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RECENT RULING ALLOWS VRBO RENTALS IN NEIGHBORHOOD PROHIBITING “BUSINESS USE” OF THE PROPERTY.

Do your neighborhood or condominium Conditions, Covenants and Restrictions (CCRs) prohibit short-term rentals through AirBnB or Vacation Rental By Owner (VRBO)?  If the governing documents only contain a prohibition against “business use” as opposed to an explicit restriction against short-term rentals, the answer is probably “no.”

In a recent decision from Florida’s First District Court of Appeal, Santa Monica Beach P.O.A. v. Acord, (Fla. 1st DCA, April 28, 2017), the Court addressed whether a “VRBO” short-term home rental violated a prohibition against commercial use of the property.  The restriction at issue read:In that case, the Acords owned multiple properties and listed those properites for short-term rental on the VRBO website.  The Association and filed suit arguing that such use of the Acords’ “short term rentals” violated the Santa Monica Beach subdivision restrictive covenants which stated:

Said land shall be used only for residential purposes, and not more than one detached single family dwelling house and the usual outhouses thereof, such as garage, servants’ house and the like, shall be allowed to occupy any residential lot as platted at any one time; nor shall any building on said land be used as a hospital, tenement house, sanitarium, charitable institution, or for business or manufacturing purposes nor as a dance hall or other place of public assemblage.

The Association argued that because the Acords advertised transient facilities, obtained transient rental licenses in the name “Acord Rental,” and had to collect and remit state sales and local bed taxes that the use of the property ran afoul of the restriction against commercial use.  The trial court ruled against the Association finding finding that the rental use was residential, not a business.

On appeal, the appellate court focused on the plain language of the restrictive covenant and explained that the pertinent issue was the actual use, as opposed to the duration of the rental.  In keeping in line with other Florida decisions, the court reasoned that a rental does not transform a home’s use from residential to either business or commercial. The Acords’ tenants were eating and sleeping in the homes and that use is residential.  Had the tenants used the premises for a commercial enterprise or business, the decision may have turned out differently; however, there were no allegations of business use by the tenants. The Court further explained that if the restrictions had contained a prohibition against short-term rentals, such restrictions would be enforceable against VRBO or AirBnB rentals.

More and more people are using VRBO and AirBnB to rent their properties.  As demonstrated in the case discussed above, a careful review of a property’s CCRs is vital for both those looking to rent their properties and those hoping to curtail such uses.