The Supreme Court of South Dakota recently ruled upon a short-term rental case involving a community association. In Wilson v. Maynard, No. 29307 (S.D. Jun. 16, 2021), the community association’s declaration only permitted “residential purposes”. After the Maynards began renting their property to large groups as a short-term rental, a neighbor (Wilson) file suit alleging that the short-term rentals unambiguously constituted a commercial purpose. The trial court, court of appeals and the Supreme Court all found that short-term rentals are considered a “residential purpose”.

While the South Dakota ruling is not binding upon Arizona communities, it is consistent with Mulcahy Law Firm’s interpretation of residential/commercial use restrictions as they apply to short-term rentals. Pursuant to ARS 33-1260.01(A) / 33-1806.01(A), “A member may use the member’s property as a rental property unless prohibited in the declaration and shall use it in accordance with the declaration’s rental time period restrictions.” Accordingly, in Arizona, a community association can only restrict rental time periods to the extent that such restrictions are reflected in the community’s declaration.

Do your community association’s Governing Documents restrict short-term rentals? If so, are the restrictions in compliance with Arizona law and are they enforceable? Does your community association need to consider an amendment to the Declaration? Please contact Mulcahy Law Firm, P.C. for answers to these questions and additional information and help with this issue.