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A Michigan court of appeals ruling that short-term rentals are a commercial use of property, not a residential use, could harm companies like Airbnb because local governments then can restrict such rentals through zoning ordinances.

“This is consistent with case law establishing that commercial or business uses of property, generally meaning uses intended to generate a profit, are inconsistent with residential uses of property,” the appeals court wrote in its decision.

A lower court’s ruling in the case was unpublished, but the appeals court decided to publish its ruling, which establishes precedent in the Michigan court system.

The decision is the result of a case brought by a Spring Lake woman who sued her township after her application to use her home as a short-term rental was denied.

The plaintiff, Susan Reaume, began using the property for short-term rentals in 2015 when the township had no restrictions on such activities. But in 2016, Spring Lake passed an ordinance that prohibited short-term rentals in an R-1 residential zone and required all short-term rental homes to be registered and licensed with the township. A short-term rental was defined as any dwelling that was rented out for 14 or fewer days.

When Reaume applied for the license, she was denied. She appealed to the Township Zoning Board of Appeals and then went through the judicial system.

“The Township’s mere failure to enforce the Ordinance does not confer upon plaintiff a right to continue violating the ordinance,” the appeals court ruled. “Neither does a statement made by any individual without the power to bind the Township, especially where none of the statements clearly express an opinion that short-term rentals in R-1 zones was affirmatively lawful. Accordingly, the trial court properly affirmed the Township Board’s denial of plaintiff’s application for a short-term rental license.”

Jennifer Rigterink, a spokesperson for the Michigan Municipal League (MML), told The Center Square that local governments ought to have the ability to regulate their residential zones. The MML represents the interests of local government entities.

Short-term rentals change the makeup of a community because people are moving in and out of the home on a regular basis, Rigterink said. That “changes the integrity of that neighborhood.”

Airbnb declined to comment on the ruling.

Legislation currently pending in Michigan would prevent local governments from prohibiting short-term rentals in residential zones.

Rep. Jason Sheppard, R-Temperance, who is sponsoring H.B. 4046, told members of the Local Government and Municipal Finance Committee that short-term rentals always had been permitted in residential zones. Certain municipalities are trying to take property rights away from owners that they previously had, he added.

The pending legislation, which is opposed by the municipal league, would still allow for some local regulations on the property.

Staff Writer

Tyler Arnold reports on Virginia and Ohio for The Center Square. He previously worked for the Cause of Action Institute and has been published in Business Insider, USA TODAY College, National Review Online and the Washington Free Beacon.