Short-Term Rentals in MI Condos & HOAs: Supreme Court Deadlocks, Lower Court Rulings Stand
Short-term rentals remain popular as the state of Michigan continues to grow as a vacation destination for travelers. Over 131 million people visited Michigan in 2024, and a study commissioned by Airbnb purportedly found that, in 2024, 2 million of those visitors stayed at Airbnb properties, bringing in $1.4 billion to Michigan’s economy. These numbers, of course, do not account for the other short-term rentals hosted by different platforms, such as VRBO and local property management companies.
Despite the increasing prevalence and appeal of short-term rentals, Michigan’s courts have consistently held that short-term rentals violate residential, business, and commercial restrictive covenants, finding that short-term rentals within a residential community are a commercial activity inconsistent with residential use covenants. Up until recently, the furthest these cases ever made their way through the Michigan courts was the Court of Appeals. That changed, though, when the Michigan Supreme Court, for the first time, took up this issue and agreed to hear the case Melvin R Berlin Revocable Trust v Rubin. Community association and property law attorneys across the state expected this case to provide the final answer as to whether short-term rentals violate residential use restrictions. Instead, the case ended in an equally split decision, leaving this issue unsettled at the highest level.
The Dispute: From Lakefront Vacation Homes to the Courtroom
The Swift Estates community is located on Lake Michigan and is made up of only nine homes, seven of which were owner-occupied for at least six months out of the year. The other two lots were owned by a limited liability company, whose owners resided in England, and a married couple who lived in the state of Washington. The community offered a number of amenities that were available for members’ use only, and it historically permitted property owners to rent their homes to family and friends. The two non-permanent resident property owners hired a company to short-term rent their properties on their behalf, and they both alleged that their ability to rent their properties on a short-term basis when they were not occupying them was an important factor in their decision to purchase the homes.
The community is governed by restrictive covenants that limit the use of property to “single family residence purposes.” The restrictive covenants defined a “single family” as “one or more persons each related to the other by blood, marriage, or adoption, or a group of not more than three persons not all so related together with his or their domestic servants, maintaining a common household in a residence.” The restrictive covenants also defined a “single family residence” as “any dwelling structure on a lot intended for the shelter and housing of a single family.”
After consulting with its attorney, the HOA determined that short-term rentals were not allowed under the restrictive covenants, and short-term renters were not permitted to use the community’s amenities. A group of homeowners eventually filed a lawsuit against the two non-permanent resident property owners to enforce the restrictions. The trial court agreed that the deed restrictions prohibited short-term rentals and, in response, the defendants filed a counterclaim, alleging that the deed restrictions could not be enforced against them due to acquiescence, unclean hands, equitable estoppel, laches, and waiver. The plaintiffs also prevailed on these claims, and the defendants appealed the trial court’s decisions to the Court of Appeals.
Court of Appeals Affirms that Short-Term Rentals Violate “Single Family Residence Purpose” Restriction
The Court of Appeals upheld the trial court’s decisions, relying on the Michigan Supreme Court case, O’Connor v Resort Custom Builders, Inc, 459 Mich 335 (1999), and two Court of Appeals’s cases, Eager v Peasley, 322 Mich App 174 (2017), and Aldrich v Sugar Springs Prop Owners Ass’n, Inc, 345 Mich App 181 (2023). The court laid out a concise and pointed statement of the law regarding short-term rentals and residential use restrictions, stating:
A residential purpose is the one place where a person lives as their permanent home, and, when applying that standard, a summer home cannot constitute a permanent residence when a person’s domicile is in another location. In a residence, a person lives, has a permanent presence, and stores their belongings there, even when they are not at home. A residence reflects permanence and a continuity of presence. Occasional rentals do not alter the character of a subdivision, do not defeat the original purpose of the restrictions, and do not result in a waiver of restrictions. Additionally, short-term rentals violate a restrictive covenant barring commercial use of a property. The act of renting property to another for short-term use presents a commercial use despite the fact that the activity is residential in nature.
The Court of Appeals focused on defendants’ use of their properties, noting that:
[I]t is apparent that defendants did not utilize their property as a single family residence. Defendants, as purchasers of the properties, did not use the properties as a permanent home, and a summer home cannot constitute a permanent residence when their domicile is in another location . . . Defendants did not delineate the extent to which they stored their belongings at their homes. Instead, their use was intermittent and inconsistent with a single family residence; it did not reflect permanence and a continuity of presence generally associated with a single family residence but rather, a vacation home.
The Michigan Supreme Court Split Leaves the Lower Court’s Rulings Intact
After being unsuccessful in the Court of Appeals, the defendants filed an application for leave to appeal with the Michigan Supreme Court, asking the Court to take and review their case. In May 2024, the Court granted their application and asked the parties to “address whether a restrictive covenant limiting lot use to ‘single family residence purposes’ unambiguously prohibits all short-term residential rentals.” In July 2025, the Court issued an order that affirmed the Court of Appeals’s decision “by equal division of the Court.” The order included a concurrence, written by Justice Welch, and a dissent, written by Justice Thomas.
Justice Welch’s Concurrence
Justice Welch wrote a concurring opinion, which was joined by Justice Zahra, to confirm that she agreed with the Court of Appeals that the defendants’ short-term rentals were inconsistent with the “single family residence purpose” restriction, but she disagreed that a summer home could not be considered an owner’s permanent residence, even if they resided in another location. Justice Welch agreed that O’Connor provided the proper analysis to determine whether a property use is residential, focusing on permanence and continuity of presence at the property. In doing so, she held that “[u]nder these facts, the restrictive covenant is clear—a single family residential purpose cannot include a home that is almost exclusively held out as a short-term rental.” She explained that:
While perhaps a single family residence can be rented out occasionally and still fit the definition of a residence as intended in the Association’s Declaration, that is not the case here. The record established that the homes at issue were mass-marketed and held out almost exclusively as short-term rentals.
She also contrasted the uses of the properties between the plaintiffs and the defendants, stating:
The plaintiffs here all use their homes in a manner consistent with a residential use. They do not necessarily have to maintain domiciles or primary residences at their homes for that to be true. By contrast, defendants use their houses primarily to host transitory renters—members of the public at large with no lasting or long-term ties to the homes. The degree of permanency that defines a residential use did not exist with these rentals.
Justice Thomas’s Dissent
Justice Thomas wrote a dissenting opinion, which was joined by Justices Cavanagh and Bolden. Justice Thomas argued that the “single family residence purpose” restriction was ambiguous and susceptible to multiple interpretations, requiring the case to be resolved in favor of the free use of property, i.e., that the short-term rentals were a permissible use. She pointed to other ways in which the restriction could be interpreted, such as the type of structure that could be built on the properties, the duration and permanence of ownership of the properties, how the owners are using the properties, and how the occupants are using the properties. In doing so, she noted that “[t]he level of activity generated by the rentals . . . is not distinguishable from the activity that one would see from the property being owned and used by a large family in residence.” She also focused on the fact that the plaintiffs had also rented their properties and there appeared to be no meaningful distinction between their rentals and the defendants’, except that the plaintiffs’ rentals were based on “strong referrals” and were “for a lengthy period of time.” Furthermore, she found it persuasive that supreme courts in a dozen other states have held that short-term rentals are residential uses of property.
Takeaways for Michigan Condos and HOAs
The Michigan Supreme Court has 7 justices—so how did Berlin result in a 3-3 tie? When Berlin was argued, former Chief Justice Clement was still on the bench; however, between the time the case was argued and the order was issued, Chief Justice Clement stepped down from the bench. Justice Hood was recently appointed to fill her seat, but because he was not on the bench when the Court considered the case, he did not participate in the decision.
With Berlin ending in a tie, the Court of Appeals’s decision, and the other published cases regarding short-term rentals and residential use restrictions from the Court of Appeals, remain the law in Michigan. The Court of Appeals’s track record on short-term rentals and residential use restrictions, which has been building since 2004, shows that short-term rentals are not a favored use in communities with residential and business/commercial restrictions; however, Michigan courts will only make this determination on a case-by-case basis after considering the restrictions, community, and rentals involved so we recommend that condo associations and HOAs follow the example set by the HOA in Berlin and consult with an attorney first before restricting or prohibiting short-term rentals in your community.
Michigan condos and HOAs should also be aware that this issue is not settled, at least not at the highest level of the Michigan courts. Berlin ended in a tie, and the Michigan Supreme Court still has not definitively weighed in on this issue, which means the Court will likely revisit this issue in a future case.
Kayleigh B. Long is a Member at Hirzel Law, PLC and focuses her practice in the areas of community association law and appellate litigation. Ms. Long obtained her Juris Doctor degree from Indiana University Robert H. McKinney School of Law, where she graduated in the top 5 of her class and served as the Senior Executive Editor on the Indiana Law Review. Ms. Long has been recognized as a Michigan Rising Star in Real Estate Law by Super Lawyers since 2020, an award given to no more than 2.5% of the attorneys in the State of Michigan. Ms. Long has also made numerous presentations on community association law, along with having articles published in the Michigan Real Property Review.
She can be reached at (248) 478-1800 or klong@hirzellaw.com.
