Michigan Court Rules that Long-Term Rental is a Commercial Use

The Michigan courts have consistently held that short-term rentals are neither residential nor commercial uses when interpreting restrictive covenants.  While numerous cases from the Michigan Court of Appeals hold that short-term rentals violate residential and commercial use deed restrictions, these cases have not addressed whether long-term rentals also violate a residential or commercial use restriction if the restrictive covenants do not contain any express restrictions that specifically relate to rentals. However, in a recent case, Timber Lake Drive Prop Owners’ Ass’n v Gribi, unpublished opinion of the Court of Appeals, issued September 18, 2025 (Docket No. 369520), 2025 WL 2682064, the Michigan Court of Appeals held that a long-term rental violated a homeowners association’s commercial use restriction. As discussed below, while commercial use restrictions have historically been used to prohibit short-term rentals, community associations should be aware that long-term rentals may also violate commercial use restrictions.

 

Facts of the HOA Rental Dispute

Etta Gribi was the owner of a lot in the Birch Lake Subdivision, a 37-lot subdivision originally platted in 1967, located in Elk Rapids Township.  All lots in the subdivision were subject to restrictive covenants, one of which stated as follows: “All lots shall be used and occupied for residential purposes only, and may not be used for business or commercial purposes.” The Timber Lake Drive Property Owners Association was a voluntary association, composed of 25 lot owners, which had standing to enforce the restrictive covenants.

Gribi purchased the lot in 1972. In October 2022, Gribi moved to an assisted living facility, and in June of 2023, Gribi’s son listed the property for rent under a one-year lease at $2,400 per month. Gribi intended to use the rental income toward the monthly costs of assisted living. In June 2023, the Association sent a demand letter to Gribi informing them that the proposed rental violated the deed restrictions because renting property in exchange for money was a commercial use. The Association demanded that all rental activities cease and all advertisements listing the property for rent be removed. Gribi maintained that the restrictions only applied to short-term rentals and that long-term rentals were allowed as a permissible residential use.

In July 2023, Gribi executed a lease agreement for a nine-month rental term beginning on August 1, 2023, with the option to extend monthly through July 2024 and the option to enter into a new long-term lease in August 2024. The lease limited the tenant’s use to “private residential purposes only.” The lease specified that only the persons who signed it and “their immediate family (spouse and children) may reside at the premises.” If more than three people occupied the premises, the lease authorized Gribi to terminate or assess additional rent of $200 each month for each additional person. The tenant was permitted to accommodate guests for reasonable periods, up to 4 weeks, but other guest arrangements required Gribi’s consent.

The homeowners association filed a lawsuit, seeking a declaratory judgment that the commercial use restrictions prohibited all rentals regardless of the length of the rental, that Gribi’s long-term rental violated the deed restrictions, and that Gribi’s rental must cease.  The trial court ruled that while the long-term rental was a residential use, it still violated the commercial use restrictions, and it held as follows:

The case law is very clear that short-term rentals are a commercial activity. And in the Court’s mind, the logic and rationale from the case law doesn’t change with the length of the rental. Here, defendant moved into an assisted living facility, and the stated purpose for what she was renting the home for was to help offset the costs for that. So the focus is a profit in order to be able to offset some of the additional costs of being in the assisted living facility.

So it’s clearly a commercial activity. It’s being rented for a set amount; that is income for the defendant. It’s a moneymaking enterprise. And the rental of defendant’s property in this instance is a commercial use and purpose, in violation of the restrictions.

Gribi also attempted to argue that even if the commercial use restriction violated long-term rentals, the homeowners association had waived enforcement of these restrictions by allowing prior short-term rentals. The trial court rejected the waiver argument and held as follows:

There is [sic] 31 lots in the subdivision. One or two homes being rented a few times occurring over a few years does not constitute a waiver. Plaintiff indicates that they were not aware of the rentals occurring on one property over a longer period of time. But … that wouldn’t change the analysis of the Court, either. The association and the neighborhood have not lost its character because of those. It’s a small number of rentals occurring over a small amount of time. So the restriction was not and is not waived by plaintiffs.

Accordingly, the trial court held that the commercial use restriction was enforceable and that rentals of any length violated the restrictive covenants, which led the lot owner to appeal.

 

Long-Term Rentals are a Residential Use under the Restrictive Covenants

In defining the term residential use in the restrictive covenants, the Court of Appeals relied on Bloomfield Estates Improvement Ass’n, Inc v City of Birmingham, 479 Mich 206, 212; 737 NW2d 670 (2007) and stated as follows:

The term “residential” means “pertaining to residence or to residences.” Random House Webster’s College Dictionary (1997). “Residence” means “the place, esp[ecially] the house, in which a person lives or resides; dwelling place; home.” Id. The term “residential” in the deed restriction thus refers to homes where people reside.

In applying the above definition of residential use, the Court of Appeals agreed that a long-term rental is a permissible residential use, but that the residential use and commercial use restrictions are two separate and distinct covenants.  Accordingly, the Court held that even though a long-term rental is a permissible residential use, a separate analysis is required to determine whether a rental of any length violates the commercial use restriction.

 

Long-Term Rentals Violated the Commercial Use Restrictions in the Deed Restrictions

In defining the term commercial use, the Court of Appeals relied on Terrien v Zwit, 467 Mich 56, 71; 648 NW2d 602 (2002), and stated as follows:

“Commercial” is commonly defined as “able or likely to yield a profit.” Random House Webster’s College Dictionary (1991). “Commercial use” is defined in legal parlance as “use in connection with or for furtherance of a profit-making enterprise.” Black’s Law Dictionary (6th ed). “Commercial activity” is defined in legal parlance as “any type of business or activity which is carried on for a profit.”

The Court of Appeals then analyzed various prior rental cases that held that rental activity constituted commercial use and stated as follows:

Indeed, Eager, Aldrich, Enchanted Forest, Melvin R Berlin Revocable Trust addressed short-term rentals. But in John H. Bauckham Trust v Petter, unpublished per curiam opinion of the Court of Appeals, issued September 19, 2017 (Docket No. 332643), p 6, a panel of this Court concluded that the trial court did not err by enjoining all rental activity, including long-term rentals, on subdivision lots owned by the defendants that were encumbered by deed restrictions prohibiting the use of the lots for commercial purposes. This Court explained:

The act of renting property to a third-party for any length of time involves a commercial use because the property owner is likely to yield a profit from the activity. Restrictions barring commercial uses of property proscribe a wide variety of activities, even activities that are residential in nature, such as renting to residential tenants for extended periods of time. [Id. at 6.]

Based on the above cases, the Court held that the unambiguous language of the restrictive covenants expresses an intent to restrict use of the lots in the subdivision to non-business and non-commercial residential use. The Court held that Gribi had not resided in the property since 2022, she had no intention of returning to the property and wanted to use the property in connection with or for the furtherance of a profit-making enterprise.  Accordingly, the Court of Appeals held that any rental of the property, regardless of its duration or whether it is residential in nature, violates the restrictive covenant prohibiting commercial use, and that Gribi had not established that the restrictive covenants had been waived by a small number of sporadic short-term rentals in the past.

 

Conclusion

The Michigan Court of Appeals’ decision in Timber Lake Drive Prop Owners’ Ass’n v Gribi, unpublished opinion of the Court of Appeals, issued September 18, 2025 (Docket No. 369520), 2025 WL 2682064 is significant in helping homeowners association define commercial use. This case highlights several important lessons for Michigan homeowners associations relating to rentals, which are as follows:

Long-Term Rentals are still Residential Use.

Some restrictive covenants only contain a residential use restriction, but do not prohibit commercial use.  While various other decisions of the Michigan Court of Appeals have held that short-term rentals may violate residential use restrictions, this case suggests that long-term rentals are still considered a form of residential use.

Commercial Use Restrictions Prohibit Rentals of Any Length.

The most important lesson in this case is that rentals of any length, whether short-term or long-term rentals, can be deemed a commercial use.  While community associations have largely used commercial use restrictions to prohibit short-term rentals, this case holds that rentals of any length can violate a commercial use restriction and that community associations can enforce commercial use restrictions to prohibit rentals.

Restrictive Covenants may need to be Amended to Permit Rentals.

If your community association does not have express rental restrictions but only a commercial use restriction, it should consider amending its governing documents if it intends to permit rentals of any length.

If your homeowners association is seeking guidance on enforcing restrictive covenants, amending deed restrictions, or navigating rental issues, consulting with an experienced community association attorney is essential. Please contact Hirzel Law, PLC if you need further assistance enforcing short-term or long-term rental restrictions.

 

Kevin Hirzel is the Managing Member of Hirzel Law, PLC, and concentrates his practice on commercial litigation, community association law, condominium law, Fair Housing Act compliance, homeowners association law, and real estate law. Mr. Hirzel is a fellow in the Community Associations Institute’s College of Community Association Lawyers, a prestigious designation given to fewer than 200 attorneys in the country. Mr. Hirzel has been recognized as a Michigan Super Lawyer in Real Estate Law by Super Lawyers Magazine, a Leading Lawyer in Condominium & HOA law by Leading Lawyers Magazine, and as a Best Lawyer in Real Estate Law by U.S News and World Report’s Best Lawyers Publication. Hirzel Law, PLC represents community associations, condominium associations, cooperatives, and homeowners associations in Michigan and Illinois. He may be reached at (248) 450-0339 or kevin@hirzellaw.com.