restricting short-term rentals

I am currently on the HOA board in South Bend, IN and we have started to receive complaints about some residents renting out their home 2-3x per week using AirBNB. The people complaining are citing our CCR that states:

VII. House or Dwelling Provisions.
a. Home Occupations. No lot or lots shall be used for any purpose other than as a single-family residence, except that a home
occupation, defined as follows, may be permitted: any use conducted entirely within the residence dwelling and
participated in solely by a member of the immediate family residing in said residence, which use is clearly incidental and
secondary to the use of the dwelling for dwelling purposes and does not change the character thereof and in connection
with which there is: a) No sign or display that will indicate from the exterior that the building is being utilized in whole or
in part for any purpose other than that of a dwelling; b) No commodity sold upon the premises; c) No person is employed
other than a member of the immediate family residing on the premises; and d) No mechanical or electrical equipment is
used; provided that, in no event shall a barber shop, styling salon, beauty parlor, tea room, fortune-telling parlor, animal
hospital, or any form of animal care or treatment such as dog trimming, be construed as a home occupation.

I have had wildly varying advice from different sources, and we are meeting with our HOA attorney this week to discuss. I spoke to a trusted real estate agent who lives in our neighborhood who says "99% sure you can’t restrict AirBNB rights in our neighborhood. You can make Covenants less restrictive, or clarify covenants, but only a government can impose tighter restrictions on property owners than when they took title to their property. An HOA has no right to take away property rights after the fact." but this doesn't make sense to me that we cannot restrict tighter regulations than when they took ownership. that would mean that we would never be able to update the rules!

I later spoke to the developer of the subdivision, and in the CCR's it gives him the ability to amend any of the covenants in the first 20 years of existence (we're currently only 15 years into this 20 years) and he is wholeheartedly on board to change/update the CCR's to restrict short term rentals and suggested working with our HOA attorney to help write the update and then he would sign it, as he does not want property values to go down based on short term rentals.

it would seem that having the developer change the CCR's would be the easiest route, but I'm curious about the realtor's mention of potential violations of Fair Housing laws and saying that we cannot change things to be more restrictive. is this true? Thanks in advance for your replies.

Dirk

DirkH1, you're in another state but I would caution you that a Florida Court of Appeals has ruled that residential use restrictions in a community are not sufficient to curb short-term rental activity. Should your state ever have a case rise to the appellate level, this ruling, even though from a different state and not precedent-setting in your state, might still have an impact on the Indiana courts thinking.

Florida Appellate Court weighs in on short term rentals in private residential communities

Essentially, a lower court ruled that short-term rental use was residential rather than commercial. The preferred way to limit short-term rentals is to amend your CC&Rs with explicit language. Do not think that renting one's home (even frequently for short-term use) constitutes prohibited commercial activity, because at least one state's Court of Appeals has ruled that's not the case.

Following up on this, Kentucky's Court of Appeals recently ruled on a case and concluded that the short-term rentals were in fact commercial. The judges noted that staying a night or two in a place does not constitute "residing" there under any commonly understood meaning of that word. It helped that the owners of the property formed an LLC under which to conduct business, and they pay a transient lodging tax – which helps make it more obvious that this is in fact a business.

See discussion here: https://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/288125/view/topic/Default.aspx

But relying on court cases is a crap shoot. Amending the CC&Rs is absolutely the way to go, and if you have a way to do so promptly, take advantage of it.

There is Indiana case law that said an HOA could issue rental restrictions ( 2008 Indiana Supreme Court case of Villas West II v. McGlothin - tell your attorney to look it up). I suspect the realtor doesn't know about this - it seems many of then don't even know an HOA exists or they spin it in such a way to make the HOA sound like a block club type of thing you're required to join but "don't worry about them, they don't do anything." Until of course, they do something.

And so you have the first moral of the story - go to an attorney if you have legal questions. That said, there are some who do know about HOAs (the treasurer of our association is a realtor). Your friend, maybe not so much (even the realtor association website has information on this)

I've found that property values are subjective - what makes you buy or not in a community may be different from me or someone else, so unless there's a drastic change like putting a power plant or landfill in the area, it's impossible to guarantee that property values will go up, down or sideways.

As for AirBnB's impact on Fair Housing laws, I don't think you can say one way or another yet because HOAs and their relationships with AirBnB are still evolving. One of the reasons the rental restrictions in HOAs has been controversial is because some communities used them to keep certain families out (like people of color or single-parent families who may be more likely to rent than own). With AirBnB, there have been issues with a homeowner agreeing to a rental and then reneging because he/she found the renter was a person of color. I believe this happened to one of Bob Marley's daughters last year or the year before. You can also read this for enlightenment (and there are more stories like this on the web) - https://www.nytimes.com/2016/06/26/travel/airbnb-discrimination-lawsuit.html

It may be easier for the developer to change the CCRs, but keep in mind, that probably won't resolve the issue entirely. If your neighbors are complaining about noise and litter that may be caused by the guests, this may be a matter of enforcing whatever rules you may have about that (owner-occupants are just as messy). Even then, you may need to tread carefully - there may be some people who don't like certain groups of folk anyway and whoop and holler over the ones who happen to be AirBnB renters.

Yup. :-)

Our attorneys have noted that states along the coasts tend to be more progressive about HOA/COA issues. In fact one of the founding partners of the firm we use maintains his credentials to practice law in Florida as well as Ohio - that way he can keep an eye on developments that may end up here.