Appeals Court Affirms Lower Court Finding That City’s Zoning Ordinance Permitting a Home Business Does Not Include the Business of Providing Short-Term Rental Accommodations

In People of the City of St. Clair Shores v Dorr, unpublished per curiam opinion of the Court of Appeals, issued October 29, 2020 (Docket No 349910), the Michigan Court of Appeals ruled—in a highly fractured opinion—that “a person of ordinary intelligence would reasonably understand from [a zoning ordinance that requires a home business be ‘incidental’ to the use of the dwelling as a dwelling] that the business therefore cannot be coextensive with the primary use of the dwelling as a dwelling.” As such, the Court of Appeals held that the City’s zoning ordinance prohibited him from using his home for short-term rentals through Airbnb.

The Numerous Court of Appeals Opinions

Defendant was charged with violating the City’s Zoning Ordinance, which restricted his home to single-family residential use only. Defendant admitted that he was engaged in the “business” of using his home for short term-rentals through Airbnb. Defendant argued that the zoning ordinance, which permitted “A home occupation or business” that is “clearly incidental to the principal use of the dwelling unit for dwelling purposes” also permitted the renting of his home on Airbnb because such use was the operation of a business out of his home.

The lead opinion authored by Judge Borrello, and with which Judge Jansen concurred in the result only, explained that “[b]ecause defendant’s short-term rental business directly depends on using the dwelling unit as a dwelling for guests, defendant fails to satisfy the [zoning ordinance requirement] that the ‘home occupation or business must be clearly incidental to the principal use of the dwelling unit for dwelling purposes.’” Judge Borrello explained that “[t]he purpose of the business is identical, not incidental [as required], to the principal use of the dwelling unit for dwelling purposes.”

It was this assertion that led Judge Swartzle to dissent in the case. Judge Swartzle noted explicitly that he parted with the lead opinion due to “its apparent conclusion that a permissible business use cannot involve any ‘lodging’ or ‘rooming’ in the residential home whatsoever.” Judge Swartzle noted that “dwelling purpose” is not defined in the statute, and that, in his view, the terms “dwelling purposes” and “residential purposes” “are intended to cover purposes that have a ‘permanent and distinct domestic character.’” Judge Swartzle explained that under his reading, a single-night’s stay as an Airbnb rental would not qualify as a “dwelling purpose” and therefore, the use would not fall outside the home-business exception of the City’s Zoning Ordinance.

Judge Swartzle argued that his reading was more consistent with the rest of the City’s Ordinances, which also regulated “tourist houses.” In Judge Swartzle’s reading, regulating an Airbnb rental through the “tourist house” rental ordinance would make sense, except, in this case, the City had made the decision to exclude from the meaning of a “tourist house” “any private residence or home, the owner or occupant of which is not regularly engaged in  renting any rooms in such residence or home to permanent or transient roomers who are not related to such person.”

Judge Swartzle also argued that even if the lead opinion’s reading of the Ordinance at issue is reasonable, then it is unconstitutionally vague as-applied to Defendant, who was convicted for renting his home for only a single day. Judge Swartzle closed his dissent by arguing that “if the city wants to regulate or prohibit Airbnb rentals and the like, then it should clearly say so.”

Conclusion

Judge Swartzle’s final encouragement—for governing authorities to regulate or prohibit Airbnb rentals clearly, if the governing authority is interested in doing so—should be taken to heart by Associations who often face decisions about whether to regulate short-term rentals in their communities. While this (unpublished) case can be used as persuasive evidence that an incidental home-business exception may not be read to allow short-term rentals as a business endeavor, community associations should be aware that amending the bylaws to clearly prohibit or regulate the issue is a much more efficient and comprehensive solution. 

Katherine R. Hopkins is an attorney with Hirzel Law, PLC and focuses her practice in the areas of appellate law, community association law, and civil litigation. Ms. Hopkins received her Bachelor of Arts degree in English (with a minor in Psychology), and a Teaching Certificate from Michigan State University. Prior to attending law school, Ms. Hopkins was a high school English teacher in Metro-Detroit. Ms. Hopkins obtained her Juris Doctor degree from The University of Michigan Law School, where she was a note editor for the Journal of Law Reform. Prior to joining Hirzel Law, PLC, Ms. Hopkins clerked for Chief Justice Pro Tem David Viviano on the Michigan Supreme Court for two terms, and was an Attorney in the Research Division of the Michigan Court of Appeals. She can be reached at (248) 478-1800 or [email protected].