302 A.3d 30
Me.2023Background
- The deeds for three neighboring oceanfront lots (Townsend, the Morgans, and Ward) contain a restrictive covenant: use for "private residential purposes," "no trade or business shall be conducted therefrom," and only "a private dwelling house for use and occupancy by one family."
- Townsend advertises and rents his five-acre property (main house + guest cottage) short-term via Vrbo/Airbnb beginning in 2019, hosting ~59 groups in 28 months (advertised capacity up to 32), collects lodging taxes, reports rental income, and uses a property manager.
- Neighbors (the Morgans and Ward) sued for declaratory judgment and injunctive relief, alleging violations of the covenant (business use, lodging house, multiple families, and multiple dwellings); nuisance claims were later dismissed by consent.
- The Business and Consumer Docket granted summary judgment for the neighbors, holding Townsend’s pattern of short-term rentals constituted conducting a business in violation of the covenant and entered a permanent injunction prohibiting use that violates the deed.
- On appeal, the Maine Supreme Judicial Court affirmed that Townsend’s rentals violated the covenant’s prohibition on conducting a trade or business, but vacated the injunction as too vague and remanded for a more specific injunction (defining "short-term rental" and setting permissible limits such as days per year).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether "private residential purposes" bars short-term rentals | Restriction preserves residential character; frequent short-term rentals may violate private residential use | "Private residential" does not, standing alone, categorically prohibit short-term or paying overnight guests | The phrase alone does not automatically bar short-term rentals; could violate residential character in fact-intensive inquiry, but unnecessary to decide because of business finding |
| Whether "no trade or business shall be conducted therefrom" prohibits Townsend's short-term rental activity | Townsend operates a commercial short-term rental business (frequent rentals, advertising, lodging tax, reported income, property manager) | Ordinary residential rentals do not become ‘‘business’’ merely because income is received; Silsby supports non‑commercial characterization | Court held undisputed facts show Townsend was conducting a business (akin to a hotel) in violation of the covenant |
| Meaning/enforceability of "for use and occupancy by one family" | Renting to large unrelated groups violates the one-family occupancy limitation | No evidence any specific group was not a family; the clause should not bar ordinary guests | The one-family phrase is ambiguous; cannot be read so strictly as to bar all unrelated guests—some relatedness is reasonable but record does not show violation |
| Scope and form of injunctive relief | Plaintiffs sought permanent injunction prohibiting violations of the covenant | Defendant sought clarification of injunction scope; argued vagueness | Court vacated the permanent injunction as insufficiently specific under M.R. Civ. P. 65(d) and remanded for a tailored injunction (define short-term rental and set limits, with possible hearing) |
Key Cases Cited
- Silsby v. Belch, 952 A.2d 218 (Me. 2008) (rental income alone does not necessarily transform residential use into a commercial enterprise)
- Windham Land Tr. v. Jeffords, 967 A.2d 690 (Me. 2009) (construction of "residential" and focus on residents in interpreting servitude terms)
- Doyon v. Fantini, 234 A.3d 1222 (Me. 2020) (ambiguous restrictive covenants are construed to least restrict property use)
- River Dale Ass'n v. Bloss, 901 A.2d 809 (Me. 2006) (rules for interpreting deed restrictions and summary judgment review)
- Boehner v. Briggs, 528 A.2d 451 (Me. 1987) (interpretation of "one family" dwelling limitation)
- Craig Tracts Homeowners' Ass'n v. Brown Drake, LLC, 477 P.3d 283 (Mont. 2020) (short-term rentals can be considered residential; courts focus on the nature of the use)
- Lowden v. Bosley, 909 A.2d 261 (Md. 2006) (short-term or transient habitation may still qualify as residential use)