Short-Term Rentals Win Two Big Victories in Pennsylvania’s Commonwealth Courts

There has been two significant win in Commonwealth Court in a case called Ruffled Grouse Ridge Owners Association versus Charles Hura. The second in a case called L. Chan; et al. v. The Assoc. of Property Owners of The Hideout, Inc. In both cases, HOA’s were determined to have gone well beyond their founding authority and seem to be setting the groundwork for some easing of community restraints on vacation rental properties.

The Hideout
Here is a summary provided by Attorney Eric Smith, who argued for the vacation renters.
In the case of Chan, et al. v. The Association of Property Owners of The Hideout, Inc., the court focused on the core issues of property owners’ rights versus the authority of the Homeowners Association (HOA) to impose rental restrictions. Here are the key points:

• Inherent Rights of Owners: The court highlighted that property owners have a fundamental right to use their property, including renting it out, unless explicitly restricted in the deed or original covenants. The court’s ruling emphasized that owners’ rights cannot be arbitrarily overridden by an HOA’s bylaw or policy changes.
• Limits of HOA Authority: The decision underscored that an HOA cannot unilaterally impose restrictions through a simple vote or internal policy, especially if those restrictions were not part of the original deed restrictions or Covenants, Conditions, and Restrictions (CC&Rs). Any attempt to do so would be beyond the HOA’s authority.
• Deed Restrictions Take Precedence: The judge noted that if a restriction is not clearly stated in the deed or CC&Rs at the time of purchase, an HOA cannot retroactively enforce it through bylaw or policy changes. The burden of proof is on the HOA to demonstrate that such restrictions were originally agreed upon.
• Protection of Property Rights: The court’s observations leaned toward protecting the rights of property owners from what was seen as overreach by the HOA. The ruling reflects a legal principle that property rights should be preserved unless owners explicitly agree to restrictions.

This case sets a precedent for other property owners facing similar issues, reinforcing that an HOA cannot simply impose rental restrictions without proper legal backing rooted in the original governing documents. For more information about legal services to affirm Property Rights for Vacation Rental Owners, Eric Smith, Attorney

Ruffled Grouse Ridge
Ruffled Grouse Ridge is a small community in the northern part of the Poconos, in Lakeville, Paupack Township, Wayne County. Homes here have a restrictive covenant tied to their deeds which includes giving an owner’s association regulatory powers. The association objected to an owner renting his property as a short-term rental and took the owner to court to put a stop to it. That failed, and the matter has moved through the court system to the Commonwealth Court, Pennsylvania’s second highest court system.

The owner bought the property in 2020 and started renting. In late 2021, the Association voted to prohibit short-term rentals of less than 30 days in the community. Following that, the Association sent the owner 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. The owner refused to stop, and the litigation began.

There are several very significant conclusions that the Commonwealth Court has confirmed in their decision in favor of the owner. Perhaps the most important is that residential rental income is not ‘commercial activity.’ The covenants stated that “any building to be erected thereon, 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 stating that collecting rent and having a tenant are not banned by the covenant and the activity being conducted by the occupants (eating, drinking, sleeping, relaxing) and consistent with the residential intent of the home. The owner, family and friends, or renters, using the Property in its entirety to sleep, eat, bathe and generally reside for a short-term period is consistent with the rights given in the covenants.

The courts also affirmed there is no effective difference between long-term and short-term rentals. The Association argued 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, another positive affirmation for those of us operating short -term rentals.

The court stated that using the Slice of Life doesn’t apply because it was very specific to that township’s zoning regulations. The court’s opinion states “In Slice of Life, our Supreme Court held that the operation of “a transient lodging business,” such as an AirBnB, was impermissible in a residential zoning district. The Court’s decision, however, was based on its interpretation of specific terms and phrases in the applicable zoning ordinance, including “family” and “single housekeeping unit,” none of which are at issue here.”

In summary:

• Collecting rent, the renting of one’s home is not commercial activity.
• If renting is allowed, there should be no difference as to duration, long-term is the same as short-term, use of a home as a vacation rental is consistent with the use of a home as a home.
• The Supreme Courts Decision called Slice of Life is not a general sweeping decision, rather it is specific to one township and its zoning definitions defined as single family residential.

The local rental alliance called Poconos Association of Vacation Rental Owners urges any owner in an Owners Association to know your rights, to read and become familiar with your community’s covenants, articles of incorporation or similar founding documents. You have rights and that original document will spell them out, just like the American Constitution and our state’s constitution. The devil is in the details with these court decisions so be sure to see what applies to you before making the broad conclusion that this decision overturns anything. This decision is favorable to an owner, that’s great news. The owner stood firm in his rights, and unfortunately a number of people are having to do this when boards and communities take actions to shut down legitimate rental activity.

As with any legal case, there are various ways in which a decision gets interpreted, in some cases the positive aspects of one case become negative aspects of another. For as long as we have local townships and community associations believing that legal decisions like “Slice of Life” give authority to ban short-term rentals, we have problems. When we have boards who go well beyond their covenants, we have problems. We hope that the “Ruffled Grouse” decision starts to have the impact to balance what has become a one-sided rush to take away fair and reasonable use of our properties and gives rightful use of our homes a fair defense.

For Further Reading:

Courts Find Airbnb Rentals Not Barred by Restrictive Covenant

STR Win against HOA ban of short term rentals in Wayne County

Ruffed Grouse Ridge Owners’ Association v. C. Hura (majority)

L. Chan; et al. v. The Assoc. of Property Owners of The Hideout, Inc.

Victory at the Hideout

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