The growing popularity of short-term rental platforms like Airbnb and VRBO has sparked significant interest among property owners, as well as concern among homeowners’ associations (HOAs) and condominium associations. In Michigan, the regulation of short-term rentals (STRs) within condo and HOA communities has become a hot-button issue, blending property rights, community interests, and local legislation. This blog will dive into the legal and practical considerations surrounding STRs in condos and HOAs in Michigan, exploring how homeowners and associations can navigate this complex landscape.
What Are Short-Term Rentals?
STRs refer to properties leased for a short period—typically less than 30 days—on platforms like Airbnb or VRBO. Property owners often see these rentals as a way to generate extra income, especially in areas popular with tourists. They are also very appealing to property investors. However, while appealing to owners and investors, STRs can be a source of tension in community settings like condominiums and HOAs.
Common concerns include increased traffic, noise disturbances, parking issues, and a general disruption of community norms. Condo associations and HOAs often try to regulate or even ban STRs to maintain the peaceful, long-term nature of their communities.
Statewide Legislation and Local Ordinances
In Michigan, there is no single statewide law governing STRs, but the legal framework for STRs is shaped by a mix of local ordinances, zoning regulations, and association bylaws. The Michigan Legislature has considered bills like House Bill 4722 (2021), which aimed to prohibit local governments from outright banning STRs. There is a pending House Bill 5438, which would create the “Short-Term Rental Regulation Act,” but that House Bills appears to be stalled in committee as of the date this blog is posted. Thus, local governments and community associations still retain significant authority to regulate or restrict STRs, creating a patchwork of rules that vary from one community to the next.
The Role of Condo and HOA Governing Documents
At the heart of how STRs are regulated in condos and HOAs are the governing documents—specifically, the Declaration of Covenants and Restrictions, Master Deed, and Bylaws. These documents lay out the rules and regulations for a community, including how properties can be used.
- Condominiums: Condo associations typically have stricter rules regarding STRs due to the close proximity of units and shared common spaces. The Michigan Condominium Act allows condo associations to impose reasonable regulations on property use, which can include restrictions or outright bans on STRs. Many condo associations amend their bylaws to address STRs explicitly, specifying minimum lease terms (e.g., six months or one year) to discourage transient occupancy.
- HOAs: Homeowners’ associations have more flexibility, as they often govern single-family homes where owners have more autonomy over their properties. However, HOAs can still implement restrictions through their Declaration of Covenants and Restrictions. These rules may range from outright bans on STRs to restrictions like requiring prior approval from the HOA board or mandating minimum rental terms.
Amending Governing Documents
For condo or HOA boards seeking to implement or amend STR restrictions, the process typically involves amending the governing documents. This is no small task, as it usually requires approval by a majority, two-thirds, or sometimes all of the owners.
- Condo Associations: In Michigan, changes to a condo association’s bylaws often require a two-thirds vote of the membership. The Michigan Condominium Act allows associations to amend the bylaws, but any restrictions placed on property owners must be “reasonable.” Courts have ruled that restrictions serving the best interests of the community—such as maintaining safety or preserving property values—are generally permissible.
- HOAs: Amending HOA Declaration of Covenants and Restrictions also requires member approval, typically through a majority vote, but sometimes by 100% of the owners. The specific percentage needed varies based on the governing documents, but it is common to require at least a two-thirds or three-fourths majority.
While amendments can be challenging to pass, once implemented, they are enforceable through fines, suspension of privileges, or even litigation if an owner violates the STR rules.
The Impact of Aldrich v Sugar Springs Prop Owners Ass’n, 345 Mich App 181, 186; 4 NW3d 751 (2023)
In 2023, the Michgan Court of Appeals issued an opinion for publication in Aldrich v Sugar Springs Prop Owners Ass’n, 345 Mich App 181, 186; 4 NW3d 751 (2023). As of right now, this case is binding precedent in Michigan. In Aldrich, the restrictive covenants provided that the use of the properties in the Sugar Spring Development are limited to “single-family residential use.” The Court held that the act of renting property to another for short-term use is a commercial use, even if the activity is residential in nature.
This case demonstrates the legal backing for associations that seek to regulate or ban STRs, provided the rules are clear and reasonable.
Enforcement Challenges
Even when STR restrictions are in place, enforcement can be a challenge. Associations must monitor rental activity, which can be difficult, especially in communities with many units or homes.
Common enforcement mechanisms include:
- Fines: Associations can impose fines on owners who violate the STR rules. These fines are typically outlined in the governing documents and can escalate with repeated violations.
- Suspension of privileges: Some associations may suspend access to community amenities, such as pools, gyms, or clubhouses, for owners who repeatedly rent their properties short-term in violation of the rules.
- Legal action: In extreme cases, associations can take legal action against owners who continue to violate STR restrictions. This can include seeking an injunction or filing a lawsuit to compel compliance.
Finding Balance
The rise of STRs presents a challenge for both property owners and community associations. On one hand, owners see the financial benefit of renting their property short-term, while on the other hand, associations are concerned with preserving the character and security of the community.
For associations, finding a balance is key. This might mean allowing STRs with strict regulations—such as limits on the number of guests, noise restrictions, or mandatory registration with the association—or permitting rentals for a limited number of days per year. In some cases, associations may choose to ban STRs entirely if the majority of owners agree that the practice is detrimental to the community.
Know Before You Buy and Current Owner
If you are considering purchasing a home or a condo or if you already own a home or condo and are considering marketing it for STRs, make sure you read the governing documents to determine if STRs are prohibited. In some cases, it may not be clear and if it is not, please reach out to an attorney prior to purchasing or prior to listing.
Conclusion
STRs in condos and HOAs in Michigan are a complex and evolving issue. While property owners have the right to rent out their units, associations also have the right to regulate how properties are used to protect the interests of the community. The interplay between local ordinances, state laws, and association governing documents creates a dynamic environment where the rules can vary significantly from one community to the next.
Property owners and association boards alike should familiarize themselves with their governing documents and stay up to date on legal developments to ensure they navigate the STR landscape effectively. By working together, communities can find solutions that respect property rights while maintaining the integrity of the neighborhood.
We Can Help
Do you have questions about whether your property or a property you want to purchase is subject to a STR ban? Are you an HOA or condo association that wants to know if your documents prohibit STRs or do you want to amend your documents to ban STRs? We have years of experience with these matters and other issues facing real property owners, condominium associations and HOAs. Please reach out to us at (248) 349-6203 or email us using the contact form.
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