Association Insights Legal

The Challenges of Building and Litigating a Short-Term Rental Covenants Enforcement Case

Without a doubt my experiences in representing community association clients in both D.C. and Virginia demonstrated that some of the most challenging covenants enforcement cases involve short-term rental disputes. Many of my clients have been placed in the difficult position investigating and attempting to resolve complaints concerning violations of restrictive covenants that set minimum lease terms (typically 6 months to a year) and/or prohibit short-term, transient or hotel uses of both condominium units and lots. Having successfully navigated a number of clients through these enforcement cases, both in and out of the court system, I’ve seen the benefits of expecting the unexpected and preparing clients for vehement opposition to what many consider an encroachment upon personal vested property interests.

Many short-term rental dispute cases begin with the association coming across an advertisement from one of the many popular short-term rental websites. Associations often receive complaints concerning strangers identifying themselves as short-term renters violating the parking and waste removal rules, knocking on doors at odd times to ask for directions, and treating the management staff like a concierge service at a hotel.

Appropriately documenting and maintaining the complaints received from residents, the copies of the advertisement(s) verifying the activity, and any other reliable evidence supporting that short-term rentals are occurring is imperative to beginning the enforcement case off on the right foot.

Typically, issuance of the required notices per the terms of the association’s governing documents triggers a response from the owner, often times acknowledging the conduct in question and either agreeing to stop, asking for a grace period for compliance due to existing bookings, or denying the need for any required compliance. It is crucial to log and maintain all communications received from the owner on these matters, as they may become evidence if the case has to be litigated. Conducting due process hearings and maintaining appropriate minutes from those hearings can also lay a groundwork for strong evidence at trial. In my experience, the atypical response is for the owner to deny the rental activity is occurring. It is rare to find an owner who denies ownership of an advertisement showing the name and face of the “host”, as well as the interior of the rental property. That being said, the most challenging cases you can have are the ones where the owner denies the activity because you will have to build a strong evidentiary foundation to prove the conduct primarily taking place behind closed doors is actually happening. The case becomes more about building the facts demonstrating the prohibited conduct, rather than focusing upon the verbiage in the legal documents, the applicable local code requirements, or whether the association complied with appropriate due process procedures.

Most clients assume that a copy of an advertisement is a slam dunk to winning a case seeking injunctive relief to stop short-term rentals. Regrettably, the advertisement alone presents evidentiary challenges as it is hearsay. Further, the advertisement often does not even identify the property by an address (just via general locations and photos). If an owner denies the prohibited conduct is occurring and the client knows otherwise, prepare yourself for a complicated and uphill legal battle. In recent cases I handled, we were prepared to enter a number of fortunate pieces of evidence that I suspect many associations would not have available. This enabled us to prevail at trial.  For example, I have had in-person testimony from cooperative neighbors (who were still subject to subpoenas) about their observations and in some cases involvement in the rental activity.  Note, a written complaint from a resident might not pass muster to be admitted into evidence as a business record of the Association and in-person testimony may be required to win the case. Be aware that most of the evidence the eyewitnesses have to offer is inadmissible hearsay when it comes to people identifying themselves as short-term renters.

While we have been able to successfully serve witness subpoenas on short-term tenants, understand that this is the exception to the rule. Appropriately serving a witness subpoena for on-going short-term tenants is next to impossible due to the extremely short occupancy and lack of information concerning their names and often out-of-state permanent residences. Other items I have attempted to gain admission into evidence with varying success include, phone logs, letters from the defendant owner admitting to the conduct, concierge logs with persons identifying themselves as short-term renters for particular Units, and letters to the owner with copies of the advertisement from the association (through legal counsel and not). The hearsay and foundation challenges to these pieces of evidence can be difficult to overcome.

What we have found surprisingly simple in Virginia courts, is the acceptance by the judges of the application of “hotel” and “transient” use verbiage to prohibit rentals that were for nightly or weekly rental periods, as advertised on the popular short-term rental websites. The trend in the courts seems to be to agree that these forums serve an admittedly “transient” and “hotel” purpose, in violation of many restrictive covenants, even those that do not contain specific minimum lease terms. The local regulations of each jurisdiction can also serve as useful references to defining the term “short-term rental”.

In sum, the evidentiary challenges to these cases can be considerable when the owner does not admit to the conduct in question and the association representatives have to play detective. But, if the association is prepared and dedicated to this effort, we have been able to prevail upon the courts to order injunctive relief to stop short-term rentals and to also grant reasonable awards of related legal fees and costs for associations.

By Kathleen N. Machado, ESQ.

Kathleen is a shareholder with Rees Broome, PC.  She represents community association clients, including condominiums and homeowners associations located in the District of Columbia and Virginia. Her experience includes representation of associations for their various general legal needs including interpretation and amendment of governing documents, covenants enforcements, collections of assessment, and contract negotiations.

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