HOA CC&R's written in 1998 now being used to prevent STR's, what to do?

[Paul Sanders]

I purchased a property in an area with an HOA in 2020 in a ski town with the intent to build a home on it to live in during retirement (15 years away) and rent until then using it occasionally when not rented to cover the mortgage. At the time of purchase, there were several STR rental properties active in the neighborhood. Fast forward to today and one of those existing STR's has become a nuisance to the neighborhood and so the HOA board is planning to ban all STR's using what they believe are provisions in the CC&Rs to justify it and have consulted an attorney to validate the legal standing on implementing this ban.

The CC&Rs were written in 1998 (before STR's was even a thing) and have these sections being cited by a couple members of the board as justification for banning the rentals (note there is not anything explicit about STR's in the documents)

Section 1 – Single Family Residential – states in part, “… Lots… shall be used for no purpose other than residential purposes.” The section continues, “… Bed and Breakfast establishments, boarding homes, dormitories or multiple units, or any other similar lodging arrangements are specifically prohibited.”
Section 3 – Commercial Use – states, “…no part of a Lot or Dwelling shall be used or caused to be used or allowed or authorized in any way, directly or indirectly, for any business, commercial, manufacturing, mercantile, storing, vending, or other such nonresidential purposes…”. The exception is the Association may, “…authorize such services on the Common Areas as it deems appropriate for the enjoyment of the Common Areas or for the benefit of the Members.”
Section 5 – Nuisance – states, “No noxious or offensive trade or activity shall be carried on upon any Lot … which may be, or may become an annoyance or nuisance to the neighborhood, or which shall, in any way, interfere with the quiet enjoyment of each of the Owners of his respective Dwelling…”

Feel free to think, "you fool! Never buy in an HOA for just this reason!" but replying to my post with that won't really help but as an example to others.

What I’m looking for is suggestions on how to deal with this.

A couple additional facts that might be helpful, include that the HOA president rented his home out for 10 years (on Airbnb). All the other subdivisions in the city allow for STRs. Only about 30% of the subdivision is built out. When this was discussed at the last HOA meeting 2 weeks ago, only 18 lot owners out of 65 total were represented on the meeting, about half of the attendees were good to allow STR's while the other half were opposed. It takes 2/3rds of the owners to update the CC&R's to either update to allow STR's or to specifically ban them.

For curiosity I asked Co-Pilot about it and got this response:

The language in your CC&Rs stating that “no business or bed and breakfast is allowed” can indeed impact the interpretation of short-term rentals, but it may not be as straightforward as it seems.

Definition of Business: Courts have often ruled that short-term rentals (like those listed on platforms such as Airbnb) do not necessarily qualify as a “business” in the traditional sense. This is especially true if the CC&Rs do not explicitly mention short-term rentals1.

Bed and Breakfast Clause: The mention of “bed and breakfast” typically refers to properties that operate similarly to a commercial establishment, offering lodging and meals. If your CC&Rs prohibit bed and breakfasts, this could imply that any rental activity that resembles a B&B might be restricted. However, short-term rentals where the owner is not providing meals may not fall under this definition.

Legal Precedents: Various court cases have established that renting out a home for short periods does not automatically convert it to a commercial use, especially if the property is still being used primarily for residential purposes.

HOA Enforcement: If the HOA decides to enforce this clause against short-term rentals, it may need to clarify its stance and possibly amend the CC&Rs to explicitly include or exclude short-term rentals to avoid confusion.

In summary, while the CC&Rs may suggest restrictions, the interpretation can vary based on legal precedents and the specific wording of the documents. If you’re concerned about this issue, it might be beneficial to consult with a legal expert familiar with HOA regulations in your area.

Any suggestions?

Do I spend money on an attorney to try and fight this?

Do I give up and sell the property?

Do I try to reach out to the owners and try to gather enough support to amend the CC&Rs to allow STR's?

Do I try to rent it for 8 days or more (MTR) but for the same price as I would a 3 night minimum?

Do I convert to a LTR knowing it won’t cover the mortgage fully?

Do I ignore them until some legal proceedings force me to stop doing it as STR?

[Michael Baum]

Hey @Paul Sanders, so asking Co-Pilot isn't something I would rely on at all. :)

Now, the CC&R's are totally valid and I believe the language is pretty clear on restrictions.

Section 1 says residential uses only. That would mean owner inhabiting or as a long term rental. Any other similar lodging...that pretty much covers STRs.

Section 3 is pretty clear as well. Vacation rentals etc are considered to be a business thus commerical.

Section 5 is dubious. A STR in and of itself isn't a nuisance but bad guests are.

Who did what when really doesn't mean much if the board etc decide to enforce those rules.

So where I would start is simply talking to other owners. Find out everyone's true feelings and where they might end up. That takes time but cost nothing. No reason to swing the biggest stick first. There is no going back from that.

8 days is still a STR just about everywhere. 30 days plus is a LTR or MTR. Under 30, STR. It wouldn't be a way around the regs.

Sell would be something if you would make a decent profit and could find something to replace it.

If you convert it to a LTR, could you absorb the expenses? Appreciation would be more key here, but don't buy rentals based on appreciation.

If you ignore things, then things will just fester with time and things will turn more against you and STRs in general. If you start communicating before things get all legal, then that shows everyone in the neighborhood that you are willing to work within the regs and with the neighbors in order to fix issues.

If you aren't the problem, things are smooth with your STR, then you want to convince them that they should let things continue and penalize the problem properties and not yours.

My 2 cents as per usual.