Protect Your Short-Term Rental Rights in Pennsylvania
Understanding Your Declarations
As short-term rentals (“STRs”) continue to thrive in the Pocono Region and across Pennsylvania, it is important that owners, buyers and owners’ associations understand the documents governing their planned communities. The Declaration, at times called Covenants or Restrictions, is the primary document governing not only the association and community, but also, the Homes within that community.
Summary of Main Points
- As short-term rentals (STRs) continue to grow in popularity across Pennsylvania, particularly in the Pocono Region, it is essential for property owners, buyers, and homeowners’ associations to understand the importance of their community’s Declaration and other governing documents.
- These documents dictate whether or not rentals, including STRs, are permitted.
- Attempts by associations to impose additional restrictions outside of the Declaration are often unenforceable.
- Restrictions on property use must be clearly stated and legally enacted, with substantial changes to rental rights requiring unanimous consent from property owners.
A Declaration will be Strictly Construed
The Declaration will provide whether or not rentals are permitted. It may not be perfectly clear, and often, the association’s board will attempt to regulate matters not within their power or authority under the Declaration. If the Declaration leaves the right to rent untouched, or specifically permitted, then, STRs would also be permitted. As a matter of real estate law, unless the right to rent is restricted, STRs also are not restricted, being just a form of rental. Rental rights – including STR rights – rest completely with the unit owners and are unrestricted. Nicoletti v. Allegheny County Airport Auth., 841 A.2d 156, 161, fn.11 (Pa. Commw. 2004). Importantly, restrictions on real estate are disfavored, Pane v. Indian Rocks Prop. Owners Ass’n, 167 A.3d 266 (Pa. Commw. 2017) and are strictly construed under Pennsylvania law against the party seeking to enforce or create the restriction. Jones v. Park Lane for Convalescents, Inc., 120 A.2d 535 (Pa. 1956). A real estate restriction will never be implied, and such restrictions may only be express and stated in a written instrument. Jones, supra. In fact, as a matter of law, nothing short of a “plain disregard” of the restrictive covenant’s express terms can create [a] violation of the covenant. Pocono Summit Realty, LLC v. Ahmad Amer, LLC, 52 A.3d 261, 269 (Pa. Super. 2012).
Therefore, as a matter of real estate law, a restriction on STRs must be specifically stated, and even more so if the Declaration contains a right to engage in rentals generally. Moreover, the Planned Community Act rightly prohibits the creation of unrecorded additional restrictions. 68 Pa.C.S. § 5306 and comments 1. Section 5205(10) specifically requires that any restrictions created by the declarant on use, occupancy and alienation of the units must be in a recorded document, almost always, the Declaration.
Some Declarations contain a “single-family occupancy” provision, or similar language, such as a “single-family dwelling.” Certain Associations then attempt to distinguish this type of occupancy with a transient occupancy, such as STRs under a certain duration, while still permitting rentals generally. The association then might attempt to ban or restrict STRs as incompatible with a “single-family” occupancy or dwelling. A rule or regulation, or bylaw, by an association that exceeds the restrictions of the Declaration is void. Concerning a conflict between the Bylaws and Restrictions, the Restrictions will prevail. 68 Pa.C.S. § 5203. Therefore, a ban, bylaw or rule or regulation on STRs that is not provided for in the Declaration is void and unenforceable.
Alteration of Property Rights Requires Unanimous Consent
Similarly, it is well established in Pennsylvania law that property rights may not be altered without the unanimous consent of those whose rights have been altered. See Schaad v. Hotel Easton Co., 369 Pa. 486, 87 A.2d 227 (1952); Huddleson v. Lake Watawga Prop. Owners Ass’n, 76 A.3d 68 (Pa. Commw. 2013); see also Weona Camp, Inc. v. Gladis, 457 A.2d 153, 154 (Pa. Commw. 1983) (“It is clear that the property rights of the members may not be affected without their unanimous consent.”). Said another way, an association may not alter property rights by a mere vote of the board, or just a majority of votes cast. Under the law, the minimum vote needed to amend a Declaration is 67% of the unit owners. 68 Pa.C.S. § 5219. Certain matters require unanimous consent.
Rental Rights include Short Term Rental Rights
There are many cases deciding real property rights involving associations arising out of Pennsylvania’s Pocono Mountains region. In Dawson v. Holiday Pocono Civic Ass’n, 36 Pa. D. & C.5th 449 (Carbon Co. 2014), President Judge Nanovic stated:
In general, an owner of property is entitled to use his property in any way he desires, “provided he does not (1) violate any provision of the Federal or State Constitutions; or (2) create a nuisance; or (3) violate any covenant, restriction or easement; or (4) violate any laws of zoning or police regulations which are constitutional.” Parker v. Hough, 420 Pa. 7, 215 A.2d 667, 669 (Pa. 1966) (emphasis in original) (citation omitted). When, however, a restriction or covenant limits the use of real estate, the limitation is narrowly construed in favor of the owner and may, over time, dissipate and be lost. Holiday Pocono is a private community held together by a common set of restrictive covenants which bind some, but do not nullify all, rights of ownership. The Development is located in the Poconos with many of the homes being second homes used as vacation properties by their owners. Common sense dictates that the right to lease these homes, especially on a short-term basis, is important. To relinquish this right by covenant requires an express clear statement that the right does not exist. To do so either in an association‘s bylaws or the rules and regulations of its board of directors requires the express consent of all affected owners.
The case of Weona Camp, Inc., cited above, also arising from Carbon County, requires unanimous consent when property rights are altered, even by a bylaw amendment.
In the case of Ruffed Grouse Ridge Owners’ Association v. Hura, 317 A.3d 665 (Pa. Commw. 2024), originating in Wayne County, the association argued that the Declaration’s limitation on use to “residential purposes only” meant that only the owner and/or his family members may reside at the property and that a unit owner’s generation of rental income was “commercial in nature and a clear violation of the restrictive covenant.” In examining the Declaration, the Court concluded otherwise. The Court flatly rejected the distinction between STRs and longer-term rentals. Indeed, the association admitted that non-STRs would be permitted and in compliance with the Declaration, but, STRs would be in violation. The Court noted that the Declaration clearly permits use for residential purposes, and that STRs were residential, and therefore permitted.
Also, another Wayne County case, the matter of Chan v. Ass’n of Prop. Owners of the Hideout, Inc., 2024 Pa. Commw. LEXIS 189, petition to allow appeal pending, involved a purported bylaw amendment seeking to strictly regulate STRs in The Hideout Community. The association adopted the bylaw amendment by majority vote, not as an amendment to the Declaration. The Declaration itself permitted rentals and contained a building restriction limiting the structures on lots to be only “single-family dwellings.” The association unsuccessfully argued that STRs violated a “single-family dwelling” use restriction, which the Court found instead to be building restriction. The Court struck and declared the bylaw amendment void.
Finally, in the Wayne County case of John Paul Duphiney, et al. v. Briar Hill South Association, Wayne Co. C.C.P., No. 163-CV-2022, Opinion and Order entered May 4, 2023 (Meagher, J.), the Court struck and voided an association’s total ban on STRs. The deed restrictions specifically provided that “[t]hese restrictions shall not prohibit the sale or rental of the properties . . . .” From this language, the Court determined that it could not infer any restriction on rentals, including STRs, making the ban improper.
Zoning Law is Inapplicable to Private Community Law
The leading zoning case on STRs, Slice of Life, LLC v. Hamilton Twp. Zoning Hearing Bd., 207 A.3d 886 (Pa. 2019), is inapplicable to private real property rights and community association law. It is the law of Pennsylvania that zoning and private restrictions do not affect each other, are different and unrelated, with one derived from police power and the other from contract. The Supreme Court of Pennsylvania has directly recognized that “a gulf ofdifference” separates a zoning regulation from a covenant restriction. Haskell v. Gunson, 137 A.2d 223, 225 (Pa. 1958); Mazeika v. Am. Oil Co., 118 A.2d 142, 143 (Pa. 1955); Michener Appeal, 115 A.2d 367 (Pa. 1955).
In Parker v. Hough, 420 Pa. 7, 12, 215 A.2d 667, 670 (1966), a building restriction case, the Supreme Court explained this wide difference even further, that “there is all the difference in the world between [a zoning ordinance and a building restriction]. In one case the Government through its police power (and for what it believes is the public interest) is regulating and interfering with the owner’s Constitutionally ordained right to a reasonable use of his property; in the other, the property owner himself has voluntarily assumed, by contract, an obligation restricting its use and waiving any Constitutional right of property he may possess.” Id. at 12, 215 A.2d at 670.
The zoning case of Slice of Life is being peddled to associations as providing legal cover for them to ban or regulate STRs on the basis that an STRs is not a residential purpose or a “single-family dwelling.” Both the Commonwealth Court and the Wayne County Court of Common Pleas rejected the applicability of Slice of Life in Ruffed Grouse and Duphiney, respectively. The Commonwealth Court in Chan did not even reference Slice of Life, despite it being raised by The Hideout and related parties. The Hideout is now attempting an appeal to the Pennsylvania Supreme Court on that very issue. Despite clear authority to the contrary, many association boards will be tempted to apply zoning law to the association’s Declaration, incorrectly believing that the association possesses broad police powers, instead of the narrow and limited contractual powers under their own Declarations.
Conclusion
There are many forces at play right now in the world of STRs. STRs can be found as first homes, second and third homes, family getaways, and investment properties. In many regions, local economies are now strengthened by STRs, not to mention the massive amount of tourism dollars STRs support. Yet, there are detractors who, in the name of the community, or self-interest, take steps contrary to the community’s own governing documents to ban or greatly limit STRs. The right to engage in STRs is a property right and may only be restricted if done in a lawful manner and with the authority to do so.
Know your Declaration; know your STR rights.
Frequently Asked Questions about Short-Term Rentals
Can my association restrict or ban short-term rentals?
Your association may restrict or ban short-term rentals only if the procedures in the Planned Community Act and the association’s declaration or covenants are followed. Usually, such a substantial change would require the unanimous consent of all affected property owners and cannot typically be accomplished through a mere bylaw amendment.
What should I do if my association objects to my short-term rental use?
Familiarize yourself with the association’s declaration or covenants. If there is not a clear restriction stated in those controlling documents, you should contact an attorney.
Are there specific municipal requirements for short-term rentals in planned communities?
Municipalities may adopt reasonable ordinances that regulate short-term rentals. Often those ordinances are overreaching, and declare short-term rentals to be a nuisance. Other times, the ordinances might attempt to regulate the number of visitors. Also, only municipalities that have adopted a zoning ordinance may engage in zoning. Some municipal ordinances governing short-term rentals may be in fact improperly adopted zoning ordinances. Further, second class townships have more limited powers than do first class townships.
Can I challenge my homeowners’ association if they impose unauthorized restrictions on STRs?
Yes. Unauthorized rental restrictions can be challenged. Ultimately, you may file a lawsuit against the association to have the unauthorized restriction declared void and short-term rental rights restored.
What happens if my community starts enforcing unrecorded restrictions on STRs?
Not all STR restrictions must be recorded. For instance, reasonable rules and regulations may be enforced, provided that the right to restrict STRs is found within the association’s declaration or covenants. If there is no recorded power or authority for the association to restrict STRs, then, the restrictions are void and may be challenged in court.
Can local ordinances or state laws override my HOA’s Declaration regarding STRs?
Yes, both local ordinances and state laws may override your HOA’s declaration regarding STRs. For example, some ordinances and zoning regulations may apply to limit occupancy or to permit short-term rentals only in certain zoning districts. Also, the Pennsylvania Planned Community Act applies throughout the Commonwealth and supersedes certain declaration provisions.
Do I need to register my short-term rental with the local government or HOA?
The need to register your short-term rental would be governed by each individual association and each specific municipality. You should consult both your association’s management office and the manager or code enforcement officer of your municipality.
Does my local government have the power to restrict or ban STRs?
Yes, your local government does have the power to restrict STRs. However, it does not have the power to outright ban all STRs. Likewise, not all restrictions imposed by a municipal ordinance are valid.
What steps should I take to minimize liability and risk when operating a short-term rental?
First, know your rights. Understand your association’s governing documents, such as the declaration, covenants, bylaws and any deed restrictions. Second, consider creating an LLC or other entity to insulate yourself from the personal risk of engaging in short-term rentals, such as might arise from a personal injury. Third, be absolutely certain that you have the appropriate primary insurance in place together with an umbrella policy. Both policies must provide coverage for claims arising from short-term rentals.
About The Author(s):
Mr. Smith, a partner of Timoney Knox, LLP, serves as Chair of the Firm’s Litigation Group and has been consistently recognized by Super Lawyers and Best Attorneys since 2005. In 2017 Mr. Smith served as the President of the Montgomery Bar Association. His commercial and real estate litigation practice spans across the Commonwealth of Pennsylvania.
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https://www.timoneyknox.com/protect-your-short-term-rental-rights-in-pennsylvania/
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