Tuesday, July 5, 2011

Indiana Supreme Court Decision Deals Blow to Property Rights

Town of Ogden Dunes
Lost in the swirl of controversy about the designated driver/public intoxication decision was another Indiana Supreme Court case that bears a closer look, Siwinski v. Town of Ogden Dunes.

The Siwinskis own a home in Ogden Dunes, a popular resort area in Northern Indiana. The Siwinskis' home is located in a residential (R) district of the town. The Siwinskis, who rented out their home, were fined for being in violation of the following ordinance:
In an R District, no building or premises shall be used and no building shall be erected which is arranged, designed or intended to be used for other than one or more of the following specified uses: (1) single-family dwellings; (2) accessory buildings or uses; (3) public utility buildings; (4) semi-public uses; (5) essential services; (6) special exception uses permitted by this Zoning Code. 
The Town also defines a "single-family dwelling" as a "separate detached building designed for and occupied exclusively as a residence by one family."

The question before the Court was whether this ordinance and the accompanying definition meant that a homeowners could not rent out their property short term.  The trial court agreed with the Town that the ordinance language "occupied exclusively as a residence by one family" prohibited the owner from renting out the property on a short-term basis.  This was deemed a "commercial" use inconsistent with the residential zoning. 

The Court of Appeals, however, in a 3-0 decision, ruled that even though the Siwinskis profited financially, renting the property to another family constituted a residential use of the property.  In a 4-1 decision, the Indiana Supreme Court disagreed, holding the Siwinskis' use of their property as a rental was commercial and not residential, and that the Town was within its authority to prohibit the Siwinskis from renting their property and for fining them for doing so.

Justice Sullivan of the Indiana Supreme Court dissented, simply saying he agreed with the Court of Appeals' decision. So do I.  First, I don't think renting a house out as a residence is a commercial use.  The Court of Appeals explained why in its decision:
In Applegate v. Colucci, 908 N.E.2d 1214 (Ind. Ct. App. 2009), trans. denied (2010), this court analyzed whether a restrictive covenant, which specified that the parcels were to be used for residential purposes only and prohibited commercial business while specifically not preventing the leasing or renting for residential use, prohibited a property owner from the short-term rental of his cabins. Citing long-standing precedent, we concluded that a “residential purpose” is “one in which people reside or dwell, or in which they make their homes.”
The Court of Appeals also noted the legal principles which apply to interpreting a zoning ordinance:
“Because zoning ordinances limit the free use of property, they are in derogation of the common law and must be strictly construed.” [O]ur courts interpret an ordinance to favor the free use of land and will not extend restrictions by implication.” Therefore, when a zoning ordinance is ambiguous, it should be construed in favor of the property owner. (Citations omitted.)
The application of the Ogden Dunes zoning ordinance is in derogation of property rights. As such, the ordinance should have been strictly construed with any doubt decided in favor of the Siwinskis.    Restrictive covenants and zoning ordinances are strictly interpreted because people who are considering buying property need to know any limits on the use of that property that could affect its value. To prohibit the Siwinskis from renting their property, especially in a resort area like Ogden Dunes, is to negatively affect its value.

Unless it is crystal clear that the Ogden Dunes ordinance prohibits rentals, which doesn't appear to be the case, the Indiana Supreme Court should have found in favor of the Siwinskis.


Nicolas Martin said...

Pathetic. Evisceration of property rights. While the Republicans talk the property rights talk, they are stalwart defenders of zoning laws, and employ them for whatever ends they seek. As usual, Democrats are equally indisposed to property rights, but less hypocritical about it.

Pete Boggs said...

Should the court likewise insist on DIY home repairs within this community rather than contractors using these properties for commercial gain? Commercial property taxes are 3%, is that what these landlord owners are paying?

Paul K. Ogden said...

Pete, actually it's 1% for residential, 2% for rental, 3% for commercial. Good question. I'm sure they're not paying commercial property tax rates. That issue though is not necessarily dispositive of the issue decided by the court.

IndyDem said...

The UCC defines commercial:
A commercial use is one which is undertaken for a business purpose, rather than hobby, recreational, educational, or other purposes. Such uses are usually attributed to a for-profit entity, rather than an individual, university or other educational institutions, or non-profit organizations (such as public libraries, charities, and other organizations created for the promotion of social welfare).
While it might not be commercial like a store, its clearly not someones homestead. There are different rules for these situations for a reason, mostly to protect the non owner, either the renters or the neighbors. Blockbuster Video is a Commercial Business, right? Even though they Rent and not sell, videos. A rental, I think, is another kind of commercial use. I think the court was right as I think they stayed true to the intent of the law, meant to protect the other residents in a resort town from living next to a house that might have a wedding one weekend and a frat party the next.

Paul K. Ogden said...


I live in an area zoned residential. To me that doesn't mean I can't rent out my property for someone else to use as a rental. If I want to do so just for Indy 500 weekend that is my right.

Unless the zoning classifciation clearly prohibits rentals, then the homeowner can rent. This isn't a case of a judge making a close call on a difficult interpretation. Unless you can say the law clearly prohibits rentals, then the homeowner should win. Clearly the law is vague at best...and that means the homeowner wins.

Cato said...

No law can legally say that a person can't rent his house. Renting property is one of the blessings of title. If someone defeats your ability to transfer an interest in your land, they have taken your land, and they owe you big for it.

Further, banding together as a collective and using a law to do violence does not insulate the law-passers from having committed trespass and being morally indebted to their victims.

America is turning into a large HOA, where every person gets to tell his neighbor how to live.

Mind your own damn business, America.

bemused said...

The Supreme Court does not seem to have realized that their decision would actually prohibit ALL rentals of ANY length of time in ALL single family residential zones in ALL jurisdictions in the state of Indiana, unless the local ordinance specifically identifies rentals as a permissible use (which most probably do not). The decision essentially says that only the owner can ever occupy a single family residence. Since most single family houses are in single family zones, it all but makes renting houses in Indiana illegal.

The idea in the ruling that having more than one “family” serially or sequentially occupying a dwelling makes it multi-family is ludicrous. That would mean that an apartment building is not merely a group of dwellings, each intended for one family, but rather a group of units with each individual unit also being multi-family (because it gets rented sequentially to different families). Even selling a house would be called into question, as it would then be owned and occupied by a different family, which would by the Court’s definition, make it a multi-family uses. And buying a selling houses for profit would appear to be a prohibited “commercial” use.

In short, the ruling is ludicrous. Of course, the irony of them ruling by a vote of 3-1-1 that the ordinance is “unambiguous”, without being unanimous in what it supposedly “unambiguously” means, but that its supposedly unambiguous meaning is opposite of the unanimous interpretation by the appeals court justices, makes the meaning of “unambiguous” rather, well, ambiguous.

mark70 said...

i live i new castle indiana, i recently bought a distressed commercial property from our local commissioner sale it has a single use building on it, after cleaning it up from out of 20 years of over growthi try and start to use this building to help make some money to pay the high commercial taxs and make a few needed repairs i get a letter from the local building inspectors office telling me im zoned res 3, i said ok cleaned up what i had started bowed out, went to the court house to tell them i am res 3 instead of commercial where i found out that they will not change the way the property is taxed so i have a building that is not worth near what i was lead to believe it was worth commercial verse residential tax rate is there any way i can fight this?