A regulatory wind blowing from the West – Michigan Lawyers Weekly

By Robert Pollack
The difficulty of short-term leases is a very hot-button difficulty throughout Michigan proper now, with many various events having an curiosity in how the state regulates the difficulty.
Single-family householders might have an curiosity in renting out a room to offset their mortgage cost. Investors might have an curiosity in buying cash-generating properties for passive revenue. Homeowner’s associations and condominium associations might have an curiosity in managing how the houses or condos of their communities are used. And lastly, cities might have an curiosity in learn how to greatest regulate short-term leases for the good thing about operators whereas sustaining the character of their residential neighborhoods.
Several circumstances in the previous few years in Michigan have highlighted the proven fact that short-term rental legislation nonetheless varies from native jurisdiction to native jurisdiction, with some courts various as to the actual nature of the use, however one case specifically highlights the crux of the difficulty nicely.
In Reaume v. Township of Spring Lake (MiLW 07-100320, 7 pages), the Court of Appeals first dominated that working a short-term rental is a industrial use of property and never a residential one and was thus prohibited in a residential zoning district. The ruling was then appealed to the Michigan Supreme Court, the place the Supreme Court upheld the impact of the ruling, that the use was prohibited, however on a unique foundation: The court docket dominated that the short-term rental use of property fell inside the township’s definition of a “motel,” not a “dwelling.” Because “motels” weren’t a permitted use in the residential zoning district, and the plaintiff’s property was zoned residential, the excessive court docket affirmed the appellate court docket ruling and concluded that short-term leases weren’t allowed in the district.
One of the different fundamental points in the Court of Appeals case that the Michigan Supreme Court addressed was whether or not the definition of a “single-family dwelling” might apply to a household that was staying in a short-term rental on a short lived foundation. The Court of Appeals dominated {that a} “household” for the functions of single-family zoning didn’t apply to “people whose relationship is of a transitory or seasonal nature” and excluded transient or short-term rental occupation in that zoning on these grounds.
The Supreme Court of Michigan, nevertheless, vacated that slim query, affirming {that a} “household” for the functions of single-family dwellings, though not being of a transitory nature with respect to one another, nonetheless could possibly be transitory because it pertains to their occupancy. This theoretically might lay the groundwork for permitting short-term leases in residential single-family zoning districts if there are not any different provisions of the metropolis’s zoning ordinance that take care of short-term occupancy, like a “motel,” wherein the use would extra readily match.
Other subsequent circumstances have sidestepped this difficulty of whether or not short-term leases are allowed in single-family residential districts by ruling on different grounds. For instance, in Pigeon v. Ashkay Island, LLC (MiLW 08-103562, 5 pages), the court docket discovered {that a} short-term rental property was not permitted in a residential district as a result of it met the definition of a “vacationer residence,” which isn’t permitted in the district.
Confusion concerning learn how to outline and regulate short-term leases could also be partly why the Michigan Legislature has been engaged on passing statewide payments not too long ago that will carry some conformity to the difficulty. House Bill 4722 and Senate Bill 446, payments with similar language, would enable short-term leases throughout the state as a permitted residential use in all residential zones with out the want for a particular use or conditional use allow. Under these payments, municipalities would nonetheless be allowed to manage a few of the results of short-term leases, corresponding to site visitors, noise and promoting, and would be capable to implement ordinances for the safety of public well being and security, so long as it didn’t have the impact of prohibiting short-term leases.
The City of Sedona, Arizona, has been the epicenter of the debate over short-term leases in Arizona. Sedona had beforehand made information in Arizona by being one early metropolis to completely ban short-term leases. But in 2016, the Arizona Legislature handed Senate Bill 1350, stopping native governments from banning short-term leases and permitting them throughout the state, very like HB 4722 and SB 446 in Michigan. This Arizona legislation has been modified barely to permit cities to impose some zoning restrictions and regulate well being and security, however as of now, the legislation has remained comparatively comparable over the previous 5 years, and efforts to dispose of it have been rebuffed.
Arizona has seen a boon in short-term leases in consequence. For instance, in 2014, Phoenix had 867 properties for lease on Airbnb, which is now at 3,707 energetic leases, in response to AirDNA.co. Arizona has seen the most drastic results of the legislation notably in Sedona, the place seemingly complete neighborhoods had been purchased up and became profitable Airbnb leases charging a whole lot per night time, some purchased up by capital traders from out of state. Although this has created a terrific funding alternative in the metropolis, it additionally has created a pointy downturn in inexpensive housing — the common house is now over $800,000 in Sedona and fewer than 2% of Sedona residents had been born and raised in the metropolis. Some are attributing the drawback to the 2016 legislation.
It is difficult to say how a lot of the difficulty is brought on by short-term leases versus different intervening variables driving demand to locations like Sedona, corresponding to extra folks working remotely from scenic locations throughout the pandemic, folks shifting out of cities usually, and other people shifting from California. Whether a one-size-fits-all method throughout the state or a extra localized method is extra acceptable stays to be seen in Michigan, however one factor is definite: Michigan municipalities, HOA/condominium associations, traders and householders will doubtless want efficient authorized steerage to navigate the thorny authorized points concerned with short-term leases which can be positive to come up in the future.
Robert Pollack, an actual property, enterprise, and municipal legislation lawyer with Fausone Bohn LLP in Northville, is licensed to follow legislation in Michigan and Arizona.


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