Can a Homeowners’ Association Ban Short-Term Rentals?
As the popularity of Airbnb, Vrbo, Vacasa, and other websites have grown, disputes between short-term rental (“STR”) owners and their neighbors have caused people to lobby for changes in how STRs are regulated. Many cities and counties have passed laws to ban STRs, but in jurisdictions where the government is not interested in regulated this type of use, homeowners’ associations have attempted to create restrictions and covenants to regulate or ban STRs in particular neighborhoods.
Many neighborhoods in Washington have covenants, conditions and restrictions (“CCRs”) to regulate the use, look and feel of a neighborhood. Often CCRs restrict owners from taking actions or making changes that will negatively affect their neighbors or change the look of the neighborhood, such as a prohibition on raising chickens or a requirement that every house to use cedar shake roofing. A common provision is that the properties are only used for residential use, and not for commercial use. Many CCRs date back to the 1970’s, 80’s and 90’s when the use of personal residences and vacation homes as hotels was a foreign thought to developers. Many CCRs allow a supermajority of owners to amend the CCRs.
Some HOAs have attempted to amend their CCRs to prohibit or regulate STRs. In 2014, the Washington State Supreme Court ruled in a case called Wilkinson v. Chiwawa Communities Association. The holding of that case was that 1) CCRs that prohibit commercial use of residences do not prohibit short-term rental of the residences, 2) the power of the owners to amend the CCRs does not give them the power to create new rules and restrictions.
In Twin W Owners; Ass’n v. Murphy, a 2023 case arising out of a HOA amending their CCRs to phase out STRs in their Douglas County neighborhood, the 3rd District Court of Appeals upheld Chiwawa and deemed the “new” rules about STRs to be void because they were more than just amending existing rules. The association first tried to challenge Chiwawa directly in an effort to have the courts change their previous precedent. The Washington State Supreme Court did not take the case, showing that they did not intend to overturn Chiwawa. The association argued that a prohibition on creating a nuisance would have put owners on notice that regulation of STRs could be enacted later. The court held that the connection between rules preventing nuisance and rules preventing STRs were not sufficiently connected. An owner would not believe that the natural evolution of rules about nuisance would be to morph into rules about STRs. The association also argued that their regulation, which had an effect of phasing out STR uses, was not a complete ban on STRs, like the facts in Chiwawa. The court held that regardless of the nature of the regulation, a majority of owners did not have the authority to create new regulations in the CCRs. The association’s CCRs had a general statement about maintaining and protecting a rural lifestyle, but the court did not find those “ethereal references to rural living” as creating a restriction on how a property owner can lease their property.
The court in Twin W Owners; Ass’n v. Murphy gave a resounding approval of the application of Chiwawa and a warning to HOAs that any regulation of rental activity must be based on existing rules or amendments that are directly tied to the concepts of leasing and rental use. If an HOA cannot bootstrap short term rental activity into commercial activity prohibitions, it will be difficult for a majority of owners in an HOA to create new rules to adapt to the new reality of STR uses of properties.
To learn more about Washington’s CCR’s, please contact Beresford Booth at info@beresfordlaw.com or by phone at (425) 776-4100.