914 N.W.2d 643
Wis.2018Background
- Lee and Mary Jo Neuschwander own a large renovated house on two lots (2.2 acres) in a 15‑lot subdivision on Lake Hayward and rent it to vacationers via VRBO for short‑term and long‑term stays.
- The subdivision deed contains three restrictions, including: "There shall be no commercial activity allowed on any of said lots." The other two restrictions set a minimum dwelling size and prohibit lot subdivision.
- Neighbors sued in Sawyer County, seeking injunctive relief, arguing short‑term rentals violate the "no commercial activity" covenant; the circuit court granted the injunction (with a narrow exception), but the court of appeals reversed.
- The Wisconsin Supreme Court granted review to decide whether short‑term rentals constitute "commercial activity" under the covenant.
- The lead opinion concluded the term is ambiguous, construed ambiguities in favor of free use of property, and held the covenant does not bar short‑ or short‑term rentals; the court affirmed the court of appeals.
Issues
| Issue | Plaintiff's Argument (Neighbors) | Defendant's Argument (Neuschwander) | Held |
|---|---|---|---|
| Whether short‑term rental of the property is "commercial activity" under the restrictive covenant | Short‑term rentals are commercial: the Neuschwanders rent for profit, collect substantial rents and taxes, and thus engage in commerce on the lots | Renters use the property residentially (sleep, cook, recreate) and the owners provide no on‑site services; "commercial activity" is ambiguous and should not be read to prohibit ordinary residential use by transient occupants | Term "commercial activity" is ambiguous; construing ambiguities narrowly in favor of free use, the covenant does not prohibit short‑ or long‑term rentals |
Key Cases Cited
- Sands v. Menard, 379 Wis. 2d 1 (2017) (summary judgment standard and appellate review described)
- Dufour v. Progressive Classic Ins. Co., 370 Wis. 2d 313 (2016) (standards for reviewing summary judgment)
- Crowley v. Knapp, 94 Wis. 2d 421 (1980) (restrictive covenants must be clear and are strictly construed in favor of free use)
- Zinda v. Krause, 191 Wis. 2d 154 (Ct. App. 1995) (ambiguity in covenant requires construction and intent is ascertained from language used)
- Bubolz v. Dane Cty., 159 Wis. 2d 284 (Ct. App. 1990) (restrictive covenants construed to apply to use and that incidental home businesses may be limited)
- Heef Realty & Invs., LLP v. City of Cedarburg Bd. of Appeals, 361 Wis. 2d 185 (Ct. App. 2015) (zoning analysis focusing on how occupants use property for residential versus commercial purposes)