537 S.W.3d 254
Ark.2018Background
- Property: a fully furnished single-family house on a 6.07-acre lot in the Jeffries and Norvell Subdivision (platted 1953) governed by a bill of assurance forbidding use "other than residence purposes" and "any commercial purpose, including motels... hotels... apartments, etc."
- Owner: Vera Lee Angel Revocable Trust (trustees Johnny Angel and Paula Napper) listed the house on VRBO in 2015 charging a nightly rate with a two-night minimum.
- Plaintiffs: other subdivision lot owners sued to enjoin short-term rentals, alleging breach of the covenants and irreparable harm; they sought preliminary and then permanent injunctive relief.
- Trial court: after testimony about neighborhood impact, granted a preliminary injunction, then by joint motion converted it to a permanent injunction finding rentals violated the bill of assurance as a commercial use.
- Appeal: trustees appealed; Arkansas Supreme Court reviewed de novo for equitable issues and for clear error on factual findings.
- Outcome: Arkansas Supreme Court reversed and dismissed the injunction, holding the restrictive covenant did not clearly and unambiguously prohibit rentals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether short-term rentals violate the covenant limiting use to "residence purposes" | Rentals convert use from residential to nonresidential and disturb enjoyment | Renting does not change the essential character of a dwelling as a "residence" whether owner-occupied or rented | Held: Renting does not change the house's character as a residence; covenant does not clearly prohibit rentals |
| Whether short-term rentals constitute a "commercial purpose" under the covenant | Charging nightly rates constitutes commercial activity comparable to motels or hotels | Short-term rental income alone does not transform use into a commercial enterprise; examples in covenant target commercial enterprises with different character | Held: Covenant forbids "commercial purposes," but examples (motels, hotels, apartments) imply outward operational character distinct from a single-family residence; rentals not clearly commercial here |
| Proper construction rule: whether covenant must be strictly construed against restraints on land use | Plaintiffs: covenant language is plain and prohibits commercial uses, so it should be enforced | Defendants: ambiguous silence about rentals requires construction favoring unfettered use | Held: Constraints on land must be clearly apparent; because covenant is silent on rentals, strict-construction rule favors defendants |
| Whether injunction was justified based on irreparable harm/nuisance | Plaintiffs: short-term rentals harm enjoyment, warranting injunction | Defendants: plaintiffs did not plead or prove nuisance separately; evidence did not transform character of neighborhood | Held: Trial court made no findings on nuisance; irreparable-harm theory tied to covenant breach fails because covenant does not clearly prohibit rentals — injunction reversed and dismissed |
Key Cases Cited
- Dunn v. Aamodt, 695 F.3d 797 (8th Cir. 2012) (federal case construing similar residential-use covenant; found ambiguity)
- Slaby v. Mountain River Estates Residential Ass’n, Inc., 100 So.3d 569 (Ala. Civ. App. 2012) (rental income did not transform single-family residence into a commercial use)
- Lowden v. Bosley, 395 Md. 58 (Md. Ct. App. 2006) (distinguishing landlord commercial benefit from residential use by tenants)
- Royal Oaks Vista, L.L.C. v. Maddox, 372 Ark. 119 (Ark. 2008) (restrictive covenants disfavored; must be strictly construed against restrictions on land use)
- Holaday v. Fraker, 323 Ark. 522 (Ark. 1996) (courts should not construe covenants to defeat their plain and obvious purpose)
- Ligon v. Stewart, 369 Ark. 380 (Ark. 2007) (standard for clear-error review of factual findings)
- Ark. State Game & Fish Comm’n v. Sledge, 344 Ark. 505 (Ark. 2001) (equitable injunctions reviewed de novo)
- Aviation Cadet Museum, Inc. v. Hammer, 373 Ark. 202 (Ark. 2008) (definition and elements of nuisance)