Online Short-Term Renting Upheld as Not Clearly Commercial

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By Alexis Kramer

The owners of a single-family home can rent their property online on a short-term basis despite a covenant prohibiting commercial activity on the lot, the Wisconsin Court of Appeals held June 13 ( Forshee v. Neuschwander , 2017 BL 199704, Wis. Ct. App., No. 2016AP1608, 6/13/17 ).

The restrictive covenant is ambiguous about whether short-term rentals constitute commercial activity, so it can’t be enforced against the homeowners to block them from renting to others, the court said in an opinion by Judge Lisa K. Stark that reversed a lower court’s decision.

The decision highlights the difficulty in applying existing property laws and regulations to the popular practice of short-term renting through online platforms such as Airbnb Inc. and VRBO.com. Short-term rentals are part of the gig economy, which is characterized by freelance or contractual, instead of permanent work.

Seven neighbors of homeowners Richard Lee and Mary Neuschwander alleged that the Neuschwanders violated the covenant by renting their property via vacation rental website VRBO. They alleged the Neuschwanders made $55,800 in rent in 2015.

The court said that reasonable minds could differ as to whether short-term rentals meet the dictionary definition of “commercial activity.” The fact that the Neuschwanders sell to tenants the right to use their property for profit suggests commercial activity, the court said. On the other hand, the tenants are using the property as a residence and no evidence shows any exchange of money occurs on the lot, the court said.

The court said that because Wisconsin’s public policy favors unrestricted property use, all doubt should be resolved in favor of the property owner.

An attorney for the Neuschwanders’ neighbors didn’t immediately respond to a request for comment.

Spears Carlson & Coleman SC represented the neighbors. Appellate Consulting Group represented the Neuschwanders.

To contact the reporter on this story: Alexis Kramer in Washington at aKramer@bna.com

To contact the editor responsible for this story: Keith Perine at kperine@bna.com

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