A growing number of homeowners have created a new source of income by listing their property on Airbnb. However, some of these individuals have also faced pushback from their neighbors and communities. In a recent New York case, the issue ended up in litigation with the Court called upon to decide whether Airbnb rentals violated a restrictive covenant that existed in the parties’ subdivision. The case is a reminder for those for and against Airbnbs to carefully check whether there are prohibitions on the use of the property.
In West Mountain Assets LLC v. Dobkowski, the Plaintiff offered its single-family residence as a short-term rental property through Airbnb. The Plaintiff sued the Defendant, a neighbor who objected to the Airbnb, claiming that the Defendant interfered with the Plaintiff’s use and enjoyment of its property. The Defendant filed a counterclaim seeking a declaratory judgment that the Plaintiff’s use of its parcel for short-term Airbnb rentals violated the restrictive covenant requiring that all parcels in their subdivision, including Plaintiff’s property, be used as a single-family residence and that the Plaintiff be enjoined from making such short-term rentals.
The lower court found in favor of the Defendant and the Appellate Division, Third Department agreed. The Court found that the Defendant met its burden of proof through clear and convincing evidence showing the restrictive covenant applied and prohibited use of the property as an Airbnb.
The Court acknowledged that the law favors the free and unencumbered use of real property. However, the chain of title for both the Plaintiff and Defendant contained a restriction stating that “the land conveyed herein shall be used only for single-family residential purposes.”
The Court further determined that although the deed restriction allows homeowners to rent their home, it unambiguously states that all properties within the subdivision must be used only for residential purposes. In analyzing the definition of a residence, the Court determined that lodgers in short-term rental properties do not “live on” the premises but instead are only there for a short time and usually live elsewhere. The Court found that the Plaintiff’s use of its parcel for short-term rentals did not fit the definition of a residence and that the Defendant met its burden of establishing the applicability of the restriction by clear and convincing evidence.
As such, the burden of proof then shifted to the Plaintiff to raise a triable issue of fact in opposition to Defendant’s counterclaim. The Court determined that the Plaintiff failed to do so and upheld the lower court’s decision to enforce the restrictive covenant.
It is important when purchasing real property to have a title search performed so that any covenants, easements or liens can be reviewed by your attorney. Please contact one of our real estate attorneys if you have similar issues or questions regarding real property that you currently own or are about to purchase.