Case Notes

Short-Term Vacation Renting Is Not a 'Commercial Use'

In April, the Court of Appeal of Florida, First District, determined in Santa Monica Beach Property Owners Assoc. v. Acord, 2017 Fla. App. LEXIS 5932, that condominium owners who rented their properties to vacationers through the online service VRBO2 had not violated restrictive covenants not to conduct business in their units.

The Santa Monica Beach Property Owners Association sent letters to owners of two properties in 2015 informing these owners that it had “been observed” that they were primarily using their properties as rentals to vacationers, in violation of a covenant. The Association demanded that these owners cease operating their “vacation rental business[es].” Apparently unsatisfied with the owners' responses to its letters, if any, the Association brought an action seeking a declaration that the homeowners were violating the Association's covenants restricting the use of the owners' homes to residential purposes only.

The owners moved to dismiss the complaint for failure to state a cause of action, claiming that their rentals did not violate the covenant. They stated in their brief: “Critically, the [Association] ha[s] not alleged that the properties are being rented for any purpose other than residential use by residential tenants. … [T]he fact that this use is residential in character, and not a commercial or 'business' use, is conclusively established by the fact that [the Association] repeatedly refer[s] to Florida's statute concerning 'public lodging,' lodging being an inherently residential use of a dwelling.”

The action was dismissed and the Association appealed.

Noting that the issue was a novel one for Florida, but also one that had been adjudicated in several other jurisdictions, the court looked to guidance from some of the other courts that have dealt with the question.

The court distinguished the facts of this case from one cited by the Association — Robins v. Walter, 670 So. 2d 971 (Fla. 1st DCA 1995) — which involved a Bed and Breakfast (B&B) business being run in a property restricted to residential use. The B&B owner was found to have violated the covenant even though the renters of rooms within it were using those rooms for the same residential purposes — eating, drinking, sleeping, etc. — as in the present case. This was different, the court concluded here, because the homeowner in Robins had put in place “a number of indicia of a business,” including maintaining a manager to control the guests, posting signs on the property advertising it as a B&B and providing five bedrooms, each with a separate entrance to the outside of the structure.

The unanimous appeals panel therefore affirmed the dismissal of the Association's action.