A homeowners’ association has lost its battle to enforce a restrictive covenant against an owner who began renting his property on a short-term basis to private parties through his own website and third-party rental sites, including Airbnb.

In Ruffed Grouse Ridge Owners’ Association v. Hura, the Pennsylvania Commonwealth Court upheld a trial court's ruling that the language of the restrictive covenant prohibited only commercial or business uses, but did not prohibit short-term rental to private individuals for residential use.

This Commonwealth Court opinion underscores the value of establishing a condominium under the Pennsylvania Uniform Condominium Act or a planned community under the Pennsylvania Uniform Planned Community Act.

Condominiums and planned communities have greater flexibility than recorded restrictive covenants to be modified or create new rules and regulations, to address new or unforeseen issues regarding how community members should be permitted to use their properties.

Background

Ruffed Grouse Ridge is a community in Wayne County, Pennsylvania. All deeds in Ruffed Grouse Ridge contain restrictive covenants prohibiting any property from being used for “commercial purposes,” and limiting use of each property “strictly to private residential purposes only.” The community is also regulated by a nonprofit corporation, Ruffed Grouse Ridge Owners’ Association, which is neither a planned community association nor a condominium association.

After buying a property in 2020, Charles Hura began renting it on a short-term basis through various websites, including Airbnb. In late 2021, the Association voted to prohibit short-term rentals of less than 30 days in the community.

In early 2022, the Association sent Hura a cease-and-desist letter that said the short-term rentals were a violation of the recorded restrictive covenant against commercial use and requiring the property to be used only for private residential purposes. When Hura refused, the litigation began.

Residential Rental Income Is Not ‘Commercial’

The pivotal issue in the litigation was the interpretation of a restrictive covenant in the community’s by-laws, which states that properties “shall not at any time be used for commercial purposes, but the use of the same shall be limited strictly to private residential purposes only.”

The Association argued that short-term rentals constituted a commercial use, thereby violating the covenant. But both the trial court and the Commonwealth Court rejected that argument.

The appellate court said the Association had the burden to show that Hura’s conduct showed a “plain disregard” for the terms of the restrictive covenant. But the nature of the renters’ use – residential activities like sleeping and eating – did not support this claim, the court found, and that the generation of rental income did not alter the residential character of the use.

The court also rejected the Association’s argument that the transient nature of short-term rentals violated the covenant’s intent. The court found no basis in the covenant language to differentiate between short-term and long-term rentals.