Property Owner Wins Short-Term Rental Case

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The Wisconsin Court of Appeals recently held that a property owner can use their property for rentals. At issue was whether a restrictive covenant which prohibited commercial use prevented short-term rentals.  The Court held that the use was not prohibited.

What Is A Restrictive Covenant?

Restrictive Covenants are clauses in a deed or lease to real property that limits what the owner of the land or lease can do with the property.  Wisconsin’s public policy favors the free and unrestricted use of property.  Thus, restrictive covenants must be clear and unambiguous to be enforceable.

Short Term Rentals were Not Unambiguously Prohibited?

The property owners in Foreshee rented their property to more than 170 people and received more than $55,000 in rent for the year.  A neighbor filed a lawsuit seeking an injunction contending that the use of the property for rentals had violated the “no commercial activity restriction.”

The Court held that using a property for short-term rental is not unambiguously prohibited. The Court noted that the primary purpose of the property was still residential use as a single-family dwelling.  The court, therefore, concluded that commercial activities were ambiguous (as numerous other state’s courts have similarly concluded) and held that the property owner could continue to use their property for short-term rentals.

Murdock Law’s Take:

As short-term rental lawyers, we applaud this decision.  The term commercial activity was not defined by the restrictive covenant.  Surely any prohibition on activity that results in a profit is unreasonable.  Such a position would ban all rentals of properties. The question of how long a lease must be or how frequently a property can be rented before it would constitute commercial activity is not answered by the restrictive covenant.  Andrea Murdock and Anthony Murdock prevailed in a short-term rental case against Walworth County where the zoning ordinance likewise failed to provide anytime or frequency restrictions.

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