With the growth of sites like airbnb.com, more and more homeowner’s associations (HOAs) have owners who lease out their homes for days at a time. These short term rentals sometimes come with problems, like increased traffic, noise and damage to the common area.
Some declarations of covenants, conditions and restrictions (CC&R’s) have clauses prohibiting short term rental. Others don’t. But most CC&R’s prohibit “commercial” activities within the neighborhood. This raises the question of whether short term rentals are commercial activity and, therefore, violate the CC&R’s.
Under Idaho law, short term rentals don’t appear to be “commercial” activity. In Pinehaven Planning Bd. v. Brooks, 138 Idaho 826, 829, 70 P.3d 664, 667 (2003), the covenant at issue stated:
No commercial or industrial ventures or business of any type may be maintained or constructed upon any lot…
In Pinehaven, the trial court ruled that the covenants weren’t ambiguous and clearly prohibited short term rentals. The trial court said that when it reviewed the covenants as a whole, given the plain meaning of the terms, “residential” and “dwelling” were meant to include only single family dwellings, permanent dwellings, residential dwellings, and any other place to reside as opposed to a mere rental cabin for transient vacationers.
The trial court explained short term rentals, as a business use, effectively prevent other property owners from enjoying the benefits of the covenants, which, together, establish the residential character of the neighborhood. Transient lodgers, lacking an investment in the neighborhood, were likely unaware of the existence of the covenants, and there was no effective enforcement against them in case of breach.
These arguments make perfect sense. But, the Idaho Supreme Court rejected them. It said that covenants weren’t ambiguous and, according to their plain meaning, clearly allowed the rental of residential property. The covenants restricted the use of residential property to the construction of a single-family residence, which may not be used for commercial, industrial, or business purposes. A residence used a rental was used for a residential. It also said renting the property for a short term (like days) does not change the use of residential to commercial and it didn’t amount to commercial activity.
The rental of a house on a short term basis is not likely to be considered “commercial” activity under Idaho law. Therefore, if an HOA is looking to prohibit short term rentals under a “commercial activity” clause, it would likely lose.
Please Note Addendum (Added April 6, 2021): If a homeowners’ association is considering restricting rentals, it must also comply with Idaho Code Section 55-115. Please see our updated blog post here on how Idaho law prohibits certain rental restrictions.
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