Dispute over a restrictive covenant prohibiting short-term property rentals; Interpretation of restrictive covenants; O’Connor v Resort Custom Builders; Eager v Peasley; Commercial vs residential use

The court held that the trial court erred by granting plaintiffs-property owners summary disposition of their claims against defendant-association, and by denying defendant’s counterclaim for summary disposition, in this dispute over short-term rentals. Plaintiffs sued defendants seeking a declaration that they were not prohibited from using the property as short-term residential rentals and that defendant could not prohibit or punish them for doing so. On appeal, the court agreed with defendant that the trial court erred in its application of caselaw to the covenant at issue because summary disposition was proper in its favor. It noted the covenant “expressly provided that the lots and condominiums were limited to ‘residential purposes only.’” It additionally “expressly provided for commercial property, and it was not included within the building of a single-family residence.” Further, plaintiffs “failed to identify a single-family residence that was given permission on the plat to engage in commercial activity; rather, commercial activity was limited to a specific designated area.” The trial court’s “reliance on the failure to expressly prohibit short-term rentals or commercial use did not examine the Covenant as a whole and the intent of the developer as expressed therein.” The court also rejected plaintiffs’ contention that O’Connor and Eager were factually distinguishable and that the trial court correctly determined the covenant did not contain any restriction or prohibition on short-term rentals or commercial use. “The Eager Court’s discussion and application of O’Connor demonstrates that, although it involved timeshare ownership—which is admittedly factually different from short-term rentals—the legal reasoning of O’Connor is directly applicable. The O’Connor Court adopted the trial court’s reasoning in which the focus was on a permanent presence and whether individuals at the property had the right to occupy it whenever they desired and to leave belongings at the property, and the Eager Court reached the same conclusion under the same rationale.” Reversed and remanded for entry of summary disposition for defendant.