Subdivision Declaration Prohibited Daily/ Weekly/ Monthly Sublets: Court Decides if One Year Rental was Covered or Permitted

This was originally posted on the SGR blog.

Reported decisions abound relating to the violation/enforcement of the prohibition of short-term rentals of coop and condo units. But are those restrictions enforceable where contained in the declaration of a residential subdivision in which each singular property was separately and privately owned?

LG Lakeside Limited Liability Company, owned by Glenn and Laura Kupsch, completed the construction of a home at 6 Mayfair Drive in Bolton Landing, Warren County in early 2018/late 2019. The home is located in the Mayfair Resort subdivision on the shores of Lake George, with all homes in the subdivision subject to a Declaration of Covenants, Restrictions, Easements, and Assessments dated May 15, 2012, and amended on November 13, 2013.

Article II, § 2 (N) of the Declaration provides in pertinent part:

Subletting of Property. [The] right to sublet individual lots shall be limited to one-year rental terms only by written lease to be provided to [Mayfair]. No daily, weekly, or monthly rentals shall be allowed.

Upon the completion of construction, Lakeside began renting the home on a weekly basis. Mayfair Resort Homeowners Association, Inc.– together with Paula Wun and Susan Burke, both members of the HOA who own homes at 12 Mayfair Drive and 7 Mayfair Drive, respectively — then filed suit in February 2020 seeking, inter alia, a permanent injunction prohibiting Lakeside from continuing with short-term rentals of its property in violation of Article II, § 2 (N) of the Declaration.

Mayfair, Wun, and Burke simultaneously moved by Order to Show Cause for a preliminary injunction restraining Lakeside from renting its property on a daily, weekly, or monthly basis during the pendency of the action. Lakeside appeared in opposition, arguing that Article II, § 2 (N) of the Declaration prohibited only daily, weekly, and monthly sublets of the home — not daily, weekly and monthly rentals. The Court was not persuaded by that tenuous interpretation, however, and found that — notwithstanding the Declaration’s use of the term sublet in the title of Article II, § 2 (N) — the section clearly stated that “[n]o daily, weekly, or monthly rentals shall be allowed.” In that regard, Article X of the Declaration stated that “[a]ll captions. .. are for convenience only and do not in any way limit or amplify the provision[s] hereof.” The motion was granted by Order dated June 3, 2020, and entered that same date, with this Order expressly providing “that [Lakeside], its agents and employees, are enjoined and restrained, during the pendency of this action, from offering the [s]ubject [p]roperty for rent for periods of less than one year.”

Shortly after the entry of that Order Mayfair discovered that Lakeside had rented its home from June 13, 2020 to August 24, 2020, thereafter moving for an Order finding Lakeside in both civil and criminal contempt. This motion was granted by Decision and Order dated November 4, 2020, and entered that same date, with Lakeside directed to (1) reimburse Mayfair for the counsel fees and costs incurred in connection with the motion as and for a punishment for its civil contempt, and (2) pay a fine of $25,200.00 — roughly the same amount received for the rental — to the Warren County Treasurer as and for a punishment for its criminal contempt. 

Aside from the extensive motion practice, the issue was joined by Lakeside asserting a counterclaim against Burke alleging that her home violated Article II, § 2 (B) of the Declaration which required that “[e]ach home shall contain a minimum of 1,600 square feet of living space exclusive of basement and attic areas, garages, porches, patios, or decks.” More specifically, Lakeside alleged that:

The house’s footprint is 24’x 24′ which gives the total sq ft of the 1st level of 576 sq ft. There is a second floor with dormers (so actual size was not 24×24), which would bring the house to a max sq ft measurement of 1152 square feet[,] far below the minimum 1,600 square feet required by the Declaration.

Before the Court was Mayfair’s motion for partial summary judgment relative to their request for permanent injunctive relief prohibiting Lakeside from any daily, weekly, or monthly rentals of its property, as well as their request for costs and counsel fees with respect to the action.

A party seeking summary judgment must establish its entitlement to judgment as a matter of law by admissible proof. Once the movant has met that initial burden, the burden then shifts to the opponent of the motion to establish, by admissible proof, the existence of genuine issues of fact.

At the outset, the Court found that Mayfair, Wu, and Burke had amply established their entitlement to partial summary judgment. Insofar as their request for permanent injunctive relief was concerned, they submitted a copy of the Declaration together with the affidavit of Wun, whose home is located only one lot away from that of Lakeside. In her affidavit — which was also submitted in support of the motion for a preliminary injunction and discussed by the Court in its prior decision — Wu recounted in painstaking detail the many times Lakeside rented its home on a weekly basis and the problems that arose because of these rentals. Lakeside in fact did not dispute having rented its property on a weekly basis. And argued again that the Declaration did not prohibit such rentals.

Insofar as the request for costs and attorneys’ fees is concerned by Mayfair, Wu, and Burke, Article VII, § 1 of the Declaration provided as follows:

[E]ach person to whose benefit this Declaration insures [sic], including the [HOA], may proceed at law or in equity to prevent the occurrence, continuation or violation of any provision of the Declaration, and the [C]ourt in any such action may award the successful party reasonable expenses in prosecuting such action including attorney’s fees.

The Declaration was a contract and [the Court’s review and analysis was governed by principles of contract interpretation that were both familiar and well-settled. As a starting point, it was axiomatic that a contract was to be construed in accordance with the parties’ intent, which was generally discerned from the four corners of the document itself. Consequently, a written agreement that was complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms. Further, the contract must be read as a whole to determine its purpose and intent, and it should be interpreted in a way that reconciled all its provisions, if possible.

Here, there was simply no question that the Declaration prohibited daily, weekly and monthly rentals of homes within the subdivision, as well as provided for an award of reasonable expenses and attorney’s fees to the prevailing party in any lawsuit seeking to prevent a violation of the Declaration.

The Court found that Lakeside failed to establish the existence of any genuine issues of fact. In this regard, Lakeside submitted only the affirmation of counsel in opposition to the motion which reiterated the very same argument previously rejected by the Court, namely that the Declaration prohibited only daily, weekly and monthly sublets — not rentals. That argument was wholly without merit. A Court may not by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing — which was precisely what Lakeside was asking the Court to do.

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