N.H. Supreme Court Throws a Curveball on Short-term Rental Zoning Regulations

The NH Supreme Court’s recent decision in Appeal of Hoekstra, 2024 N.H. 23 (May 14, 2024) alters the landscape for municipalities that rely on a permissive zoning regulation to control or prohibit short-term rental uses. The court was called upon to examine the Sunapee Zoning Ordinance to determine whether a travel trailer on a lot with a single-family home could be used as a short-term rental.

The Hoekstras own a single-family home in the village residential district in Sunapee and maintain a travel trailer on their property they use as a short-term rental. The town’s zoning administrator notified the Hoekstras that use of the travel trailer as a short-term rental was not a permitted use. The Hoekstras appealed that determination to the Sunapee ZBA which upheld the zoning administrator’s decision. The Housing Appeals Board upheld the decision of the ZBA, and the Hoekstra’s appealed to the NH Supreme Court.

When the court is called on to interpret the meaning of a municipal zoning regulation it renders that determination de novo deciding the question without reference to prior judicial or administrative interpretations. Central to that question for the court was whether Sunapee’s ordinance adequately excluded the use of a travel trailer as a short-term rental in the village residential district as a permitted use.

Most zoning ordinances in New Hampshire are of the so called “permissive” variety. That is, in the absence of a variance or special exception, such an ordinance functions generally to prohibit uses of land unless they are expressly permitted as principal uses or can be found to be accessory to a permitted use. The Town of Sunapee has a “permissive” zoning ordinance under which any use not expressly permitted is deemed prohibited.

The court’s decision in Hoekstra seemingly abandoned its long-standing approach of first looking at the list of permitted for the applicable zoning district. Instead, the court examined a section of the ordinance titled “Additional Requirements,” and zeroed in on a part of that section labeled “Dimensional Controls,” to determine whether the use is permitted. The court concluded that a sentence in the “Additional Requirements” creates new categories of permitted uses, including the use of a travel trailer as a short-term rental. The court determined that under the plain language of the “Additional Requirements” a travel trailer is permitted and may be used for temporary sleeping quarters for not more than ninety days in a twelve-month period so long as it complies with State or Town sewage disposal requirements and all other provisions of the ordinance including building setbacks. The court reached this conclusion even though the title “Additional Requirements” indicated it was intended to impose additional requirements on permitted uses, and not to create additional permitted uses.

Because of the decision in Hoekstra, municipalities will have to carefully examine what other provisions in their zoning ordinances, intended as restrictions on use, might be interpreted instead to create permitted uses.

What Does Work for Zoning Regulation of Short-Term Rentals: Using the NH Supreme Court decision in Working Stiff Partners v. City of Portsmouth as a guide, consider the following to be included in a local zoning ordinance:

• Include a provision in the general requirements or similar section of your zoning ordinance that states something like the following: “No building, structure, or land shall be used for any purpose or in any manner other than that which is permitted in the district in which it is located.” This will establish that your zoning ordinance is of the permissive variety intended to prohibit all uses of land that are not expressly permitted.
• For residential zoning districts, consider including a provision that states the general purpose of the district is to permit single-family, two-family or multi-family dwellings and then provide a definition of dwelling unit like the following: “a dwelling unit is defined as a building or portion thereof providing complete independent living facilities for one or more persons, including permanent provisions for living, sleeping, eating, cooking and sanitation. This use shall not be deemed to include such transient occupancies as hotels, motels, rooming, boarding houses or short-term rentals.”

Even if short-term rentals are not a permitted use, would they be considered an accessory use? The Supreme Court did not entirely resolve the accessory use issue in Working Stiff. If the zoning ordinance cannot be interpreted to expressly permit short-term rentals, an owner could still claim that a short term rental must be allowed as an accessory use to a residential dwelling. An accessory use is one that is “subordinate and customarily incidental to the main use on the same lot.” Forster v. Town of Henniker, 167 N.H. 745, 758 (2015). A common example of an accessory use is a garage on a residential lot. If residential dwellings are permitted and garages are not expressly prohibited, a garage ordinarily will be allowed as an accessory use to the house.

The “subordinate” and “incidental” criteria require that the accessory use be “minor in relation to the permitted use and . . . bear a reasonable relationship to the primary use.” The “customarily” requirement is an important one. It requires evidence that the accessory use “has commonly, habitually and by long practice been established as reasonably associated with the primary residential use in the town.” Becker v. Town of Hampton Falls, 117 N.H. 437, 440-41 (1977).

A homeowner might claim that renting out a room in his or her home is an accessory use to the primary use as a residence. There is no clear, uniform answer to this, but there are some obvious cases: if the homeowner does not actually live there, but merely rents individual rooms or the entire house to short-term occupants, then the rental is not “subordinate”—it is the primary use. Similarly, if the owner occupies just one or two rooms and rents several units to short-term occupants, the rental business is not subordinate and not an accessory use.

A more difficult case is where the owners legitimately occupy the house as their primary residence and merely rent one or two rooms on a short-term basis. That may satisfy the “subordinate” requirement, but the owner would still need to establish that homeowners in the municipality have “customarily” rented rooms to short-term occupants as an incident to their use of the property as a residential dwelling. This seems unlikely in most cases; but these questions need to be resolved on a case-by-case basis. Consultation with the municipality’s legal counsel is strongly encouraged before any conclusions are drawn on whether a short-term rental is an accessory use.

Legislation on Short-Term Rentals that also must be considered by Municipalities when addressing short term rental uses:

• Short-term rental operators must pay rooms and meals tax, and any advertisement for a short-term rental shall include the meals and rooms license number of the operator. RSA 78:4-a. This tax statute also defines a short-term rental as “the rental of one or more rooms in a residential unit for occupancy for tourist or transient use for less than 185 consecutive days. RSA 78-A:3, XXII.
• In 2017 an amendment to the Housing Standards statute, RSA chapter 48-A, prohibited the application of locally adopted housing standard regulations on vacation or short-term rental uses. The legislative history reveals that the purpose of the amendment was simply to state that RSA 48-A cannot be used to regulate vacation rentals, while confirming that that cities and towns are free to regulate short-term under RSA 674, planning and zoning.

Any amendment to a zoning ordinance must be clear and unambiguous. The ordinance must be clear, starting with the definition of “short term rental.” The ordinance might establish a separate definition specifically
for short-term rentals, or it might fold it into an existing definition of hotel, bed and breakfast, or similar transient uses. If the ordinance is going to allow short-term rentals, the following are some of the issues that should be considered. (There are most likely several others):

• Limit on number of days per year units may be rented
• Owner occupancy requirement
• Allowance only by special exception or conditional use permit
• Restriction to specific zoning districts

It is impossible to address every imaginable situation in a zoning ordinance, but an effort should be made to anticipate and answer as many questions as possible. If the ordinance is going to prohibit short-term rentals, clarity is equally important. The ordinance should be very specific about what constitutes a short-term rental so there is no question about what is and is not prohibited. A statement that “short term rentals of residential property are prohibited” will raise more questions than it answers.

Any amendment will need to be tailored to accommodate the municipality’s specific needs and to fit with the existing ordinance. Consultation with the municipality’s attorney and/or a professional planner is strongly recommended.

Stephen Buckley is the Legal Services Counsel with the New Hampshire Municipal Association. He may be contacted at 603.224.7447 or at legalinquiries@nhmunicipal.org.