If Rentals Not ‘Affirmatively Lawful,’ Court Says They Can Be Considered Unlawful

A Michigan Court of Appeals ruling that short-term rentals are a commercial use of property and not a residential one could harm companies like Airbnb and their customers because local governments can now restrict such rentals through zoning ordinances.

“This is consistent with case law establishing that commercial or business uses of property, generally meaning uses intended to generate a profit, are inconsistent with residential uses of property,” the appeals court wrote in its decision.

A lower court’s ruling in the case was unpublished, but the appeals court issued a published ruling, which means it establishes a precedent in the Michigan court system.

The decision came in a case brought by an Ottawa County woman who sued Spring Lake Township after officials there denied her application to use her home as a short-term rental.

The plaintiff, Susan Reaume, began using her property for this purpose in 2015 when the township had no restrictions on such activities. But in 2016, the township passed an ordinance that prohibited short-term rentals in an R-1 residential zone, and it required owners of all homes used for short-term rentals to register and get a license. A short-term rental was defined as any dwelling that was rented out for 14 or fewer days.

When Reaume applied for a license, she was denied. She appealed to the Township Zoning Board of Appeals and then went through the judicial system.

“The Township’s mere failure to enforce the Ordinance does not confer upon plaintiff a right to continue violating the ordinance,” the appeals court ruled. “Neither does a statement made by any individual without the power to bind the Township, especially where none of the statements clearly express an opinion that short-term rentals in R-1 zones was affirmatively lawful. Accordingly, the trial court properly affirmed the Township Board’s denial of plaintiff’s application for a short-term rental license.”

Jennifer Rigterink, a spokesperson for the Michigan Municipal League, told the news site The Center Square that local governments ought to have the ability to regulate residential zones. The league represents the interests of local governments.

Short-term rentals change the makeup of a community, Rigterink said, because people are moving in and out of the home on a regular basis. That “changes the integrity of that neighborhood.”

Airbnb declined to comment on the ruling.

Legislation currently pending in Michigan would prevent local governments from prohibiting short-term rentals in residential zones.

Rep. Jason Sheppard, R-Temperance, sponsor of House Bill 4046, told members of the Local Government and Municipal Finance Committee that short-term rentals always had been permitted in residential zones. Certain municipalities, he said, are trying to take property rights away from owners that they previously had.

Sheppard’s bill would allow local jurisdictions to impose regulations on short-term rentals, but not a ban.