In 2015 the Colorado Court of Appeals, Third Division, affirmed the decision made in Houston v. Wilson Mesa Ranch Homeowners Ass’n, Inc., that Short Term Rental Agreements cannot be prohibited nor be interpreted as utilizing the property of “commercial use.” An Association’s Declaration is the only document that can prohibit the use of short term rentals. The Court held that an Association has the right to enforce the covenants, however the Association cannot enforce a covenant that doesn’t exists. In O’Neil v. Conejos County Board of Commissioners, 2017 COA 30, 395 P.3d 1185, (Div.2 2017) it also upheld that residences occasionally engaging in short-term rentals are not “commercial use.” The Court disallowed county tax assessor’s reclassification of a residence being used for short-term rentals property from residential to commercial. The Court held “We perceive no unreasonable application of the law in the Board’s refusal to characterize the property’s use as “commercial” instead of “residential” during the time the property was unoccupied. In the first instance, “homes which stand empty a period of time would not lose their residential classification simply because they were not ‘actually’ being used as a residence.” Mission Viejo, 881 P. 2d at 465. In the second instance, to classify a vacation home as commercial for days it was empty, but listed as available for rent on the Internet, would undermine the purpose of the “residential” tax classification—which is to “grant homeowners a modicum of tax relief.” Vail Assocs., Inc. v. Bd. Of Assessment Appeals, 765 P. 2d 593, 594-95 (Colo.App. 1988)”). 

Short term rentals cannot be reasonably interpreted to fall under the prohibition of “any hotel or lodging house.” In the Houston, supra, case the Court acknowledged that a Texas Court had found that language barring, “transient uses” could apply to short term rentals. Yet, the Colorado Court also acknowledged that Colorado law requires interpretation of Declarations in favor of free use of property while Texas law does the opposite. Thus, even language such as “transient use” may not be effective to bar short term rentals. 

What it means for your Community? 

If an Association wants to ban the property for being used as short-term rentals it needs to look at its Declaration. If the Declaration uses language such as “commercial use” or “transient use” under Colorado law it would not be effective in barring short-term rentals. Homeowners would be able to use their property as short-term rentals and still classify as being used for residential purposes. In Colorado only express language in a Declaration barring short term rentals will be effective for that purpose.

What you should do?

  1. Have your attorney review your Declaration.
  2. Consult your attorney on how to amend your Declaration to reflect these changes.  

We would be happy to review your Declaration and advise your Community on what steps need to be taken to address your concerns on short-term rentals. Contact us today.