Law School Case Brief
Houston v. Wilson Mesa Ranch Homeowners Ass'n. - 2015 COA 113, 360 P.3d 255 (Colo. Ct. App. 2015)
For the purpose of interpreting restrictive covenants, "residential" is defined as used, serving, or designed as a residence or for occupation by residents. "Residence" means the act or fact of abiding or dwelling in a place for some time; an act of making one's home in a place. "Residential use," without more, is consistently interpreted as meaning that the use of the property is for living purposes, or a dwelling, or a place of abode. Although "residential" unambiguously refers to use for living purposes, courts recognize ambiguity in the term in cases involving short-term rentals or other situations where those residing in the property are living there only temporarily, not permanently. As long as property is used for living purposes, it does not cease being "residential" simply because such use is transitory rather than permanent. Mere temporary or short-term use of a residence does not preclude that use from being "residential."
Wilson Mesa Ranch was a residential subdivision governed by restrictive covenants, one of which prohibited the use of the residences for commercial purpose. Plaintiff David Houston owned a home in the subdivision. Despite notices from defendant Wilson Mesa Ranch Homeowners Association, Inc. ("Association"), Houston rented out his subdivision property for short-term vacation rentals. When the Association learned about the rentals, it amended its rules to prohibit rentals for periods of less than 30 days without prior approval; violations were punishable by $500 fines. Houston objected to the new rule; the Association countered that short-term rentals were a commercial use that was already prohibited under the covenants, which the new rule simply clarified. The Association fined Houston for subsequently taking rental reservations. Houston then filed an action in Colorado state court seeking a declaration that the Association could not bar the short-term rental of his property based on the commercial use prohibition in the covenants. The Association filed a counterclaim for a declaration that the covenants barred rentals of less than 30 days. The district court entered judgment on the pleadings in favor of Houston and dismissed the Association's counterclaims. The Association appealed.
Did the district court err when it ruled that Houston did not violate the Association's restrictive covenants?
The appellate court affirmed the district court's judgment. As to the Association's requirement that subdivision tracts be "residential," the court ruled that Houston's short-term vacation rentals were not prohibited by the restrictive covenants because the renters did not use the residence for anything other than ordinary living purposes; short-term rentals were not precluded as inconsistent with "residential." As to the Association's prohibition against commercial use, the court agreed with decisions from other courts holding that prohibitions against commercial or business uses unambiguously did not bar short-term vacation rentals of residences where a renter used the premises for residential activities such as eating and sleeping and not for commercial activities such as running a business. Thus, the court concluded that short-term vacation rentals such as Houston's were not barred by the commercial use prohibition in the Association's covenants.
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