Yogman v. Parrott
1997 Ore. LEXIS 44, 325 Or. 358, 937 P.2d 1019 (1997)
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Rule of Law:
When a restrictive covenant is ambiguous, it must be construed strictly against the restriction, and a property use will be permitted unless it is plainly and unambiguously prohibited by the covenant's language.
Facts:
- Plaintiffs and Defendants own homes in a beachfront subdivision governed by a set of restrictive covenants.
- One covenant states: 'All lots within said tract shall be used exclusively for residential purposes and no commercial enterprise shall be constructed or permitted on any of said property.'
- Defendants use their house as a vacation home.
- When not using it themselves, Defendants rent the house to others on a short-term basis for a daily or weekly fee.
- Both the Defendants and their renters use the property for vacation purposes, such as eating, sleeping, and recreating.
- Rental transactions, such as negotiations and payments, occur off-site.
- Defendants do not provide on-site services such as staff, cleaning, linens, or food to their renters.
- At least one other property in the subdivision has also been used as a short-term vacation rental.
Procedural Posture:
- Plaintiffs filed a complaint in the trial court (circuit court) seeking a declaratory judgment and an injunction against Defendants' rental activities.
- On cross-motions for summary judgment, the trial court granted summary judgment for Plaintiffs.
- Defendants, as appellants, appealed to the Court of Appeals of Oregon.
- The Court of Appeals, with Plaintiffs as respondents, reversed the trial court's judgment and remanded for entry of judgment in favor of Defendants.
- The case then came before the Supreme Court of Oregon for review.
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Issue:
Does the short-term rental of a residential property violate a restrictive covenant that requires lots to be used 'exclusively for residential purposes' and prohibits any 'commercial enterprise'?
Opinions:
Majority - Graber, J.
No. The short-term rental of the property does not violate the restrictive covenant because the covenant's language is ambiguous and must therefore be construed strictly in favor of the free use of land. The court employed a three-step analysis for contractual interpretation. First, it found the terms 'residential purposes' and 'commercial enterprise' to be ambiguous, as they could reasonably be interpreted to either permit or prohibit the defendants' rental activity. Second, the court found the extrinsic evidence of the parties' intent, such as the rental of other homes, to be too 'sketchy' to resolve the ambiguity. Third, faced with a persistent ambiguity, the court applied the long-standing maxim of construction that restrictive covenants are to be construed strictly against the restriction. Because the rental activity is not plainly forbidden by the covenant, it will not be enjoined.
Analysis:
This decision reaffirms the traditional legal principle of strict construction for restrictive covenants, prioritizing the free use of land over uncertain restrictions. The court deliberately chose to uphold this long-standing maxim, rejecting a previous opinion's dictum that modern land-use policies might warrant a new approach. This precedent provides significant protection for property owners engaging in short-term rentals, establishing that general or ambiguous covenants prohibiting 'commercial' use are insufficient to ban such activities. For a covenant to be enforceable against short-term rentals, it must contain clear and explicit language to that effect.
