Short-Term Rentals Expose Conflict

Airbnb, Vrbo, and other short-term rentals expose conflict between freedom of contract and free use of land.
By: Hastings Law
CHAPEL HILL, N.C. - Jan. 20, 2021 - PRLog -- In a little more than a decade, Airbnb has revolutionized the travel industry through the establishment of user-friendly platforms that connect guests with hosts at locations across the globe. Guests can now customize their travel experience from their palms while property owners can open their doors to increase income with minimal risk of loss.
Still short-term rentals draw the ire of NC community associations and neighborhoods across the state. Opponents argue the transient nature of the rental inhabitants in residential areas can lead to an increase in traffic congestion, parking shortages, safety concerns, noise nuisances, and unsightly landscaping troubles (read into that what you will). In response, homeowners have started to spearhead efforts to compel community associations to regulate the ability for other members to market property on Airbnb or other short-term rental platforms.
But it's not that easy. Some owners turned to existing declarations in their associations that prohibit the use of property for "business use." Not so fast, the NC Court of Appeals ruled in Russell v. Donaldson, 731 S.E.2d 535 (N.C. App. 2012), explaining instead that short-term rentals might be a business (i.e., meant solely to turn a profit), but that does not equate to "business use," as long as the inhabitants use the property for residential purposes, such as sleeping, bathing, and cooking.
Other homeowners then focused on amending bylaws to declare regulations on the use of short-term rentals. That's not the easiest of prospects either. Even if a tipping point of owners can convince an association to take action, North Carolina law mandates any restriction on alienation to conform to a reasonableness standard. Armstrong v. Ledges Homeowners Ass'n, Inc., 360 N.C. 547, 633 S.E.2d 78 (2006). There, the Court attempted to reconcile the conflict between the freedom of contract (bylaws and declarations) and the freedom to alienate property. On the one hand, it acknowledged that the primary purpose of a court when interpreting a covenant is to give effect to the original intent of the parties because they originate in contract. On the other hand, courts must strictly construe those covenants in favor of the free use of land.
In the end, reasonableness in novel areas of the law can often elude a clear definition. The issue of short-term rentals presents such novelty and pits owners against each other with a lot at stake for both sides. Meanwhile, it's safe to say that Airbnb and similarly situated platforms are here to stay, and NC courts will continue to navigate the choppy waters created when the most classic of free market principles collide.

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