State Supreme Court Has New Spin on “Residential Purpose”

We’ve covered several cases over the past couple of years where state courts found that an association’s residential use restriction prohibited short-term rentals. But now the South Dakota Supreme Court has held otherwise. That court concluded that the definition of the term “residential purpose” includes short-term rentals.

“This is a different interpretation than I’ve seen before,” says Dan Artaev, managing partner with Artaev at Law PLLC. “The court seems to be focused on the renters’ use rather than the owners’.”

In 2007, the Wilsons purchased a home in the Shirt Tail Gulch subdivision, intending to use it as a vacation home and eventual retirement home. The Maynards bought an adjacent lot in 2016 and began construction on a three-story home with five master bedrooms, five master bathrooms, and a half-bath. The property could house as many as 14 people, and the Maynards planned to rent the property to short-term guests.

They rented the property nine times in 2018. The following year, they rented it every day between June and September. The property has housed as many as 20 guests at a time. The Maynards charge $500 for weekday stays, $650 for weekends, and up to $1,200 per day during the annual Sturgis Motorcycle Rally.

The Wilsons filed a lawsuit in 2017, asking the court to declare that the Maynards’ use of their property for short-term rental income was prohibited by the subdivision’s covenants. The covenants provide that: “No lot may be used except for residential purposes, which shall include normal home occupations and offices of recognized professions and bed and breakfast uses …”

Learn what the court ruled, and what impact the decision has:

Court Says Short-Term Rentals are “Residential Purpose”

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Matt Humphrey
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