Montana court hears dispute over whether restrictive covenants bar short‑term rentals

The Montana Courts heard oral argument in cause number DA223‑0716 over whether restrictive covenants permit short‑term rentals of a single‑family home owned by R and R Mountain Escapes LLC.

At argument, counsel for the appellants said the covenants expressly allow rentals and contain no language limiting duration; counsel for the neighboring homeowners said the covenants' broad ban on "commercial" purposes and other provisions show short‑term, nightly rentals are not residential uses. The case centers on how to read the covenants together and which precedents govern, including Craig Tracks and Myers v. Kleinhans.

Appellants' argument: Stephanie Boggess, appearing for R and R Mountain Escapes (which counsel said is wholly owned by Dr. Russell Palmer and Ramona Stewart), told the court the covenants "allow rentals" and contain "no language about duration," and therefore the documents are not ambiguous on the point. Boggess said the signage provision in the covenants expressly contemplates advertising "for sale or rent," and that the provisions should be harmonized rather than read to impose a temporal restriction that the drafters did not include. Counsel noted amici briefs filed in support of the appellants by the Landlords Association and the Bridger Canyon Property Rights Coalition and warned the court that imposing a new durational restriction could affect many homeowners in covenanted subdivisions.

Appellees' argument: Sean Frampton, counsel for the neighbors who brought the underlying challenge, said the core dispute is "at what point does the rental become such a short duration that it is no longer a residential use and more of a commercial type use." Frampton emphasized the district court found ambiguity and resolved it against the short‑term rental use, relying on the covenant language that favors strict construction of restrictions. Frampton pointed to factual evidence in the record that the property was marketed on commercial platforms (VRBO and Airbnb), had nightly rates the parties cited as roughly $850–$1,400 depending on season, and produced revenue the briefs quantify: in the six months after the property permit was issued in mid‑2022 the property hosted 11 separate groups over 68 days and generated about $55,000 in gross revenue with approximately $19,000 in management fees. Frampton urged the court that those facts make the use closer to a hotel or tourist home than a long‑term residential tenancy.

Judicial questioning and contested points: Justices pressed both sides on how a court would draw a workable line if the court were to rule that some durational threshold distinguishes residential from commercial use. Several justices asked whether the county permit that applies to short‑term rentals (which the parties said limits certain permits to stays of 30 days and under) should be treated as relevant to interpreting "residential use." The court also discussed a nuisance clause in the covenants (paragraph 7 in the record) and the provision that structures be "private single‑family residence[s]," and asked whether those provisions support the neighbors' reading.

Precedent and evidence: Both sides invoked prior Montana decisions. Counsel debated how to apply Craig Tracks and Myers v. Kleinhans and disputed whether the absence of contemporaneous extrinsic evidence of the drafter's intent means ambiguities must be resolved in favor of free property use. Appellants argued the covenants' text (including a rental/advertising clause) is unambiguous or, at minimum, ambiguous in appellants' favor because there is no contemporaneous extrinsic evidence showing a contrary intent. Appellees argued the district court properly read the covenants as restricting the short‑term use at issue given the covenant language and the record evidence of frequent nightly rentals and associated advertising and revenue.

Case status: After extended questioning the court heard rebuttal and the matter was submitted. No opinion or ruling was announced at argument.

Ending: The court will issue a written decision resolving whether the covenants, as written and under Montana precedent cited at argument, permit the short‑term rental practices described in the record.