Idaho Land Law

A Blog Discussing Current Issues of Land Use, Real Estate, and Construction Law in the State of Idaho.

Oh no… The Idaho Supreme Court may have killed Airbnb in most neighborhoods

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With the growing popularity of short-term rental sites such as Airbnb and VRBO it was inevitable that we would see a court case on whether or not a homeowners’ association (“HOA”) could prohibit the short-term rental of real property.  I knew this would eventually be decided due to the numerous calls we receive from HOA boards and members concerning rental units.  Whether these HOA rental concerns are fair or unfair is a question for another article, but regardless it is safe to say that HOA boards and members have real concerns about renters.

For years, the question in Idaho has been whether or not an HOA could prohibit the rental of real property?  We now know, at least for short-term rentals, the answer is… Yes.

In Virgil Adams v. Kimberly One Townhouse Owner’s Association, Inc., the Idaho Supreme Court upheld an Ada County District Court’s decision that an HOA could prohibit the rental of property for periods of less than six months.  The Kimberly One case concerns a property owner, Virgil Adams, who had been renting his subdivision unit to short-term renters as a vacation property.  The Kimberly One HOA had objections to such use and in response amended its conditions, covenants and restrictions (“CCRs”) to prohibit short-term rentals.  Mr. Adams filed suit alleging that such amendment was an unreasonable restriction on the use of his property and that the amendment was not in keeping with the original CCRs.

The Idaho Supreme Court examined the District Court’s ruling and held that because the original CCRs clearly provided for their amendment, that the HOA had the right to amend the CCRs and prohibit short-term rentals.  The Court found this despite the fact that the original CCRs allowed for leasing or renting a subdivision property. The Court basically examined this issue as a freedom to contract argument and held Mr. Adams to a sort of caveat emptor standard in regards to what could possibly be restricted in HOA subdivisions.

So what are the practical implications of this case?  The obvious implication is that an HOA can restrict short-term rentals. This of course could have a dramatic impact on property owners earning income and paying debt service by using Airbnb or other online sites such as VRBO.  The other thing we have learned is that in the future a court may uphold a complete restriction on rentals in HOA controlled subdivisions.  We do not know if the Court would uphold such a restriction but given this holding, individuals looking to purchase investment rental property should know this is a distinct possibility.   

One final thought on this case.  The Court did say that, “There is doubtless a point when a party has changed his or her position in reliance upon the covenants in effect to a degree that enforcement of an amendment would be precluded.”  We do not know where this “point” lies but a potential purchaser of investment rental property could request a written statement from the current HOA board approving the property as a rental.  This document could later be offered as evidence of reliance on the CCRs and potentially used to defeat an amendment restricting rentals.  Just a thought and there are probably other methods to document this reliance in hopes that a Court would negate an amendment restricting long-term rentals.  

Landlords Beware - Recent Ruling Clarifies Tenants' Ability to Sue for Long-Standing Uninhabitable Conditions

Depositphotos © vicnt2815

Depositphotos © vicnt2815

The scenario: (1) Idaho tenant rents a house with alleged uninhabitable conditions but continues to live in the house for years; (2) tenant sends a letter to landlord demanding that landlord correct the uninhabitable conditions within three days or tenant will sue; (3) landlord refuses; and (4) tenant sues…  What happens? 

The answer may surprise you but the Idaho Court of Appeals in William D. Rekow v. Ronald Weekes held that the tenant can pursue damages from the date the tenant first rented the home with uninhabitable conditions and is not limited to damages from the date landlord received the notice to cure. 

Idaho, like many other states, recognizes what is commonly referred to as the “implied warranty of habitability.”  The “implied warranty of habitability” is the concept that a residential property will be “habitable” for the tenant even if the lease does not specifically require the landlord to make repairs.  Idaho has enacted a statutory version of the “implied warranty of habitability” under I.C. § 6-320

In order for an Idaho tenant to sue under I.C. § 6-320, the tenant first must provide notice to the landlord and allow the landlord three days to cure the breach or failure.  Specifically, it requires that the tenant give written notice “listing each failure or breach upon which his action will be premised and written demand requiring performance or cure.” For each failure or breach listed in the notice that has not been cured by the landlord within three days after the notice was given, the tenant may pursue a claim for under I.C. § 6-320.

The question for the Idaho Court of Appeals was whether or not the tenant’s damages began to accrue after the three day notice letter or whether damages accrued from the date the uninhabitable condition occurred (in this case nearly fifty-five months worth of damages).  The Court of Appeals answered this question by stating that the “damages begin when the implied contractual provision is breached.” 

This ruling provides some exposure to landlords that do not correct defective conditions within the three day cure period provided by the statute.  With this ruling the landlord could be liable for treble damages due to conditions that existed for years on the property.  Given this exposure, the prudent thing for a landlord to do is to correct such deficiencies within the three day cure period and remove the ability for a tenant to proceed with a lawsuit under I.C. § 6-320.

Idaho Senate Says No Eminent Domain for Trails

We at the Idaho Land Law blog are busy this time of year monitoring all the proposed Idaho legislation concerning real property. There are numerous bills making their way through the House and Senate that touch on our favorite subject (land) but we find Senate Bill 1044 to be of particular interest.   As currently drafted, the bill would prohibit government agencies from using eminent domain for “trails, paths, greenways or other ways for walking, running, for hiking, bicycling or equestrian use, unless adjacent to a highway, road or street.”

Bill 1044 passed out of the Senate yesterday and is now headed to the House and if voted out of committee would be considered on the House floor.  Should Bill 1044 pass out of the House, it will then be presented to Governor Otter where it could be signed into law.  We have not seen any comments from the Governor’s office on the bill.

This particular piece of legislation has had some serious opposition by local governments and it will be interesting to see how this plays out.  We will keep you posted with further updates.   

New Eminent Domain Case from the Supreme Court of Idaho

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@depositphotos-londondeposit

The Idaho Supreme Court unanimously affirmed the Kootenai County district court’s compensation award to HJ Grathol (“Grathol”), vacated and remanded the district court’s denial of attorney fees to the Idaho Transportation Department (“ITD”), and affirmed the district court’s award of costs to ITD. The Court also unanimously awarded attorney fees and costs to ITD on appeal. 

A link to the full decision can be found here: Idaho Trans. Dep’t v. HJ Grathol, Docket No. 41068 (February 11, 2015) http://www.isc.idaho.gov/opinions/40168.pdf

This eminent domain case arose when ITD acted to condemn 16.314 acres of Grathol’s 56.8 acres in order to improve U.S. Highway 95. After a bench trial, the district court held that just compensation would be based on the 56.8-acre parcel’s value and that the property remaining suffered no severance damages. Grathol argued on appeal that the district court should have based just compensation on a 30-acre parcel. Grathol also argued that the district court ignored Grathol’s severance damage evidence and improperly excluded testimony about damages from a proposed frontage road. Grathol also appealed the district court’s award of costs to ITD, arguing that ITD was not entitled to costs. ITD cross-appealed, arguing that the district court should have awarded ITD reasonable attorney fees under Ada County Highway District v. Acarrequi, 105 Idaho 873, 673 P.2d 1067 (1983). 

Contrary to Grathol’s assertions that the district court ignored the law and evidence, the Idaho Supreme Court found substantial and competent evidence supporting the district court’s findings that Grathol’s parcel was valued at 56.8 acres and that the remainder suffered zero severance damages. The Court also found the district court did not err by excluding testimony about impacts from an alleged frontage road because this Court held in a prior decision that ITD had no intent to condemn land for that road. 

As to attorney fees, the Court vacated the district court’s denial of attorney fees based on Idaho Code section 12-117 because that statute is not the exclusive source of fees for state agencies. The Court reasserted that it held in Acarrequi that courts can award attorney fees to a condemnor in extreme and unlikely cases. The Court then adopted a three-part test to determine when a case is extreme and unlikely. The Court remanded for the district court to analyze attorney fees within the new “extreme and unlikely case” parameters. 

As to attorney fees on appeal, the Court found that this was in fact an “extreme and unlikely case” and awarded ITD its reasonable attorney fees to be paid by Grathol. The Court found Grathol’s arguments on appeal were unreasonable and frivolous because Grathol asked this Court to re-weigh the evidence and second guess the district court without any legal or factual basis to support its arguments.

One of the lessons from this case is that appealing decisions in condemnation cases is not without risk that the Court may award attorney’s fees to the condemnor.  Our suggestion would be to carefully balance this risk before proceeding with an appeal.

Idaho’s Quick Answer to a Tenant’s Failure to Pay Rent

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@Depositphotos_feverpitch

Each state has its own set of rules relating to how quickly a property owner can remove a non-paying tenant.  Having practiced for a number of years in Kansas and Missouri, I was pleasantly surprised to learn Idaho has a quick procedure to put an owner back in possession of its rental property.  In Missouri and Kansas, the process can takes months and often causes significant financial hardship on landlords.  Fortunately, Idaho has an expedited process that takes only days… 

The process is fairly straightforward and governed by Title 6, Chapter 3 of the Idaho Code.

First Step: Provide Tenant with a Notice of Violation

The Notice of Violation must be either delivered to the tenant in person or left with a competent person at the property and also mailed to the tenant.  Typically, I like to use a process server for the delivery of the Notice of Violation. This allows me to use the process server’s affidavit of service in preparing the complaint for unlawful detainer. 

Sometimes, it is impossible to locate a tenant or find a competent person at the property.  In those instances, the landlord should: (a) post a copy of the notice in a conspicuous place on the property; (b) leave a copy of the notice with any person living at the property; and (c) mail a copy of the notice to the tenant.  You can use a process server for posting the Notice of Violation but request that they complete an affidavit stating they posted the Notice on the property.  I always request the process server take a photograph of the posted Notice of Violation. 

The Notice of Violation should provide the amount of rent owed, and state that the tenant has three days to pay all amounts due to landlord or surrender possession of the property. It should also include a statement that regardless of whether the tenant surrenders the property, the landlord will be entitled to bring a separate legal action to collect accruing rents under the lease.  Finally, the Notice of Violation should state that the tenant may be required to pay the landlord’s attorney fees should the landlord be successful in an eviction proceeding.

Second Step: Complaint for Unlawful Detainer

After service of the Notice of Violation and failure of the tenant to cure within the three days, the landlord can move for eviction of the tenant by filing a complaint for unlawful detainer.  This is relatively straightforward and an expedited trial on the complaint will occur within five to twelve (12) days after the tenant has been served with the complaint.  The tenant can request a continuance but only for two days, unless the tenant deposits additional security with the court clerk.

One thing to remember is that recovery of past due rent must be pursued in a separate action.  The goal of the expedited unlawful detainer action is to put the landlord back in possession of its property and not to assist the landlord in recovery of amounts owed by the tenant.  Often it may not be worth pursuing a defaulting tenant for past due rent due to legal costs and the unlikelihood of recovery.

Third Step: Eviction

Most tenants will voluntarily leave the premises after the court has issued its order instructing them to vacate the property.  Sometimes it is necessary to file a writ of restitution and have the sheriff remove the tenant and its property from the premises. All these steps cost the landlord time and money but may be necessary to obtain possession of the property. Hopefully, through proper planning (credit checks, references, and security deposits) you as a landlord can minimize risk and avoid having to evict a tenant.    

Look for a future blog post on what to do with a tenant’s personal property post eviction or when a tenant abandons its personal property. 


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