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Court of Appeals Rejects HOA STR Amendment Based on "Character of the Community"

   Court finds condo amendment "unreasonable" in light of language in original declaration coupled with fact that short-term renting was "commonplace" in the condominium prior to the amendment.

   A new, albeit unpublished decision by the North Carolina Court of Appeals sheds fresh light on how a court might analyze and resolve the highly contentious issue of a homeowner's association’s attempt to amend its declaration to prohibit short-term rentals of homes within the community

    As “AirBnB”-type short-term rentals (STRs) become more popular in communities bound by restrictions and covenants contained in so-called “declarations,” the covenant communities are striving to prohibit STRs by way of amendments to those declarations.  Neither North Carolina statutes nor case law has definitely provided guidance as to whether or not communities can prohibit current owners from doing STRs by amending their declarations.  (It seems less contentious whether amendments can prohibit future owners in the same communities.)
   In Mileview, LLC v. Rsrv. II at Sugar Mt. Condo. Owner’s Ass’n, 2024 N.C. App. LEXIS 148, the Court of Appeals, like the trial court below, relied entirely on a conservative reading of the North Carolina Supreme Court’s opinion in Armstrong v. Ledges HOA, Inc., 360 N.C. 547 (2006), to hold that the prohibition of short-term rentals at the condominium association was “unreasonable” and therefore void.  In rejecting the amendment, the Court emphasized the importance of a case-by-case determination of the “character of the community” together with a close reading of the original declaration.
   Quoting extensively from Armstrong, the Court of Appeals in Mileview explained that, when examining the permissibility of an amendment to an association's declaration, “we must determine whether the amendment preserves the original nature of the bargain [of the covenanting parties] by remaining faithful to the purpose of the original declaration.  To make this determination, we ascertain the reasonableness of the amendment from the language of the original declaration of covenants, deeds, and plats, together with other objective circumstances surrounding the parties’ bargain, including the nature and character of the community.”  It found the following “hypothetical” in Armstrong compelling: 
   “[I]t may be relevant that a particular geographic area is known for its resort, retirement, or seasonal 'snowbird' population. Thus, it may not be reasonable to retroactively prohibit rentals in a mountain community during ski season or in a beach community during the summer.”
   The challenged amendment prohibited owners from renting their homes for less than 30 days between November and March (presumably high season for skiing).
   Applying that analytical framework to the facts before it, the Court was cognizant of the fact that the condominium was indeed located in a ski community, that the original covenants expressly contemplated renting units generally and that no language in the declaration was consistent with the prohibition of short-term rentals. In practice, finally, short-term renting was “commonplace” in the condominium prior to the amendment. 
   Accordingly, the amendment prohibiting short-term rentals during the ski season was “unreasonable” and therefore void.
   As mentioned above, Mileview is an unpublished decision meaning that it is not intended to have any value as a precedent.  Still, the opinion is instructive as an insight into the analytical framework that a trial court or other appellate panel may apply when confronted with a similar situation.
   And what we learn from Mileview is that the principles set out in the now nearly 20-year-old Armstrong case are alive and well in 2024 and that the “character of the community” prior to the challenged amendment ‒ is the association located in a resort or otherwise special community, and are short-term rentals already “commonplace” in that community? ‒ are clearly among the paramount considerations in any such analysis.



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Philip Roth is a founding shareholder at Marshall, Roth & Gregory, PC. One of the firm's principal litigators, Philip's practice involves myriad issues involving community associations.

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