What happened?
In February, the Court of Appeals of Kentucky ruled that using a property for a short-term rental did not classify as residential use and violated a restriction limiting the property’s use to a private summer residence.
The homeowners in the case (The Hoffman Revocable Trust v. Marshall) purchased a home in a community association, which had restrictions, reservations, and covenants on how the property could and could not be used, including that the property “shall be used only for the purpose of constructing and using a private summer residence or for other private recreation purposes; provided, the occupancy of a residence for private residential purposes at times other than the summer season would not be deemed a breach of the occupancy restriction.”
After purchase, the homeowners placed the home on vacation rental websites, directly violating the association’s covenants.
What we Think
The Kentucky court’s ruling aligns with CAI’s public policy on short-term rentals.
CAI supports short-term rental regulations that are consistent with the association’s governing documents, federal, state, and local laws, and that protect the ability of homeowners to manage their affairs.
Short-term rentals are not intuitively harmonious with the community association housing model, which focuses on bringing people together, strengthening neighborhood bonds, and promoting a sense of community and belonging. Volunteer homeowners, who are elected by their neighbors to set policies and oversee association operations, and to act in the best interest of the community, are the center of community association governance.
Why it Matters
CAI opposes governmental regulations that intrude on a board of directors’ autonomy to serve the best interest of the association. Short-term rental regulation should not impair association contractual covenants and take decision-making authority away from association homeowners. This degrades the fundamental tenets of community association governance, which is based on private contractual obligations of the community’s homeowners.
It’s important for a community association to have very clear rules when it comes to subletting and short-term rentals. In addition, Directors and Officers insurance can protect associations against homeowner claims and lawsuits which have become a more frequent occurrence in recent years.
Want to Learn More?
Learn more about CAI’s short-term rental public policy here: https://www.caionline.org/Advocacy/PublicPolicies/Pages/STR.aspx
The case in Kentucky was highlighted in the April issue of CAI’s Community Association Law Reporter, a monthly, members-only newsletter that reviews key court decisions impacting community associations. Cases deal with developer liability, powers of the association, use restrictions, covenant enforcement, assessment collection, and more.
In addition, the College of Community Association Lawyers (CCAL) prepares a case law update annually. Summaries of these cases are available at https://www.caionline.org/Advocacy/LegalArena/Pages/caselaw.aspx
Source: CAI
