1st District Court of Appeal affirms dismissal of declaratory judgment in rental property case

By Richard Jones | May 11, 2017

TALLAHASSEE — Florida's 1st District Court of Appeal recently affirmed a dismissal of a declaratory decision issued by a lower court in a case disputing whether property used for short-term rentals violated an agreement.

The case involved the Santa Monica Beach Property Owners Association, et al and its claims against property owners David Acord and Virginia Acord, who owned land in a subdivision in Bay County.

In a unanimous opinion, a three-judge panel found that a declaratory judgment issued by Michael C. Overstreet of the Circuit Court for Bay County was correct because the use of the property by the couple as short-term rental did not violate the restrictive covenants in the contract between the property owners and the owner’s association.

In December 2015, the association contacted the couple and informed them that the use and advertising of the unit for short-term rental was in violation of the restrictive covenants and requested that the couple discontinue their “vacation rental business” on the property by March 2016.

In July 2016, the association filed a complaint for declaratory judgment alleging that the couple was in violation of the agreements and had continued to advertise their rentals on the internet. The complaint alleged the couple had turned the properties into a rental business. The association alleges the couple established a commercial endeavor when they obtained a business license and started collecting various state and local taxes on the rentals under the name Acord Rental.

The Acords' responded by arguing that the short-term vacation rentals were only intended for residential purposes and should not be considered a business endeavor because the renters were using the properties for only residential purposes.  

Overstreet agreed, stating that just because the state regulatory bodies require licenses for certain activates, that does not necessarily mean the couple's property had been transferred to business use. Overstreet also said the contract and its covenants were silent on the issue of the permissive use of short-term rentals.

The appeals court opinion issued by Judge Kent Wetherell said that the issuing of a license does not transform the proper to business use but held that the real issues are if the operation of short-term bed and breakfast violate the restrictions on business or commercial use.

In the panel's opinion, the covenants did not actually prohibit using the property for short-term rentals. The judges found that the contract should have included explicit language disallowing the property use for short-term rental.

Judges Timothy Osterhaus and M. Kemmerly Thomas concurred with the decision.

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