Real Property – Restrictive Covenants – Negative Covenant – ‘Business or Commercial Purposes’ – Vacation Rentals – First Impression

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Russell v. Donaldson (Lawyers Weekly No. 12-07-0910, 10 pp.) (Sanford L. Steelman Jr., J.) Appealed from Caldwell County Superior Court. (F. Lane Williamson, J.) N.C. App.

Holding: A subdivision’s restrictive covenant – “no lots shall be used for commercial or business purposes” – does not prohibit property owners from leasing their houses as short-term vacation rentals.

We affirm summary judgment for defendants.

The restrictive covenant and the surrounding context fail to define “business or commercial purposes.” When covenants are ambiguous, all ambiguities will be resolved in favor of the unrestrained use of the land.

N.C. case law deals with “affirmative” covenants requiring the use of land for residential purposes. We have found no persuasive and binding N.C. cases that deal with “negative” covenants prohibiting the use of land for business or commercial purposes.

After a review of other states’ case law dealing with negative covenants and short-term rentals, we hold that a negative covenant, prohibiting business and commercial uses of the property, does not bar short-term residential vacation rentals.

Affirmed.