Houston v. Wilson Mesa Ranch Homeowners Association, Inc
2015 COA 113
Colo. Ct. App.2015Background
- Plaintiff David Houston owns a single-family home in Wilson Mesa Ranch, a subdivision governed by restrictive covenants enforced by the homeowners association (Association).
- Houston began advertising and taking short-term (vacation) rentals through VRBO; the Association viewed this as a commercial use prohibited by the covenants.
- The Association adopted an administrative rule (Section 11) barring rentals under 30 days without prior board approval and imposing a $500 fine per violation; it fined Houston for taking reservations.
- Houston sued for a declaration that the covenants do not bar short-term rentals; the Association counterclaimed for enforcement of the covenants and Section 11 and sought injunctive relief.
- The district court granted judgment on the pleadings for Houston, concluding the covenants did not prohibit short-term rentals (and were at least ambiguous) and that Section 11 was unenforceable; the Association appealed.
- The Court of Appeals affirmed: short-term vacation rentals are not barred by the covenants, and the board could not effect a covenant amendment via administrative procedures (Section 11) instead of following the covenant amendment process.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether restrictive covenants prohibit short-term/vacation rentals | Houston: Covenants do not expressly prohibit short-term rentals; temporary residential occupancy is still "residential use." | Association: Covenants’ requirements of "residential" use and prohibition on "commercial use" necessarily bar short-term, unapproved rentals. | Court: Short-term rentals are not barred. "Residential" includes temporary habitation; "commercial use" prohibition does not unambiguously cover short-term dwelling rentals, and ambiguities favor free use. |
| Whether the Association’s Section 11 (rule forbidding <30-day rentals w/o approval) is enforceable | Houston: Section 11 improperly amends covenants and is unenforceable; fines invalid. | Association: Section 11 merely clarifies and enforces existing covenant prohibitions. | Court: Section 11 unenforceable. The board cannot amend covenants via administrative procedures; the covenants’ formal amendment procedure was not followed. |
| Entitlement to attorney fees under § 38-33.3-123(1)(c) | Houston: N/A (defends against fees) | Association: Sought fees on appeal. | Court: Denied Association’s request for attorney fees. |
Key Cases Cited
- Jackson & Co. (USA), Inc. v. Town of Avon, 166 P.3d 297 (Colo. App. 2007) (distinguishable municipal/plat regulation of a "lodge" used for short-term rentals)
- E.R. Southtech, Ltd. v. Arapahoe County Board of Equalization, 972 P.2d 1057 (Colo. App. 1998) (tax classification treating <30-day rentals as hotel-type commercial use for property tax purposes)
- Double D Manor, Inc. v. Evergreen Meadows Homeowners’ Ass’n, 773 P.2d 1046 (Colo. 1989) (receipt of funding does not convert residential use into commercial use)
- Good v. Bear Canyon Ranch Ass’n, 160 P.3d 251 (Colo. App. 2007) (restrictive covenants construed by plain language; ambiguities resolved in favor of unrestricted use)
- Pinehaven Planning Bd. v. Brooks, 70 P.3d 664 (Idaho 2003) (renting to occupants who use premises for ordinary living does not violate prohibition on commercial or business activity)