Equal Division Clarifies: Mass-Market Short‑Term Rentals Breach “Single Family Residence Purposes,” But Summer Homes Can Still Be “Residences”

Introduction

In Melvin R. Berlin Revocable Trust v. Rubin, the Michigan Supreme Court affirmed by equal division an injunction barring defendants from conducting short‑term rentals in a nine‑home Lake Michigan community governed by a 1977 Declaration limiting lots to “single family residence purposes.” The case sits at the intersection of private land-use controls and the contemporary short‑term rental economy. On one side, several lot‑owner trusts and the homeowners’ association sought to preserve the community’s quiet, family‑oriented character; on the other, two owners (and an LLC owner) argued the Declaration did not unambiguously prohibit short‑term rentals and that Michigan’s canon favoring the free use of property should control.

The Court split 3‑3. The result: the Court of Appeals judgment stands for the parties, but no binding statewide precedent is created. Even so, two written opinions offer important guidance. Justice Welch’s concurrence (joined by Justice Zahra) supports the ban on the case’s specific facts and clarifies that a summer home can still be a “residence” under Michigan law. Justice Thomas’s dissent (joined by Chief Justice Cavanagh and Justice Bolden) would have reversed, reading the covenant as ambiguous and therefore construing it in favor of free use. Justice Hood did not participate.

Summary of the Opinion

• Disposition: The Michigan Supreme Court affirmed the Court of Appeals by equal division. Because there is no majority, the decision has no precedential effect beyond this case.
• Concurring (Welch, J., joined by Zahra, J.): Agreed that defendants’ use—homes “mass‑marketed” and used almost exclusively for short‑term rentals—violates the Declaration’s “single family residence purposes” clause under the permanence-and-continuity framework from O’Connor v. Resort Custom Builders. Clarified that the Court of Appeals erred in suggesting a “summer home cannot be a permanent residence.”
• Dissenting (Thomas, J., joined by Cavanagh, C.J., and Bolden, J.): Would reverse. The phrase “single family residence purposes” is ambiguous and equally susceptible to multiple reasonable readings; under Michigan law, ambiguity is resolved in favor of the free use of property. Noted that many sister-state high courts have read similar language to permit short‑term rentals absent explicit bans.
• Other issues: The injunction mirrored the Declaration and permitted long‑term “duly delegated tenants” who reside under a leasehold, while enjoining short‑term vacation rentals. Arguments on waiver/acquiescence and fraud failed; the Declaration included a non‑waiver clause.

Detailed Analysis

Procedural posture and standards

• Trial court: Granted summary disposition to plaintiffs and permanently enjoined short‑term rentals that lacked a “single family residence purpose.”
• Court of Appeals: Affirmed in an unpublished opinion, holding that renting the properties short‑term was contrary to Article IV, § 1 and constituted commercial use (citing Terrien v. Zwit). It additionally reasoned that defendants’ use lacked the permanence associated with a residence, in part because their domiciles were elsewhere.
• Michigan Supreme Court: Affirmed by equal division after granting leave; no majority opinion. Welch, J., concurred in result; Thomas, J., dissented.

The covenant text and its placement

The 1977 Declaration provides in Article IV, § 1: “No lot shall be used for other than single family residence purposes,” with a one‑home (plus accessory structures) limitation. Article II defines “single family residence” as a dwelling intended to shelter a single family, and “single family” as related persons, or up to three unrelated persons, maintaining a common household (with antiquated “servants” language). Article IV, § 10 separately bars “home occupation or profession” unless authorized.

Context matters: Article IV is titled “LAND USE,” and the surrounding provisions regulate building size, number, and placement. This framing is central to the dissent’s structural reading; the concurrence’s analysis looks through that lens but ultimately focuses on use as measured by permanence and continuity of presence under O’Connor.

Precedents and how they matter

• O’Connor v. Resort Custom Builders, 459 Mich 335 (1999):
  • Key principle: “Residence” entails a “permanence and continuity of presence,” even during physical absence (e.g., personal belongings, ongoing connection).
  • Holding: Interval time‑share ownership violated a “residential purposes” restriction due to inherently transitory, non‑continuous use.
  • Relevance here: Welch applies O’Connor’s permanence test to mass‑market short‑term rentals; Thomas distinguishes O’Connor because defendants here hold full title and can use the homes year‑round (unlike time‑share “interval” restrictions).
• Terrien v. Zwit, 467 Mich 56 (2002):
  • Key principle: Restrictions “for residence purposes,” if clearly established, are favored; nullifying them can wrong neighborhood expectations.
  • Also held: A covenant expressly barring “commercial” uses can prohibit a for‑profit daycare even in a dwelling.
  • Relevance: The Court of Appeals relied on Terrien to label rentals “commercial.” The concurrence reached its result based on “residence” purpose rather than any standalone “commercial use” ban (none appears in this Declaration).
• Thiel v. Goyings, 504 Mich 484 (2019):
  • Key principles in tension: Courts strictly construe restrictive covenants and resolve doubts in favor of free use, but must not defeat their plain purposes.
  • Relevance: Both opinions invoke Thiel—Welch to respect neighborhood character when text is clear enough; Thomas to emphasize resolving ambiguity for the owner.
• Bloomfield Estates Improvement Ass’n v. Birmingham, 479 Mich 206 (2007):
  • Interpreted “strictly residential purposes” in a land‑use context and relied on noscitur a sociis.
  • Relevance: Supports Thomas’s reading that Article IV’s placement suggests a structural land‑use limitation, not occupant conduct regulation.
• Wood v. Blancke, 304 Mich 283 (1943):
  • Safe rule: “Usual, ordinary and incidental” use as a place of abode satisfies “residence purposes”; “unusual and extraordinary” uses do not.
  • Relevance: Thomas argues short‑term renters sleep, eat, and dwell as any family would—an “ordinary” residential use.
• Contract interpretation authorities:
  • Ambiguity exists only if language is “equally susceptible” to more than one meaning (Barton‑Spencer v. Farm Bureau).
  • Courts cannot ignore text and must seek ordinary meaning in context (Klapp; Kendzierski).
  • Relevance: Thomas finds multiple equally plausible meanings for “single family residence purposes,” triggering the free‑use canon; Welch disagrees, finding the O’Connor permanence framework decisive on these facts.
• Other Michigan decisions invoked:
  • Beverly Island Ass’n v. Zinger (daycare could still be “residential purpose”).
  • Miller v. Ettinger (apartment building is both commercial and residential).
  • Livonia v. Dep’t of Social Services; Boston‑Edison v. Paulist Fathers; Delta Charter Twp v. Dinolfo (cautions against narrow, exclusionary “family” notions).

Justice Welch’s concurring analysis

• Core holding (case‑specific): Using homes “almost exclusively” as short‑term rentals is inconsistent with “single family residence purposes” because it lacks the “permanence and continuity of presence” that defines a residence under O’Connor.
• Clarification: The Court of Appeals erred in asserting a summer home cannot be a residence when domicile is elsewhere. O’Connor says otherwise; residence depends on the home’s ongoing connection to the owner and family (belongings, decor, community ties), not on the domicile label.
• Occasional rentals: O’Connor suggests occasional short‑term rentals may coexist with residential use so long as they do not undermine the restriction’s purpose or alter community character.
• Commercial-use theory: The concurrence did not rest its conclusion on labeling rentals “commercial” in the absence of an explicit business‑use ban. The key is the residence‑purpose limitation and O’Connor’s permanence test.
• Important nuance: The Declaration’s antiquated language (e.g., “servants’ quarters”) and the discriminatory past of covenants are noted, but the analysis remains narrowly focused on the specific restriction before the Court.

Justice Thomas’s dissent

• Ambiguity: “Single family residence purposes” is equally susceptible to multiple plausible readings; that ambiguity must be resolved in favor of free use. Thomas identifies five readings:
  1. “Single family” (rejected as narrowing “family” contrary to anti‑discrimination jurisprudence).
  2. Structural/land‑use reading (what may be built/maintained on the lot).
  3. Duration/permanence of ownership or residence (O’Connor’s time‑share analysis is inapposite because owners here hold full ownership and can use the dwellings year‑round).
  4. Owner’s purpose (income generation) versus residential purpose (not clearly exclusive under Michigan law absent an explicit commercial‑use ban).
  5. Occupant‑use focus (how the inhabitant uses the property: eating, sleeping, living), which is residential even for short‑term renters.
• Contextual cues: Article IV is titled “LAND USE” and regulates building form—supporting a structural reading rather than conduct regulation.
• No explicit rental ban: The Declaration lacks a general ban on rentals or business; it separately regulates “home occupations,” and the trial court found no violation of that clause.
• Comparative authority: Many state supreme courts have read similar “residential” covenants to permit short‑term rentals or have found them ambiguous in the absence of explicit bans.
• Bottom line: Because the covenant is ambiguous, summary disposition was improper and the free‑use canon should favor the owners.

Commercial use versus residential use

The Court of Appeals characterized rentals as “commercial” activity even when the occupants’ use is residential. Michigan law draws a more nuanced line:

• Where a covenant separately bans “commercial” use, profit‑making activities in a home can be barred (Terrien).
• But some profit‑associated uses remain residential in character (e.g., large families, daycares in some contexts, apartment buildings as both commercial and residential), especially when the covenant speaks only in terms of “residential purposes.”
• Here, there is no explicit “commercial use” ban, and the injunction rested on the “single family residence purposes” clause; the concurrence’s reasoning therefore pivots on O’Connor’s residence‑purpose framework, not on a generalized “commercial” label.

Waiver, acquiescence, and the injunction’s scope

• Waiver/acquiescence: Past occasional rentals by other owners did not alter the subdivision’s character or defeat the restriction’s purpose. The Declaration also contains a non‑waiver clause.
• Fraud claims failed for lack of clear and convincing evidence.
• Scope of relief: The injunction prohibits “renting or leasing” lacking a single family residence purpose and limits common‑area use to owners, resident family, or “duly delegated tenants” who reside under a leasehold (names/relationships to be given to the association secretary). The Court of Appeals noted the parties remain free to engage in long‑term rentals that did not disrupt neighborhood character.

Impact and Practical Implications

Although the Supreme Court’s equal division yields no binding statewide rule, the opinions provide persuasive guidance with practical consequences:

• For the parties: The injunction stands—defendants may not conduct short‑term rentals that lack a “single family residence purpose.”
• For Michigan courts: Expect continued case‑by‑case adjudication. Welch’s concurrence strongly signals that mass‑market, high‑frequency short‑term rentals can violate “residence purposes” restrictions under O’Connor’s permanence/continuity test; occasional, incidental rentals may be treated differently.
• For associations:
  • Draft with specificity. If banning short‑term rentals is the goal, say so expressly (e.g., define “short‑term rental,” specify durations, frequency caps, platform advertising, and enforcement mechanisms).
  • Consider including an express “no business/commercial use” clause if broader activity limits are desired.
  • Maintain and follow procedures (architectural review, notice, non‑waiver clauses) and document enforcement to avoid waiver arguments.
• For owners:
  • Review the governing documents holistically. A “residence purposes” clause, even without an explicit rental ban, can pose risk where the property is used primarily as a short‑term rental business.
  • Occasional, incidental rentals are less likely to be found violative—especially where owners retain a continuous, tangible presence—but outcomes will be fact‑specific.
  • Reliance on informal assurances (e.g., brokers) is risky where covenants are silent or ambiguous.
• For policymakers: The case underscores how legacy covenants encounter modern rental platforms. Absent legislative uniformity, Michigan law will continue to evolve through litigation and careful drafting.

Complex Concepts Simplified

• Affirmed by equal division: The justices split evenly. The lower court’s judgment stands for the parties, but no binding Michigan Supreme Court precedent is created.
• Restrictive covenant: A private, recorded promise that limits how land can be used. It is interpreted like a contract and enforced to preserve neighborhood expectations—if the restriction is clear.
• Free‑use canon: If a covenant’s meaning is genuinely ambiguous (equally plausible readings), courts resolve the doubt in favor of the landowner’s free use.
• “Single family residence purposes”: Not a term of art with a fixed meaning. Michigan cases look to ordinary meaning, context, and, in “residence” disputes, whether the use reflects permanence and continuity of presence (O’Connor).
• Domicile vs. residence: Domicile is your legal home for jurisdictional purposes; you can have only one. A “residence” under a covenant may include a secondary or seasonal home if there is sustained connection and presence.
• Noscitur a sociis: Words take meaning from their neighbors. A clause in a section titled “LAND USE” flanked by building‑form limits may be read structurally—one of the dissent’s key points.

Unresolved Questions After This Case

• Where is the line between occasional and predominant short‑term renting under “residence purposes” language? The concurrence acknowledges a spectrum but does not fix a bright‑line rule.
• How should courts weigh “structural” context (placement in a “land use” article) versus occupant‑use factors when covenants use mixed phrasing?
• What role, if any, should “commercial use” concepts play when the governing documents do not explicitly ban business activity?
• To what extent can associations rely on non‑waiver clauses to overcome long histories of informal allowances?
• Given the unpublished status of the Court of Appeals opinion and the equal division, how persuasive will this decision be across Michigan trial courts confronting similar language?

Key Takeaways

• No new binding precedent was set, but on these facts mass‑market short‑term rentals violated a “single family residence purposes” covenant.
• “Residence” in Michigan turns on permanence and continuity of presence; a summer or secondary home can satisfy that standard.
• Ambiguity matters. If equally plausible readings exist, courts must favor free use. Precision in drafting covenants is essential to regulate short‑term rentals effectively.
• Courts will continue to parse short‑term rental disputes through O’Connor’s framework and traditional contract interpretation canons, with factual context (frequency, marketing, occupant behavior, neighborhood impact) playing a decisive role.

Conclusion

Melvin R. Berlin Revocable Trust v. Rubin leaves the Court of Appeals’ injunction in place without creating statewide precedent, but it meaningfully refines the conversation. Justice Welch’s concurrence reinforces that “residence purpose” restrictions reach beyond mere building form to encompass the permanence and continuity of how a home is used. At the same time, it corrects a common misunderstanding: a summer home can still be a “residence.” Justice Thomas’s dissent urges caution, highlighting multiple reasonable readings of “single family residence purposes” and the need, where ambiguity exists, to preserve the free use of property.

The practical lesson is clear: in communities that wish to restrict short‑term rentals, explicit, modernized language is the surest path; for owners, the more a property functions as a revolving short‑term lodging enterprise detached from any ongoing family presence, the greater the risk that a “residence purposes” clause will be deemed violated. Until a majority of the Michigan Supreme Court speaks definitively, O’Connor’s permanence test, read against the covenant’s text and context, will remain the touchstone in this evolving area of Michigan property law.