
the covenants did not “prohibit, limit, or regulate the rental of
residential lots for either short or long-term periods; they contain no
restrictions on the rental of single-family residences.”
Accordingly, the amendment was “unreasonable” and therefore of no
binding effect on the plaintiffs in the case.
As was the Mileview decision, the McDougald
decision is an “unpublished decision,” a term of art to indicate that
the Court does not consider the opinion as having precedential value and
should generally not be cited by lawyers for any given legal
proposition. Standing alone, moreover, the McDougald Court’s analysis is not particularly insightful. Still, when coupled with the Court’s decision in Mileview,
it seems like the momentum in this common dispute is favoring the
owners wishing to use their home for short-term rentals in the face of
amendments to covenants that do not already address leasing in the
community.
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