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2003
Opinion Letter
Opinion letter from BECKER, FLEISHMAN, BROWN & KNIGHT, P.C. indicating that short-term rentals are allowed in Lone Mountain Shores BECAUSE of the ambiguity of Covenants. Tennessee favors property rights. This attorney opinion letter was posted on the lmsoa.org website until sometime in 2022 when it was removed.
2006
Short-Term Rental Reimbursements
In September, 2006, the Board approved reimbursing owners traveling and lodging expenses when they served as a board member. This included stays at Turtle Tom’s cabin, a rental home in Lone Mountain Shores.
www.lmsoa.org >>Owners>>Documents>>Board Minutes from Meetings>>Minutes from Meetings 2006>>Boad_Decisions_Between_Meetings_2006
Owner Question
At the October 2, 2006 Annual Meeting, an owner asked the Board “Do you have to live in a house before you can make it available to rent? Is it considered “commercial use” to build a house for the specific purpose of renting?
Response: Former attorney judgment—OK to rent.
www.lmsoa.org>>Owners>>Documents>>Board Minutes from Meetings>>Minutes from Meetings 2006>>October_7_2006_Annual_Meeting_Minutes
2012
Bed & Breakfast
Prior to the June 2012 Board meeting, the Board listened and responded to questions from two guests. The guests were concerned about atypical rental activities at Lot 823, activities resembling a bed & breakfast. They were informed the Board would monitor the situation and take action if the atypical rental activities continued. In November 2013, the Board proceeded with legal action against the owners of lot 823.
www.lmsoa.org>>Owners>>Documents>>Board Minutes from Meetings>>Minutes from Meetings 2012>>
Meeting_Minutes_6-21-2012
Rental Discussion
There was discussion at the October, 2012 Annual Meeting concerning limitations on renting of properties, limits on renters’ rights, and suggestions for Covenant revisions concerning rentals.
The Board noted that currently the Governing Documents specifically indicate renting is permitted by owners and currently renters’ rights are the same as owners. The Board’s position on an owner’s right to rent their property was that it is a mutually beneficial right of the Association members.
www.lmsoa.org>>Owners>>Documents>>Board Minutes from Meetings>>Minutes from Meetings 2012>>
Annual_Meeting_Minutes_10-12-2012
2013
Covenant Change
Major changes were made to the Covenants in 2013. The change made in 2013 germane to rentals was the definition of Single Family Residential Purposes.
Article II, Section 2.15 – “Single Family Residential Purposes” shall mean the property, consisting of just one primary Dwelling and all ancillary buildings on it shall be occupied by just one legitimate single housekeeping unit as distinguished from unaffiliated individuals or groups occupying a motel, hotel, bed & breakfast, or boardinghouse. Additionally, allowances are made for one accessory living quarters, such as a mother-in-law suite, without violating the “single family residential use” provided this secondary living quarters meets the requirements of Section 6.05 of these Covenants. Any rental accommodations and services such as those provided by hotels, motels, bed & breakfasts, rooming or boarding houses, apartment buildings or condominiums are excluded by this definition.
Ambiguity
The definition of Single Family Residential Purposes is being used as the basis for claiming short-term rentals are not permitted within Lone Mountain Shores. However, there is ambiguity in the Covenants as “rentals” are specifically mentioned in the following sections:
In Section 6.04, the Covenants state “This restriction is not to be construed to prevent rental of any Lot or any dwelling for private single-family residential purposes…”
Section 6.05 states “Accessory living quarters cannot be rented independently of the primary living quarters or used to house anyone unaffiliated with the rental group (including owners of the property, members of their family or their invited guests) during the rental of the primary living quarter.” This section implies rental of the primary living quarters is permitted.
Section 6.07 titled “Rental” states “Lots and Dwellings may be rented only for private single-family residential purposes subject to the following provisions:
- The renting to unaffiliated individuals or groups at the same time is prohibited;
- Tenants are required to abide by all LMS Governing Documents
- Owners are responsible for the actions of their tenants. Each Owner shall take appropriate steps and should put in place additional rules, limitations, and restrictions as necessary to ensure that tenants do not conduct deleterious activities or otherwise create a nuisance to other Owners.
2017
Association Admits Short-Term Rentals Permissible
- As part of the B&B case mentioned in year 2012 of the timeline, the Association responded under oath that short-term rentals are permissible so long as no extra services or per-person pricing exist.
- The covenants have not changed with respect to short-term rentals since the 2017 statements made by the Association.
- The attorney who represented the B&B has written an opinion letter concerning the current lawsuit against owners leveraging short-term rentals. The letter states the current Board’s position that short-term rentals are prohibited by the covenants is “flat-out incompatible with the Association’s sworn interrogatory response” in the B&B case. “Thus, the Association is barred from taking a contrary position now. The result is that short-term rentals are permissible under the current restrictive covenant language.” Use the hyperlinked above to view the full text of the opinion letter.
2020
Complaints
At a July 6 open forum, several homeowners complained that LMSOA should discontinue the practice of allowing home rentals. After discussion, single family rentals are allowed in the Covenants, so Board will take no action at this time.
www.lmsoa.org>>Owners>>Documents>>Board Minutes from Meetings>>Minutes from Meetings 2020>>Board Meeting Minutes 070620
At the August, 2020 Board meeting, several complaints were expressed regarding rental issues such as gun target practice and fireworks. Concerned owners were advised to report complaints to the Claiborne County Sheriff’s office. A request was made to initiate a committee to research the rental concept for LMS.
www.lmsoa.org>>Owners>>Documents>>Board Minutes from Meetings>>Minutes from Meetings 2020>>Board Meeting Minutes 080320
Rental Committee Established
Following the August Board meeting, a Rental Committee, lead by Sue Woodson, was authorized by the Board. The Committee consisted of non-renters, renters and owners neutral on the topic of rentals. The stated goal of the Committee was to review the current policy on rentals within LMS to see if they are pertinent to today’s environment and address any current renter-related issues on the mountain. The first meeting was held on August 13.
Rental Committee Activities
Unproductive Discussion - The second Rental Committee meeting was held September 3 at which time there was an unproductive and unsubstantiated discussion of the issues/problems associated with rentals.
Another Deerfield - The third Rental Committee meeting was held September 17. Committee members agreed the previous focus on issues/problems associated with renters had gotten the Committee off track. The entire Committee agreed the real problem is not wanting Lone Mountain Shores to become another “Deerfield”. When the Board was updated on September 28, the Rental Committee chair reported all agreed the objective is to keep LMS a residential neighborhood and not become a commercial neighborhood.
www.lmsoa.org>>Owners>>>>Documents>>Board Minutes from Meetings>>Minutes from Meetings 2020>>Board Meeting Minutes 092820
Miles Apart - The fourth Rental Committee meeting was held October 8. The “renters” and “non-renters" made proposals for how to handle rentals which were at opposite ends of the spectrum. All agreed further discussion was needed on the possible impact of corporate investors.
Annual Meeting Update - At the October 17, 2020 Annual Meeting, the Rental Committee chair reported the primary goal of the committee is to keep Lone Mountain as a residential community and avoid becoming a commercial community. Discussion followed with some homeowners stating they could not afford to build their home here without the opportunity to rent.
www.lmsoa.org>>Owners>>Documents>>Board Minutes from Meetings>>Minutes from Meetings 2020>>Annual Meeting Minutes 101720
Course Change - On October 26, the Rental Committee chair proposed the Committee change course and concentrate on how to prevent corporate rentals within LMS. Committee members agreed.
Percentage of Rentals - At the November 2 Board meeting, the Board president stated that an HOA management company recently gave a presentation to the Board and stated the percentage of rentals allowed in a community should not exceed 30%. The current number of rentals within LMS is believed to be around 15%.
www.lmsoa.org>>Owners>>Documents>>Board Minutes from Meetings>>Minutes from Meetings 2020>>Board Meeting Minutes 11022020
Options - Following the fifth Rental Committee meeting on November 12, ten options were developed attempting to prevent corporate rentals. At the December 1 Board Meeting, the Rental Committee was asked to whittle down the options to three the committee could agree upon.
www.lmsoa.org>>Owners>>Documents>>Board Minutes from Meetings>>Minutes from Meetings 2020>>Board Meeting Minutes 12012020
No Consensus - The sixth Rental Committee meeting held December 6 centered on individual committee members voting on the 10 options. There was no consensus among the group although the option garnering the most votes was to cap the number of rentals allowed within LMS.
2021
Rental Committee Disbanded
The Rental Committee chair reported at the January 4 Board meeting that the Committee was having difficulty reaching a consensus; and the Committee requested permission to conduct an owner survey. The Board agreed to the survey.
On January 5, the Board disbanded the Rental Committee due to the Committee’s inability to reach consensus. The rental survey was conducted by the Board.
www.lmsoa.org>>Owners>>Documents>> Board Minutes from Meetings>>Minutes from Meetings 2021>>Board Meeting Minutes 01042021
Rental Survey
In February, a Rental Survey was sent to 532 owners representing 576 lots.
www.lmsoa.org>>Owners>>Documents>>Surveys>>2021>>2021 LMS Survey Questions 2-2021
The results of the Rental Survey were communicated to owners in March.
- The response rate for the survey was 29% representing 166 lots.
- Owners were asked if they felt Lone Mountain Shores should discontinue short term renting in the community. Only 23% of the owners that replied to the survey wanted to stop short-term rentals.
- Owners were also asked how they felt about only allowing long-term rentals (90 days or more). Only 20% of the owners that responded felt rentals should be limited to 90-days or more.
- When asked about grandfathering the current rentals and no longer allowing rentals in the future, only 25% agreed with that scenario.
- What makes all of this even more interesting is that 91% of the owners that responded did not use their home for short-term rental income.
www.lmsoa.org>>Owners>>Documents>>Surveys>>2021>>Lone Mountain Shores 2021 Survey Analysis Final – REV 1
Owner Vote
Based on results of the Rental Survey, the Board placed two issues related to rentals on the ballot.
- Proposal to Amend the Covenants to strike the word “accompanied” from the Covenants (Article IV; Section 4.03-Delegation of Use). This proposed change was not approved by owners and was, therefore, not implemented.
- Proposed addition to the Bylaws Article IX-Miscellaneous Provisions: Owners of Rental Property shall be required to Register their property for rental, and; require owners who rent their properties to provide renters with a copy of the LMSOA Rental Requirements. The result of this vote was 167 in favor of adopting the bylaw changes to 76 against adoption. This bylaw has never been implemented.
The results of the owner votes were announced at the Annual Meeting on October 23. Following the meeting, the new Board took over. The new Board members were Mark Jonckheere, President; Pat Armstrong, ARC Liaison, Mark Ellis, Treasurer; and Sabrina Izbrand, Secretary. Russell Brown remained on the Board as Vice President.
2022
Owner Vote Ignored
A special meeting was held January 22 to discuss the proposed Rental Registration Bylaw change. At the meeting, certain owners petitioned the board to not implement the Rental Registration Bylaw change. Note: A special meeting can be requested by 10% of owners by means of a signed petition.
www.lmsoa.org>>Owners>>Documents>> Board Minutes from Meetings>>Minutes from Meetings 2022>>Special Meeting 01222022
In February, a certified letter Certified Letter to Board re Rental Registration Bylaw Change was sent to the Board by concerned owners asking why the Rental Registration Bylaw change approved by owners had not been implemented. You may ask why we want to implement bylaw changes placing restrictions on short-term rentals. A significant concern is the board’s apparent belief they can ignore an owner majority vote by not amending the bylaws as voted on by the owners. This is a dangerous precedent to set. Below is a portion of the Board’s response to our letter. Board Response to Request regarding Bylaw Change.
“The decision to amend the Bylaws is a unilateral decision that the Board can make as the Board deems appropriate. At this time the Board does not believe that it is appropriate to amend the bylaws to create new restrictions upon the use of the property of individual owners. The proper procedure to add new restrictions is to amend the covenants by written ballot.”
The Board announced their decision to not implement the Rental Registration Bylaw at the March Board meeting. Based on the Board’s reasoning for not implementing the Bylaw change, the Board was asked to place the issue on the ballot for an owner vote. The Board refused.
A group of owners then sought and obtained the opinion of an attorney concerning the Rental Registration Bylaw. In a nutshell, the attorney agreed with our position that the Board is obligated to adopt the Rental Registration Bylaw. The attorney’s opinion Legal Opinion Regarding ByLaw Vote was shared with the Board at the July 18 Board meeting. No response was ever received from the Board concerning this legal opinion.
Contentious Meetings
The Board’s refusal to implement the Rental Registration Bylaw change passed by members, coupled with rumors circulating that real estate agents were being told there would be no more rentals in LMS, the owners supporting rentals became alarmed. At the February, March and April Board meetings, members repeatedly asked the Board for clarification concerning their intentions related to short-term rentals; and asked for discussion to resolve the issue. The meetings became very contentious when the Board refused to provide what members considered to be straight forward answers. On April 12, the Board sent an email to all owners indicating legal counsel had been retained on the issue of rentals; and the topic of rentals would not be discussed at future Board meetings.
Cease and Desist
On July 18, the Board sent an email to owners linking to a legal opinion letter stating “short-term, vacation-style rentals are specifically prohibited by the Covenants.”
On August 8, Cease & Desist letters were emailed to several Lone Mountain Shores owners (Cease and Desist Letter sent by LMSOA Board).
A Special Meeting was scheduled for September 14 at 10:00 a.m. to discuss short-term rentals. Please note the weekday (Wednesday) and time for this meeting. Approximately 85% of owners are non-residents. Could this meeting have been scheduled for a more inconvenient time for non-resident owners?
At the September 14 Special Meeting, the Board was asked several times to resolve the short-term rental question by placing the issue on the ballot for an owner vote, rather than spend thousands of dollars in legal fees. The Board refused.
Compromise Offered
After the Special Meeting, the renters proposed a compromise (Rental Owner Compromise to Board) to the Board. The Board rejected the compromise with no explanation or discussion.
Election Process Changed
The Board engaged a CPA firm to count ballots for the fall election. On the surface, this appears to be a positive move, however, it resulted in less transparency. The board secretary created her own list of owners which contained documented errors, no witnesses were permitted during the ballot counting process as was the practice in previous elections, and the board refused to release the instructions given to the CPA firm for ballot counting.
Lawsuit
In early November, the Board filed a Complaint for Permanent Injunction (Complaint for Permanent Injunction) against 19 owners. Subsequently, a Motion for Dismissal (Motion for DIsmissal) was filed by the owners’ attorney with a court hearing scheduled for January 13, 2023.
2023
Court Hearing
In early January, the Board’s attorney filed a Response to Defendants’ Motion to Dismiss. (Response to Defendant's Motion to Dismiss).
At the January 13 hearing, the judge recused himself because he knows several Lone Mountain Shores owners. The case was reassigned, and a new hearing scheduled for March 2.
Grandfathering
At the January Board meeting, the Board President made two interesting statements.
- We don’t get to decide if renters are allowed or not allowed, the membership has to make that decision. They would have to change the covenants. Right now, membership doesn’t seem to be willing to do that.
Who is “membership?” Were you asked for your opinion? At the September 14 Special Meeting, the Board was asked several times to place the issue of short-term rentals on the ballot for an owner vote and avoid a lawsuit. The Board chose a lawsuit. It appears the Board considers as “membership” the 15% of owners who live on the mountain and can regularly attend Board meetings. What about your vote?
- I offered them a grandfather and they wouldn’t go for it. I said OK. That’s the end of the conversation right there. You tell me that you don’t, you’re losing your homes and all this stuff, yet when I offer a grandfather they don’t want it. It doesn’t make sense to me as a logical explanation, it’s a logical solution.
Frankly, the renters were gobsmacked by that statement and requested documentation showing an offer of grandfathering was made. No documentation has been provided.
Court Hearing – March 2
The court denied the Defendants’ Motion to Dismiss.
Early May - Defendant Discovery Request
The defendants filed for a first set of interrogatories and request for records which is a routine part of any lawsuit with responses typically required within 30 days. A countersuit was also filed against the Board members individually and collectively alleging fraud, interference with property rights, and violation of due process rights. Any costs associated with the countersuit will be paid by the insurance company or the Board members personally – not the HOA.
Board Stall Tactics - By mid-June, the Board had failed to respond to the interrogatory and records request and the defendants were forced to file a Motion to Compel seeking a court order to compel the board to provide the requested information. The hearing was scheduled for June 29 and a day before the hearing, the Board agreed to provide the required information within 20 days. On July 14, the Board provided nonsensical and/or woefully inadequate responses to the interrogatories and request for records. On August 8 a second Motion to Compel was filed by the defendants. A hearing was held August 24 at which time the judge granted the defendant’s request and ordered the Board to produce the requested documents within 30 days. The defendants are currently waiting for the Board to fulfil their obligation.
Special Master - The Board provided a subset of information on October 16 and submitted other documents to the Special Master as allowed by the August 24 court order. On December 12, a meeting was held with the Special Master. The Special Master reported he found the additional documents to have no probative value for either side. The judge decided to review the documents herself before deciding whether the documents will remain confidential or discoverable subject to redaction. A meeting was held on February 14 with the judge and the attorneys for both the plaintiff and the defendants. The judge ruled the additional discovery documents held by the Special Master were to be released to the defendants with no redaction.
June - Effort to Remove/Replace Board
The sequence of events related to the effort to remove/replace the Board is complicated at best. What follows is a high-level review of events.
On June 3, a group of LMSOA members delivered letters to the Board Secretary requesting a special meeting for the purpose of removing and replacing the Board, which is the only avenue available to owners for the removal of a board during their term. On the same day, unbeknownst to members, the Board mailed proposed Bylaw/Architectural Guideline changes to owners. Included in the proposed Bylaws is a prohibition on the use of proxies. The timing is significant. If the Bylaws went into effect before the special meeting was held, proxies submitted by owners to remove the Board would not be permitted to be used. With 85% of owners living off the mountain, proxies are essential at a special meeting.
The Board attempted to implement the proposed Bylaws prior to holding a special meeting to remove/replace the Board. Several legal wranglings ensued, the July 22 Bylaw special meeting improperly called by the Board was cancelled, and the Board ultimately decided to mail written ballots concerning removal of the Board rather than hold a special meeting. That is their right.
The ballots on removing the Board were due to the CPA firm on July 27. Prior to votes being counted, the defendants requested, and the Board agreed to the use of a Special Master to count the ballots. The Board reneged on that agreement and proceeded with the vote count. The resulting vote count was within 8 or fewer votes for 4 of the 5 Board positions with the Board declaring 8 ballots ineligible. The Board has refused to provide any information on why the 8 ballots were declared ineligible, and the defendants were forced to use the court system to gain access to the information.
On August 24, the judge ordered the Board to deliver to a Special Master the ballots from the recall election, and a list of the 8 excluded ballots with documentation to support the exclusion. On December 12, a meeting was held with the Special Master. The judge would not permit the excluded lot numbers to be revealed and the Special Master count was the same as the CPA firm. Please note, the defendants were not questioning the count by the CPA firm. The issues are which lots received ballots, which ballots were counted and which ballots were excluded. The defendants want to know WHO voted, not HOW owners voted. The Special Master efforts answered none of these questions.
October 17 - TN Supreme Court
On October 17, 2023, the TN Supreme Court ruled on the Pratik Pandharpipande v. FSD Corporation case which has direct bearing on the case filed by the LMSOA Board against renters. The Court found “residential-purposes provisions ambiguous with respect to whether short-term rentals are allowed”. The Court addressed the question of “whether a restrictive covenant that limits the use of property to residential purposes prohibits short-term rentals” and ruled that it does not prohibit short-term rentals.
November / December - Motion for Summary Judgment
On November 9, 2023, the Board filed a Motion for Summary Judgment. On December 21, 2023, the Defendants filed a Motion for Summary Judgment. A hearing was held on January 25, 2024. The judge indicated her ruling would come within one month.
2024
March 4, 2024
Chancellor Asbury ruled in favor of the defendants (owners) in the short-term rental lawsuit filed by the Board of Directors of Lone Mountain Shores in November 2022. The Board’s Motion for Summary Judgment was DENIED. In her ruling, the judge stated the Covenants/Restrictions do allow rentals (paragraph #33); and based on the undisputed facts, one could reasonably conclude that Sections 2.14 and 6.04 were drafted in a way so as to allow short term rentals of an entire house…(paragraph #28).
The Board stated multiple times that the purpose of the lawsuit was to clarify the Covenants as written and numerous pledges were made to abide by the judge’s ruling. Below is a sample of the Board’s comments concerning the lawsuit. Additional comments can be found in the Documents section of this website.
February 27, 2024
· Board Letter to the Community – We chose to get more than a legal opinion; we desired to have a legal judgment/ruling of the existing covenants as written in regards to short-term rentals so that the community would not have to experience this disagreement again. We pledge to honor and abet any final judicial ruling in regards to the interpretation of the covenants as part of our duty of care.
Fall 2023 Campaign
· Claudio Biltoc (President) - I intend to accept the court’s legal ruling clarifying our Covenants as to
whether short term rentals (STR) are allowed or not no matter which side prevails.
· Stacy McElhiney (Treasurer) said she supports the lawsuit for final resolution so we can move forward.
· Pat Armstrong (ARC Liaison) - …these are only lawyer opinions, and they must be advanced so that a
judicial ruling could be made. Then the decision is final.
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