We often see covenants that contain the language that properties "shall be used only as residential purposes" -- and not "for business or manufacturing purposes."

Many battles have been fought over the interpretation of these few words. It's a common fight between associations and homeowners willing to do short-term rentals to help paying the mortgage. Over the years I have seen many court battles waged over this issue -- actually with often opposing results.

In this court case the Santa Monica Beach Property Owners Association, Inc., located in Bay County, sued homeowners who had actually obtained a license to "operate their property as a transient public lodging establishment" and were required to collect state sales tax and local bed tax.

Does that make the property is used as a "business?"

Not according to the Circuit Judge who signed an "ORDER OF DISMISSAL WITH PREJUDICE" favoring the homeowners. The judge quoted case law that held that "receiving rental income, or making a profit from a home" does not necessarily mean that the home is being used for non-residential purposes.

In his ruling the judge stated another very important fact: "Finally, the court also notes the generally recognized principle that restrictive covenants should be strictly construed in favor of the free and unrestricted use of real property, and therefore an ambiguous covenant must be construed in favor of the landowner.

This ruling surely contains a lot of language association boards should consider before filing expensive lawsuits against homeowners.

ORDER OF DISMISSAL WITH PREJUDICE