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South Dakota Supreme Court: Deadwood home can be Black Hills vacation rental, despite housing covenant's 'residential' rule

The state's high court split 3-2 in a decision in a fight between two neighbors in the Shirt Tail Gulch subdivision over a three-story home used almost exclusively as short-term rental property by vacationers to the Black Hills.

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A home outside the tourist-heavy town of Deadwood, South Dakota spurred a legal fight, when the owners appeared to violate a housing covenant barring non-residential activity. But a majority of the state's supreme court disagreed, saying the owners -- who live in Spearfish -- could rent out the house. (Matt Gade / Mitchell Republic)
Matt Gade
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PIERRE, S.D. — A couple who rents out a three-story home outside Deadwood, South Dakota can operate the property as a vacation rental, even though the housing covenant appears to allow for only bed and breakfasts and other "residential" uses, says the South Dakota Supreme Court.

The court issued a closely-split 3-2 opinion on the matter on Thursday, June 17, sparked when neighbors filed a lawsuit against the owners of an offending adjacent property in the Black Hills, arguing they'd broken the covenant's restrictions.

But after a lengthy dissent sparring with the majority over the definition of terms in the Shirt Tail Gulch's private housing rules, Chief Justice Steve Jensen — joined by two retired justices, including former Chief Justice David Gilbertson — ruled the property owners are allowed to largely use the 5-bedroom, 5-bath home outside Deadwood as they see fit, even making tens of thousands of dollars on income renting to other persons, while rarely using the home for themselves.

"It is undisputed the Property is used to eat, sleep, and enjoy recreational activities," wrote Jensen. "Therefore, short-term vacation rentals are a residential purpose consistent with the covenant."

At issue for the court was the covenant's language, which states homes in the privately-developed lot in the subdivision must be "free from nuisance" and are prohibited from being as anything "except for residential purposes, which shall include normal home occupations and offices of recognized professions and bed and breakfast uses."

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The dissent, authored by Justice Janine Kern and joined by Justice Patricia DeVaney, exceeded the opinion in length, arguing pointedly with the chief justice's definitions of "residential," noting that read in totality, the covenant appears to forbid the rental activity.

Justice Kern noted the couple — Rory and Kristen Maynard — live in Spearfish, take in approximately $60,000 annually on the property, and rarely, if ever, stay in the three-story, five-bedroom home.

"Reviewing just this cursory enumeration of undisputed facts, it can hardly be said that the Maynards have anything other than a 'commercial' venture," wrote Kern.

The neighbors to the mountain rental, Robert and Sharlene Wilson, sued the Maynards in May 2017. Renting began in June 2018, and court records show the home is rented out as many as 120 nights a year.

Particularly during the high-tourist summer months, wrote Kern, the home is rented out every day — fetching $1,200 a day during the Sturgis Rally.

But Kern's dissent failed to sway the other judges, who noted that interpreting the Shirt Tail Gulch subdivision's covenant to ban rentals might even bar the owners from allowing anyone — even a family member — to live on the property.

"Therefore, 'residential purposes' may be plainly understood to include the occupation of a home or dwelling for an indefinite length of time," wrote Jensen.

The 3-2 opinion is rare in South Dakota's high court, though less so recently, as the court issued a separate 3-2 ruling in a case involving rights to a speedy trial. In both cases, Kern and DeVaney were in dissent.

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Thursday's opinion also comes while legal observers across the state await another almost expectedly controversial decision — whether the ballot measure legalizing recreational marijuana that was voted on by over 50% of voters last November was a legal constitutional amendment.

That amendment was overturned by a circuit judge in Pierre in February, effectively barring the measure's July 1 effective date.

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