VRBOs: Are They for You?

There is a growing use of vacation rentals by owner (VRBO) by property owners nationwide. Many of us know people who have used this concept for their own property or have used the VRBO website to obtain a vacation spot or accommodation during Packer weekends.

If you are considering using your property as a VRBO, what are some of the important considerations you should explore? The obvious one is the fact that the occupants may damage the property and there will be costs associated with repairs and inconvenience. There are also insurance issues to be determined. Consider some other overlooked issues, such as whether there may be local ordinances that tax, restrict or prohibit the use of the VRBO vehicle. These may vary from municipality to municipality, and it is important to understand the restrictions’ content. For example, the City of Green Bay and the Village of Ashwaubenon have different ordinances which restrict and impose room taxes on VRBO properties.

Another very important issue, not to be overlooked, is whether the property lies in a subdivision plat, homeowners’ association or condominium declaration which specifically restricts the use of a VRBO. Most subdivisions, homeowners’ associations and condominium declarations contain covenants and restrictions, so it is imperative that one thoroughly research such documents before considering a VRBO.

Interestingly, the people who most often seek redress from perceived violations of a covenant are neighbors or condominium and homeowners’ associations. Issues arise which lead to disagreement and need to be resolved through court action.

The Wisconsin Supreme Court recently addressed such an issue on June 5, 2018, in the case of Forshee, et al v. Neuschwander (2018 WI 62). Forshee and his neighbors sought to enforce a restrictive covenant against Neuschwander which restricted “commercial activity” within the subdivision.

The Neuschwanders had purchased a house formerly owned by the Louisiana Pacific Railroad which was used to provide short stays for clients, vendors, politicians and employees. The Railroad used the house for everything from single night to monthly stays and hosted various events. The Neuschwanders expended considerable money in renovating the house. They occasionally used the house themselves for personal use, but its main use was that of a VRBO. The neighbors’ suit alleged that such activity violated the restrictive covenant prohibiting “commercial activity” within the subdivision.

Our Court analyzed prior case law and ruled that the restrictive covenants contained in deeds and zoning ordinances had to be strictly construed in favor of unencumbered and free use of property, and such restrictions, to be enforceable, “must be expressed in clear, unambiguous and peremptory terms.”

In conclusion, the Court found that the term “commercial activity” did not specifically define which precise activities were thus included and found the covenant ambiguous and unenforceable.

When purchasing property, it is important to consider the overall use of the property as well as whether there are any restrictions on such use. We are happy to review restrictive covenants in subdivision plats, homeowners’ association bylaws or condominium declarations to provide peace of mind when engaging in a major purchase.

Written By:
Attorney Thomas M. Olejniczak