On September 18, 2025, the Michigan Court of Appeals issued an unpublished but significant decision addressing whether a nine-month residential lease violated deed restrictions prohibiting “business or commercial purposes.” In Timber Lake Drive Property Owners’ Association v. Gribi, the Court considered whether what it described as a long-term residential rental agreement was permissible under subdivision restrictions requiring residential use and prohibiting commercial activity.
Background
The case arose in the Birch Lake Subdivision in Elk Rapids Township, a platted residential community established in 1967 and subject to recorded deed restrictions. The restrictions require that all lots be used for “residential purposes only” and expressly prohibit use for “business or commercial purposes.”
Etta Gribi had owned her home in the subdivision since 1972. In 2022, she moved into an assisted living facility but retained ownership of the property. To offset her monthly expenses, her family advertised the home for lease and entered into a written nine-month residential rental agreement providing for monthly rent of $2,400. There was no dispute that the tenant occupied the home as a residence.
Upon learning of the lease, the association notified Gribi’s family that the rental violated the deed restrictions, taking the position that leasing property in exchange for compensation constituted prohibited commercial use. When the rental continued, the association filed an action seeking declaratory and injunctive relief to enforce the restrictions. The trial court granted summary disposition in favor of the association, holding that renting the property for income violated the subdivision’s express prohibition on commercial use.
The Court of Appeals’ Decision
The Court of Appeals affirmed the trial court’s decision, also finding that renting the property for income violated the subdivision’s express prohibition on commercial use.
The Court’s analysis focused on the specific language of the deed restrictions. Importantly, the restrictions did not simply limit use to “residential purposes.” They also separately prohibited “business or commercial purposes.”
Relying on Michigan Supreme Court precedent defining commercial activity as conduct undertaken “in connection with or for furtherance of a profit-making enterprise,” the Court concluded that leasing property for income fell within the scope of the commercial-use prohibition at issue. The Court emphasized that the nine-month term did not alter the character of the activity. Although the lease was a traditional fixed-term residential arrangement rather than a transient or vacation rental, the property was being used to generate income.
The Court acknowledged that the tenant’s use of the home was residential in nature. However, it explained that the relevant inquiry was whether the owner’s conduct violated the commercial-use restriction. Because the rental arrangement was undertaken to produce income, the Court held that it did.
The homeowner also argued that the association had waived enforcement because other owners had engaged in short-term rentals in prior years. The Court rejected that argument, noting that limited or sporadic past violations do not automatically establish waiver, particularly where the association acts once it becomes aware of the challenged use.
Key Takeaways for Michigan Associations and Owners
Although unpublished, Gribi reinforces an important principle in Michigan restrictive covenant law: courts will closely examine and enforce the plain language of recorded deed restrictions.
In this case, the presence of an express prohibition on “business or commercial purposes” was central to the outcome. The Court determined that leasing property for income constituted activity undertaken in furtherance of a profit-making enterprise and therefore fell within that prohibition. The fact that the tenant occupied the home for residential purposes did not change the analysis.
The decision also confirms that limited or sporadic past violations do not automatically establish waiver, particularly where an association acts after learning of the challenged use.
As always, the enforceability of rental activity depends on the precise wording of the governing documents and the specific facts presented. Associations should review their restrictions carefully when evaluating rental activity or enforcement options.
Reprinted with permission from MAGWV, PLLC – Condominium & HOA Lawyers, Michigan
