961 N.W.2d 596
S.D.2021Background
- In 1997 Shirt Tail Gulch subdivision covenants limited lot use to “residential purposes,” stating that that phrase "shall include" home occupations, offices of recognized professions, and bed-and-breakfast uses.
- Wilsons own Lot 25; Maynards purchased adjacent Lot 24, built a large multi-bedroom house capable of hosting large groups, and intended it for short-term vacation rentals.
- Maynards advertised the house on vacation-rental platforms, rented it frequently (dozens to nearly daily in peak months), and charged substantial nightly rates.
- Wilsons sent a pre-construction demand letter; after rentals began they sued for declaratory judgment and injunctive relief claiming the rentals violate the residential-purpose covenant.
- The circuit court found the covenant unambiguous, held short-term rentals are a permitted "residential purpose," granted summary judgment for Maynards, and denied injunctive relief.
- The South Dakota Supreme Court affirmed, rejecting Wilsons’ argument that profit-making or transiency converts residential use to commercial and concluding the covenant’s plain language covers short-term rentals.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether short-term/vacation rentals violate the covenant limiting use to “residential purposes” | Wilson: Short-term rentals are commercial/transient and thus not a residential purpose | Maynard: Use for eating, sleeping, recreation — even temporarily — is residential; income does not change character | Held: "Residential purposes" unambiguous and includes short-term rentals; covenant not breached |
| Whether receipt of rental income converts residential use into a prohibited commercial use | Wilson: Profit motive makes use commercial and outside covenant | Maynard: Nearly universal authority says income does not transform residential use if renters use premises for ordinary living | Held: Income does not transform residential character; rentals remain residential use |
| Whether the covenant’s listed exceptions (home occupations, offices, bed & breakfast) narrow or expand "residential purposes" | Wilson: Enumerated commercial-like exceptions show drafters intended to limit allowed commercial uses; vacation rentals not allowed | Maynard: The word "include" expands, not limits; listed examples are illustrative | Held: List is enlarging/illustrative; inclusion of those uses does not exclude short-term rentals under plain meaning |
| Whether injunctive relief was warranted (irreparable harm / alteration of neighborhood character) | Wilson: Short-term rentals materially alter neighborhood and cause nuisance, warranting injunction | Maynard: No showing of irreparable harm or fundamental change; traffic and transient occupants are not per se nuisance | Held: Wilsons failed to show irreparable harm; injunction properly denied |
Key Cases Cited
- Jackson v. Canyon Place Homeowner’s Ass’n, Inc., 731 N.W.2d 210 (S.D. 2007) (restrictive-covenant interpretation follows contract rules; undefined terms may have plain meanings)
- Wilkinson v. Chiwawa Communities Ass’n, 327 P.3d 614 (Wash. 2014) (use for eating, sleeping, recreation is residential regardless of rental duration)
- Santa Monica Beach Prop. Owners Ass’n, Inc. v. Acord, 219 So. 3d 111 (Fla. Dist. Ct. App. 2017) (short-term vacation rentals are residential where renters use property for ordinary living)
- Tarr v. Timberwood Park Owners Ass’n, Inc., 556 S.W.3d 274 (Tex. 2018) (rental duration does not change residential character; covenant ambiguities construed to favor free use)
- Dunn v. Aamodt, 695 F.3d 797 (8th Cir. 2012) (short-term rental held compatible with residential-use covenant)
- Edwards v. Landry Chalet Rentals, LLC, 246 So. 3d 754 (La. Ct. App. 2018) (contrasting decision holding short-term rentals commercial under different covenant language)
- Halls v. White, 715 N.W.2d 577 (S.D. 2006) (undefined covenant terms are not ambiguous if they have plain, ordinary meanings)
- Luedke v. Carlson, 41 N.W.2d 552 (S.D. 1950) (historical statement about strict construction of covenants referenced in parties’ briefing)