Dear Colleagues

Florida community associations verses “vacation rental” owners. The battle is now joined!

Hot off the presses, the first appellate court decision between these dueling interests was issued Friday morning!

The decision, exceedingly narrow, is still instructive. Santa Monica Beach P.O.A. v. Acord, Case No. 1D16-4782, (Fla. 1^st DCA, April 28, 2017), addressed a “VRBO” short term home rental. Vacation Rentals By Owner is somewhat similar to AirBnB, at least in terms of the use of a property. Among the distinctions is the relationship between the owner and internet company and very significantly how money is handled between them.

The facts are short and sweet. The Acords listed homes (plural) on the VRBO website and proceeded to rent. The Association, and, interestingly, its board of directors, sought a declaratory judgment that 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.

(Emphasis added by the Court.). The Association asserted that 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. The trial court granted a motion to dismiss with prejudice finding that the rental use was residential, not a business.

The First District Court of Appeal helpfully started its analysis by framing the novel Florida issue:

… whether short-term vacation rentals violate restrictive covenants
requiring property to be used only for residential purposes and
prohibiting its use for business purposes….

Focusing upon the restrictive covenant’s limited text, the Court identified the threshold as the actual use, not the duration of the rental, and implicitly not examining advertising or organization.

Citing with agreement other decisions, the Court reasoned that a rental, even rentals for a profit, in-and-of-itself, 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. Apparently there was no allegation of a business use by the occupant tenants. Thus, the Court distinguished other decisions which found improper uses based upon the frequency of use and types of uses, as well as the difference in covenants, and affirmed the trial court’s dismissal.

Dicta addressed drafting a short term rental restriction. Based upon the premise that leasing restrictions

…are not favored and to be strictly construed in favor of the free and
unrestricted use of real property…

(citations omitted), the Court stated that an “explicit prohibition” was necessary, a restriction would not be implied. (Emphasis in original). Further dicta encouraged “explicit language” where a “question is common and predictable.”

The decision did not address why the individual directors were plaintiffs. Are they now liable as parcel owners for attorney’s fees? The decision did not state the actual duration of the rentals, a day, a week, or otherwise. The decision did not indicate any outward adverse manifestations of the rentals. These matters likely were not relevant in the context of a claim focused on a narrow restriction.

Looking forward, where do associations go from here? The starting point if short term rentals are to be prohibited, the covenants should be restricted. A mere “no business use” limitation is not sufficient. Simply stated, if you desire to prohibit something, then have a covenant that addresses text the issue.

If the covenants are perhaps too brief, then consider amending to add a short term limitation. Consider other covenant tools that would serve a community’s valid goals which tools may include limitations on who can own, how many can own, registration of guests and vehicles. Perhaps limits on what can be advertised in conjunction with other restrictions.

What can associations do in the interim? Surrendering is not an option when there are blights and disturbances. Concentrate on a rental’s negative impacts. If there is too much noise, blight, lack of maintenance, trash, improper parking, or other annoyances, then focus on those manifestations and how they may trigger other use restriction violations.

Consider recommending other avenues of assistance. Are municipal or county codes violated? Call code enforcement! Is there a significant disturbance of the public welfare and peace, or endangerment of minors or others? Call law enforcement! Are taxes properly remitted? Call the Tax Assessor! Is the property shown as homestead? There may be grounds for the Property Appraiser to re-evaluate the Parcel Card!

More formal tools are available: fining, pre-suit mediation/arbitration and court. The tenant may be far away, but no tenant wants to receive formal demands while on vacation.

Of course, each tool or option requires a careful examination of the situation.

Kudos to: Condominium and Planned Development Committee Chair Sklar for the Court’s call out to his February Florida Bar Journal Article: Bill and RPPTL Legislative Co-Chair Steve Mezer for their discussion Friday afternoon at Stetson Law School; and, to Committee Vice-Chair Ken Direktor for coordinating a very practical CLE Friday covering many new topics which you can access through www.RPPTL.org.