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Residential use covenants won’t necessarily prohibit all business activities

BY PETER S. SACHS – THE ASSOCIATION BARRISTER

Restrictions found in homeowners’ associations’ and condominium associations’ governing documents are generally disfavored by courts in favor of the free and unrestricted use of property by owners. This is the reason why communities put so much time and care into drafting the language contained in their declarations, by-laws, rules and amendments. The ability to enforce property use restrictions depends on the clarity of what conduct is prohibited and what conduct violates the restrictions.

The waters may be cloudy when it comes to restrictions in declarations that require properties to be used only for residential purposes. While such restrictions seem clear upon first reading, in practice, when it comes to enforcement, such provisions can turn out to be unexpectedly complicated. How precisely to define “residential purposes” and whether or not restrictions requiring only residential use prohibit all business activities are questions that have vexed associations and the courts alike. As the result of a variety of case decisions over a number of years, a framework has been developed that today gives guidance as to how to interpret covenants that require properties to be used only for residential purposes.

Generally, properties subject to such residential use covenants may nonetheless still be used to a minor extent for some business activities so long as the activities are casual, unobtrusive, result in no appreciable damage to neighboring property, and do not result in unreasonable inconvenience, annoyance or discomfort to neighboring residents. Such minor business activities must be incidental to the good faith residential use of the property by its owner or occupant. Courts will sometimes review the evidence to determine if multiple factors of a commercial enterprise are present. Therefore, prior to initiating enforcement activities, associations are encouraged to determine if such factors may be shown in order to support the position that a violation is occurring.

Enforcement has become difficult as the result of this framework. It can be costly and time-consuming for an association to prove that business activities are sufficiently substantial to violate residential use covenants. Many communities have resorted to amending their governing documents to include provisions directly restricting or regulating items that otherwise might merely be factors of a commercial enterprise. Namely, it is not uncommon for an association’s governing documents to directly prohibit and/or regulate commercial signs, commercial vehicles, traffic, parking, guests, animal breeding, storing caustic or noxious chemicals or other such items that may affect the rate of the association’s insurance, etc.

The success of any enforcement action addressing a violation of a residential use covenant by a homeowners’ association or condominium association will largely depend upon how much evidence is available. Communities must understand how the facts of any particular matter relate to the framework established by case law. Associations should also be prepared to discuss with their legal counsel amending their governing documents as necessary to prohibit and/or regulate any specific conduct that may be objectionable.

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Peter S. Sachs is the managing director with Sachs Sax Caplan in Boca Raton, Fla.

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